How Important Is Index Crediting On Income Cases? | 7 Figure Annuity Sales Podcast | Ep. 305

All right, welcome back to the Seven Figure Annuity sales Podcast. Caleb north here with Chad Owen, first and last name introduction.

I need to get, like a treat dispenser on the other side. So whenever you do something good, it just pushes like a candy button or something. Actually, no, for you, it'd probably be. It would be. Yeah, I would say. What's that?

Fried chicken tenders.

Fried ticket. Oh, I was gonna say.

Cigar supplies.

I'll take that, too.

A new leaf of tobacco just gets spread out, but yeah, Chicken tenders. Cane's Chicken Tenders would. I could just literally press that. You'd be like £500 and. Well, no, you went. Because you hardly ever get out of boys. So.

I was gonna say less chicken tenders.

Than I currently do.

Yeah, you went for sure. Yeah, that wouldn't work. Never mind. You know, be skinniest man around. You only get fed when you do something good.

Oh, yes. Yeah, Pretty seldom.

You'd be like that one movie. What was that? Why? I can't say that because that. See, I have filters. I just. I do say. I don't say everything that comes to my mind.

So that's an improvement.

Okay, go for is an improvement. It's taken me many years, many years to. To learn that expertise.

Yep. Well, we're talking today about how important is index crediting on income cases, right? It is, because it's pretty obvious and clear that you're dealing with accumulation. Well, okay, how are you accumulating your crediting interest via the index strategies if it's an indexed annuity? But when we talk about income, we're dealing with a whole different purpose of the money. And the purpose of that money is obviously guaranteed lifetime income or in some very specific instances, period, certain income. But the point is not necessarily how much growth do we obtain or how much do we make, it's, to use Chad's terminology, how much do you take? And so sometimes the index crediting features of a indexed annuity product can be overlooked, I think, or treated like it's not that big a deal. And I would agree that it's not the biggest deal, but it should still be considered. And there's some factors here that we can talk through that the index crediting really, really affects. And number one is you don't want to see that account value diminish over time if it's avoidable, obviously, if it's a void.

That's the key, though, right? I mean, you know, there are some products that have a super high payout, and I just tell them hey, you know, especially depending on how long it defers for. I mean, if you have something deferring for 15 years and they draw income, that account value is pretty much gone in six to seven years, depending on how old they are and everything. But, you know, that's why I always say, do you want to plan for living or plan for death? What's more important, how much you live off of or how much you pass on to your heirs when you die? And it's pretty crazy to me because I always believe a wise man leaves a. An inheritance to his children's children. But it's amazing to me how many people just don't care how much gets left on to their heirs. And part of that, I believe, is because they do need the maximum amount they can, because they don't have millions and millions of dollars, so they need to pull out as much as they can. So in that case, obviously, what does the index matter? Now, fortunately, we've actually lately in the past five or six years, we've had some really good indexed annuities with income riders that still have really good index strategies in them. It's not like you have to sacrifice that. And so, I mean, there, if you can do both, and, and the products available for that 100%, I'll do that.

Right. Well, and that's, and that's the key. And that's why I think, you know, if avoidable is a key, a key piece to that statement, because there are instances where what we need to do is just purely maximize the amount of income that we're able to obtain on this premium. And if the product that maximizes that amount of income has low index rates and your crediting potential is not very good, you have to meet the first purpose of the money before you can go on to a second purpose of the money. But in those instances where you can meet the guaranteed income needs with a product that has better index rates long term, you probably position that client in a better scenario than just purely only selling the highest income available. Now, we're in a weird position right now where.

I mean, in many cases, the highest guaranteed income product also has really good index rates on it.

Yeah, I mean, 50% participation rate in the S and P. I mean, come on. Yeah, I use that analogy all the time. If you could go to Las Vegas and you could sit at a blackjack table and you only got 50% of your wins but none of your losses, how long would you sit at that table?

Forever.

And on top of that, you're getting income free. Drinks the rest of your life. Free drinks and free food the rest of your life. You know, I mean, who wouldn't do that? Right?

Right.

