Income Strategies for Agents Pt. 1 | 7 Figure Annuity Sales Podcast | Ep. 194

In today's episode, we're going to talk about income strategies. This will be part one of two.

Hey, everyone. Welcome back to this week's podcast. I am Chad Owen, the annuity sales coach, owner of Retirement Realize Financial. It's a full service. Unreal. Incredible. Helper of agents. Yeah, that's really what we.

I love how you say that. Not even imo, because imo, you can't even, you can't even use that synonymously with helpers of agents anymore.

You know, it's funny, I saw someone on LinkedIn, they said IMO's are a dime a dozen right now. And it's true. I mean, there's so many marketing organizations out there. What sets yours apart from the others? To me, it's all about helping people enjoy the ride. With me, you know, I mean, I want agents to be able to enjoy life. I mean, if I have someone, and this is just me personally, I love hearing the motivation behind people, why they want to do something and if it aligns something about I'm passionate about, then it's easy to help them. And I find honestly, in our industry we have some of the most generous people I've ever met in my life.

That's true.

I seen them. What they do away from work and how they're able to help people. I've seen, I mean, it's. The stigma is the broker world does the fancy cars, the fancy. This fancy house, and they're more about the things than they are what helps. That's not always true. There's some really good brokers out there that they're very generous as well. But in the annuity world, I have actually seen more crazy generosity. It's just weird. I. I don't know. It'd be interesting to do a study sometime on why I see that. Because I've been in the financial world for many, many years. I mean, it's. And I just hear what. And see what people do. I see what people do because to me, I don't care if I hear what I want to see.

Talk. But if you're not doing anything.

Exactly.

Income strategies, Chad. This is specifically pertaining to fixed indexed annuities.

That's good to know.

Okay, that is good to know. We're not going to talk about sp. Yeah. We're going to talk about your bread and butter. But that said, three of the strategies.

Warm butter. I just like got this major craving for a nice piece of warm sourdough bread toasted with Kerrygold butter on it.

Kerrygold.

Kerrygold, Nice. And I want Kerrygold, was it? Texas Roadhouse rolls with their, with their whipped butter. Oh, yeah.

Carry Gold. You know, I wonder when people listen to us because we talk about food quite a bit, they're like, darn it, somebody's trying to lose weight. What's going on?

Pulling over, getting food.

Yeah. I usually fast every day till 5 to 7 o', clock, so I usually don't. I stop eating around 9 o', clock, so I'm torturing myself right now.

Yeah, it's true. Hey, it's very true.

So I'll take one for the team.

But the four income strategies, there's one that you use far more than the other three and I've heard of the other three used. I've actually had conversation with agents and talking about how are you creating income streams for your clients. These are three very common practices and not always the best.

We don't talk about this ahead of time.

Right.

So this has me intrigued.

Yeah. So we're going to talk about the four strategies today and then next week in part two, we, we're going to cover the do's and the don'ts. When do these particular strategies apply and when should they be avoided?

Okay.

Okay. So number one strategy is probably.

Do you feel like we're looking into the sun right now?

I do. We've got a studio light. I keep trying to like angle my face.

Like that. Your face is now sunburnt.

Yeah. It is worth adding here though, Chad, that income strategies will rarely come up as a need unless you're doing a full fact finder and planning. Worst case scenario. If you're just talking with clients about what do you want? Most of them are just totally fine right now.

We have plenty of income coming in. Yeah. As long as you're both still alive.

Right? Yeah. Some kind. They were looking for some kind of protection and accumulation and it's the agent's responsibility to do a full fact find or find the worst case scenario. And a lot of times that's where the income need pops up. So if you're not doing that, you're probably not going to find it as often, but you should be doing that.

I did it again. I just totally blocked you out.

That's okay.

It's a, it's a skill set.

It's an easy thing to do.

No, not. No, it's not.

I'll never forget. I'll never forget the one time I told you, or I've told you this multiple times, but I was like, chad, you're one of your. Or you will always be One of my favorite people to pick on and mess with. I just, I love, I love pushing your buttons. And you looked right at me and said, caleb, you will always be one of the most ignorable people.

Fair enough.

You know, it's so funny though we say that, but then I still like, hey. I mean, I'm the one that said, hey, you know what, you can go out and start dating my daughter or start. And then I'm the one that said, hey, why don't you come work for me? And I'm the one that says, let's go hunting and what am I doing?

Chad's been pursuing me for years.

Let's not put it in those words. Okay?

All right. Strategy number one, annuitization, been around a long time. It's an age old income strategy. Essentially you're taking the premium, the account, whatever you want to call it, and you're converting that into a guaranteed income stream for life. Right. Very straightforward. Now, there are pros and cons.

I know how you feel about it.

Cons.

The pros, I will say, is that it is a guaranteed stream of lifetime income.

So as an income rider, it's true.

And we're gonna get to income riders and because Chad loves income riders. But there's another, another pro that it's often what would be considered a high guaranteed income amount. Right.

That's fixed at that amount for the rest of your life. And if you do the one with inflation rider, you have to take less than the bank getting. So con.

I mean, I'm just looking objectively.

I just don't like the fact that you lose control your money, but you can get return premium. Yeah. Okay. So for 15 years you got your money back. Yay. You know, I just, I'm not a big fan of it. I've done it four times, four or five times in 18 years. And it was really weird circumstances. Like if you have someone and this just hasn't happened. Wow. Yeah. This has only happened twice when someone was under the age of 59 and a half. And we had to have an income stream. One lady was paralyzed, so we had to have an income stream.

You knew it.

And then. Yeah, because they have the exclusion ratio on that and you don't have the 10% penalty. And then the other one was a very similar type circumstance just because of health issues. They needed money like right now and they weren't at the right age. And then the other two were just people that we needed. And this was back when the interest rates were higher.

There wasn't the Good indexed annuities and we had to use the highest potential income they could ever, ever get. So you squeeze out every drop of.

Juice out of that lemon.

But nowadays with the way they've adapted these income riders, especially if you can get the ones with good indexes that back them up, you can do way better than.

You take the worst case scenario and then you do between the worst case scenario as far as the fixed guarantee and then the worst case scenario and the income rider with the index growth, you're still going to be way better than what you would if you annuitized it. Yeah.

I mean if you look at what the account value has the potential to do. Right. If you're, if you're considering just straight income stream and what you're taking every year, it's, it's not uncommon for annuitization to beat a rider like because, because of what you're giving up. But you have to bear in mind you're not Giving up a 1%, you know, fee like you would be in a rider. You're giving up control of the account.

In exchange for that it will eventually be paying less than what it would have if you would have done a good indexed annuity with an income rider.

Yeah, it's true. And if you can't tell Chad loves his income riders.

The reason why is because, and this is just, you know, now if you do an immediate annuity, you're done. That's, you're never getting another deal again as far as with that money. But it's the same thing with an indexed annuity with an income rider. You know, if you do it right, you're just never getting that money again. That has already been given a purpose. It's what is for another some scumbag slime ball agents out there that will still try and replace annuities with income riders. And, and I hate that. I've never done that. But there's a guy in our area that, he sends out letters to his clients and he's like, you know, this is your account value, this is your surrender value. Bonus will put you above not even stating anything about the income value that's on that annuity. And he sold it. It's like, man, I hope they fry that guy. I'm working with a lawyer to help that guy get shut down. It's just, it's gummy and slimy. And then I called him on it, I called him and I said, hey, why are you surrendering these annuities when you're the one that wrote them and you're putting them into a new one. He goes now, come on, Chad. You know, they'd want. The insurance companies want you to replace this business. And so I finally got a client to be able to cooperate with that in a very good way. And multiple clients. And so I keep running into him, so hopefully I don't run into them anymore. I hate it when people take advantage of someone and, and, and really rip them off. That's exactly what they're doing. Especially ripping them off for your own personal gain.

Yeah, that's.

If you can't tell how I feel about this, big time. Okay.

You want to go Elon Musk and, and Putin with you and him.

Elon Musk and Putin.

Well, so Elon's been challenging Putin to a fight essentially for authority over Ukraine or basically the exchanges. If Elon wins.

Not a physical draw, right?

No. Yeah. Like, Elon's like, like wanting to challenge Vladimir Putin.

You know what it makes me Wonder? Elon's probably 50th degree black. Right. We don't even know about. Yeah. And he's got an Iron man suit for sure. Oh, I'm sure Putin's only 5 foot 2. You know, he's a super short dude. He's Napoleon.

You want to. You want to do that same deal with, with this other individual? It sounds like.

Yeah, it wouldn't be a challenge.

Yeah. The second strategy is RMDs. Okay. And it's. It's hardly a strategy. Right. I mean, it, it works for income.

It is it. Yeah. Not for an income purpose. I mean, obviously, if they've already got income taken care of and they have to do their rmd, that's. Yeah, they're going to have to. But yeah, not for income purposes.

The pros. And again, because. Well, we can say why it's not designed for income. From the standpoint of there's not the same level.

There's no pro. When it's used for income purposes.

You don't.

Well, I mean, even if you have a good index, you still have the actual RMDs that continue to go up as you get older. And the reality is you can have 20 years in the index, and it could really change everything really quick. Quick. And so that, once again, goes back to the importance of a good income rider.

I did, I did map out pros for RMDs.

The One Pro is you don't have a income rider.

You don't have a rider fee. You have more product options, which, if you're using a good income product with an income rider that's not necessarily an issue. You have more product options because you don't need the rider. It's just R and D friendly.

You don't need the rider. Then don't use a rider.

Exactly.

But don't pick an inferior product that doesn't meet the income for life need.