I mean, that's just a phenomenal situation. We've talked about this past few podcasts, how great it is when the environment we have right now, and I don't expect it to last forever. I do really expect product innovation to get better and better though. I really do. I mean, if I think about 1995 when we just had indexed annuities, before that there wasn't just fixed annuities, but we had indexed annuities. Then 2003, 2004, we had indexed annuities with income riders. And then around 2019, 2020, we started to get really good income riders with really good index strategies. Who knows? I mean, granted we could say this has been because of higher interest rates, but 2019, a company called Guggenheim at the time actually had a pretty decent index strategy, multiple decent index strategies and really good increasing income if that index performed well. And so, you know, now you look at EquiTrust. EquiTrust has a really good product right now that has high income and a really good multiple good index strategies. Right. So, so, I mean, who knows what it could be? I mean, everybody knows here I'm not loyal to any company, whoever's the best for my client based off of the age and what they wanted to do and the financial stability, I'm going to do that. Right. So, you know, that's, I'm excited about where indexed annuities are going and what's what the future of it holds. Oh yeah.

I mean, yeah, we're, we're in a competitive, in a competitive environment right now with these carriers.

They are competing on the quality of the products that they're offering, which is a beauty of the free market where companies can actually compete with each other on the quality of the product that they produce. But because of that, I think we will continue to see innovative strategies and things. They're going to have to be creative because there's a threshold where from a pricing standpoint you can only price a product and the benefits so good. So then you have to blend innovation and new things, new creativity in with it to try to create a competitive advantage. So who knows what we're going to see in the coming, in the coming five to 10 years in our products. But they are really, really good right now. And one of the cool things about them is a lot of these income riders are offering some kind of long term, care impaired, you know, enhanced income to the Guaranteed, you know, level amount, you might have a 2x or 11 1/2x multiplier of the guaranteed income for long term care needs if somebody were to qualify. And that's one of those things that most of the time is dependent upon there being an account value. So if you go to try and use that, that benefit, but the product has terrible index rates so your crediting is horrible, but it's paying a lot of guaranteed income and you've sucked that account value down to nothing and you go try to activate that benefit and it's not going to be there in most instances to actually use it. So there's a way there or a reason why even in income types of policies, having good index crediting can impact the overall benefit of that product. Another one's death benefit, how much is actually being passed on to heirs and beneficiaries. And Chad, I know for you you've won cases in comparing rates and indexes from product to product and you'd be up against another one. You say, well look at the, look at the rates here, look at the rates here. And income might look similar, other parts of the carrier and product might be similar, but you've been able to win it and have on the, on the upside potential side, not even a guaranteed factor of the product, but where we have more upside potential for crediting, it can be, it can be competitive and death benefit is big for people.

Well, it can be, it's not like I said, it's not near what I thought it would be. But I always tell people when they say, hey, I want to leave something to my heirs, remember they're almost always going to have all their possessions, cars, they're going to have often equity in the home. And if they don't have a bunch of equity in the home, then they're probably not in a situation where they're going to leave much anyway. And it's very common nowadays for people over 60 years old to not have life insurance policies. And so it's just shifting. But I mean in all fairness, kids often cost a lot more than they did per child than they did 10, 15, 20 years ago.

Right.

You know, I think about the number one man, oh, I wish I could remember this article who it came through. But it's a very, very reputable publication. That said the number one expense for retirees right now is boomerang children. So what's a boomerang children? It's people that come back and they have to live in their home. I saw this other one 26% of males 22 years old to 46 right now do not have a job.

And this has been in the last three years, four years since COVID since they started giving money out. And I can't tell you the number of times I run into a client's home and. And guess who's living with them. They're full grown children with the grandkids. Now, in all fairness, America is one of the few countries that doesn't do that. I mean, a lot of foreign countries, grandma lives with you, right? You know, parents live with you. I mean, that's a pretty normal thing. So I'm not opposed to that. I mean, I was raised in Hawaii, a good part of my life. And I can tell you that was very normal that kids, parents, grandkids, our grandparents, all lived in the same place. So I think it can have its spot. But the problem is, is the kids are often contributing. So I would say probably 1 out of 25 clients I run into, the kids are staying at home and they're not working.

They're zero kids.

A leech. Yep. And so, you know, people have had to deplete. I just actually made a call today where the parents had no retirement because they've had to help pay for their kids. They've had to cash out their 401ks and IRAs because their kids didn't have a job.

That's crazy.

I mean, so when you look at. And that's why I focus so much on how much you take versus how much you make if you put in $100,000. But over your lifetime, you. Wow, wow. I just got this revelation here. So the average person pulls out approximately 66% of their Social Security of what they put into it. If you have an annuity, that is $100,000, but in your lifetime, you pulled out 2 or 200,000, you pulled out 100% more than what you put into it.

Right.

In terms of you're excited when you. Yeah, so you're excited when you start to collect your Social Security and you get paid out, but you don't realize. And I was at an appointment one time, and this lady I had the husband right in front of, and the wife was sitting over at her desk working. And I said, do you know statistically it's about 66% of the amount what you put into Social. Social Security you actually pull out. That means the government keeps 34%. And she's like, that's a lie. I said, really? I said, what do you do? She goes, I work for the Social Security Administration. I said, you want to know where I got that statistic from? She looks like where I said the Social Security calculator was on SS.gov and she goes, well, we removed that. I said, exactly. Why would you remove that? Because it showed truly how bad your money was being managed. And so even pensions. And I, you know, I'm going to. I'm going to put a note down on that because I'm curious what the statistic is on pensions, too, because we used to know Social Security at age 65 is when people start to drop it. A lot of people only lived age 68. Now, granted, life expectancies have increased, but percentage of pension withdrawn.

And percentage. I think I could do a handout on this.

You probably could. You know, the other thing that I think about.

And then percentage.

The other thing that I think about when you talk about how is it what's more important how much you make or how much you take?

The thing is the other thing you think about, the. The one other thing you think about.

Yeah, well, on that specifically.

Okay, let's clarify here. He's like thinking of one thing. Well, you want to know the other thing I think about?

That's funny?

Probably cows or chicken. One of the two.

Yeah, A lot. A lot of cows lately. But on that specifically, both are returns. Okay. How much you make is a return, how much you take is a return. One's an interest rate of return, the other is an internal rate of return. Both the returns.

Your life. More.

Exactly. The difference is that how much you make is how much benefit you pass on to yours and beneficiaries. How much you take is how much you benefit from here and now. Correct to both our returns. But one has more impact on you, the other has more impact on them.

Boy, we're on to something here. Yeah, we might get more people listening to our podcast now.

We might. We might. So if you can blend in your product good income as much as you can, while also trying to maximize the index rates, now you've created a situation where how much they make and how much they take is. Is as maximized as possible. The last piece that I would add about why index crediting is important, even on income cases is simply for conversations at reallocation and annual reviews. If you're doing them, I mean, even if the purpose of income, it's still nice to be able to say, hey, look, your crediting strategies return 5%, 6, 7, whatever it is, you don't want to see the s and P500 up 20% and oh, by the way, you credited a goose egg.

Correct.

It's like, that's just not a good book.

Most clients, so if they're getting income, they never have to worry about. You know what's crazy? I tell every single client multiple times to call me when you get your index allocation and I'll go over with you. I tell probably only about 40% of my clients do that. Right. And I just, I, I don't get it. I'm like, why wouldn't you want to take that opportunity to try and get more? It's because they only care about income.

Interesting.

They want that mailbox money coming in every single month, and they don't care about what's passed on.

Oh, yeah.

Now, granted, they'd rather have the. Their heirs than the insurance company get it. So that's why you have contingent beneficiaries. But yeah, it's pretty crazy when you think about it. Yeah.

That'S it. We, we beat this one pretty dead. So now we'll listen or wait for you guys to what? You know what? Hey, be sure you go on YouTube and subscribe, and I'm going to do a shameless plug. If you want training, you've got to check out our training. It is absolutely incredible. It's agents.retirement realized with a d.com so agents.retirement realized.com. and I'm telling you, we have the architect. Well, we have the jump start, then we have the architect, and then we have the titans. And if you want to, I mean, the, even the, the architects. 197amonth. I'm telling you, if you can't make that up with one annuity for five years worth of training, it is so beneficial to you do. For you to do that. So you definitely want to jump on. Sign up for that. We have so many testimonials of people, agents just killing it. Some brand new to the industry.

Hey, here's my, here's my thought. Chad. Of course we had if, hey, if you, if mine was good enough, if you think 197 is too much because of the cost and you feel like you can't make that up with the sale of an annuity, you're exactly the agent that needs to pay for that training. And if you do think you can make that up, then, hey, there's no problem. So sign up.

Anyways, thanks so much for that wisdom and revelation of the obvious. Okay, you guys have a great day, and happy selling.

Sam.