Right.

You know, because you want to have repeat business.

Correct.

And that's why a lot of agents just do straight indexed annuities. They do the seven and the 10 year. Because they know in seven or 10 years are probably going to try and replace that annuity.

If your index strategies happen to perform well, which they may or they may not. We don't.

But a good indexed annuity though, honestly we'll still have really good index strategies.

Totally.

With an income rider.

But as your.

I couldn't say that in 2005, 2006, 2007 even. I mean if you had an income rider, your indices were trash.

Yeah.

And it, and there's still a lot.

That have the super high guaranteed income.

Products rarely have index will never increase. But the index, you know, I mean I tell people all the time, you know, even when I did, when we didn't have the good options, I'd say 17 to 20 years, your death benefit is gone.

It's just done.

Yeah, yeah.

I had another thing. Oh when if you were to try and strategize with RMDs and, and here's the thing is when you look at illustrations right now it's prime time for those products that their income rider multiplies what the index does and then it has these growing potentials. We know where those are located. It's prime time to show RMDs because again the last 10 years have been phenomenal. But the, the thing that those are contingent upon is index performance.

What if we ran into three or four years? I mean the longest that I know of was the Great Depression. Nine years.

Right.

Where the market went down. But there's nothing to say that we couldn't have a three to five year downfall. I mean I don't know that obviously but with this market going up for 12 years, I mean if it went up for, let's see, went 2003 to 2007, so we had four years and then it went down two. So it would be safe to say if we went up 12 years, could we have a six year fall? It's possible. You could not just doom and gloomers. You know there's a couple doom and gloomers out there who are saying we're gonna have a 70% fall in the market. We don't know that. Well, we're gonna barter for gold. Trust me, if you're at the bartering for gold stage, bullets are far more valuable than gold. It's true.

Unless you have to like flee the country. That is one thing.

That precious metal bullets still would take care of that.

You think?

Yeah.

In other countries where they don't even have guns.

Well, that's why bullets would be valuable if you're the only one with them.

Oh my God.

I mean if you go in a country where there's no bullets, no guns. Yeah, yeah.

Anyways, the third strategy, penalty free withdrawals idea being. And really it only applies during the surrender period anyways. Right. But I know people that will say yeah, you know, for income, just draw out 6% of your account value every year.

So how long are you going to live for?

That's the problem is there's no guarantee on it. If you have years where you credit nothing, you have to withdraw an increased percentage each year to have the same amount of income. So to me, that one is like of all three. To me, just withdrawing penalty free is the worst option.

If you're talking income for life. They're all bad.

And then you get to the income rider. Yeah. This is Chad's favorite. But, but the reality, the reason why is the most. Well, wrong.

How long they live for, the income's never stopping. You know, it's. It's the thing that the. The two things we can never answer. How long you gonna live for? And where's the stock market going to be tomorrow, let alone five or ten years from now?

Yeah.

And when I do income planning, I use the absolute worst case scenario that the index did nothing and I show them what it would be. You know, that's really what it comes down to. And now yes, I'm die hard income riders when it's right.

Exactly.

Because I have millions and millions and millions of dollars in annuities with clients that we didn't do an income rider. They didn't need it, everything was fine. But does it make, let's get real. Does it affect my commission either way whether they do an income rider or not?

Nope.

No, it doesn't matter. But does it affect my clients? Income affects them way more way than it affects you. And so their money, not mine.

I made a list of a bunch of pros that I find with income riders and literally, well, you'll see how few.

And again and let's see if I agree with you on the cons we'll.

See pro number one, guaranteed amount of lifetime income. And again lifetime income often contains a bonus, often contains a roll up rate. Maintains control of the account value. There's indexing opportunities still. Some riders provide increasing potential for inflation protection. Some provide doubling income for long term care needs.

Like it's very important to know on those. So most I've never seen one that if that account account value runs to zero that doubling stops.

Right. It always goes back to the original income amount.

Got to make sure you know that.

Cons and these cons are man, they're not, I don't even know if you can fully call them cons as much as they are just typically a fee for the rider.

It's all reinsurance has a fee.

You're paying, you're paying to create guarantees that other free strategies can't create. So toss up there. Use of penalty free withdrawals may reduce the income.

That's true. So you know, but I mean if you're truly using this Frank, I mean you have enough set aside emergency funds.

And savings need penalties.

You shouldn't need that.

Yeah, correct. And then there are some that may not protect against inflation. Right. That's a lot that are just leveled and capped and that's what it is.

But what's inflation going to be? We don't know.

We don't even know. We don't even know. I mean you think about RMDs, right? Is it historically.

Often viewed as superior way of hedging against inflation is just drawing RMDs because you've got an increased essentially RMD percentage And if your index strategies work, you're drawing a higher percentage on a larger account. There's a point where that will eventually balance out maybe you know, depending on how much you're actually drawing and how much is getting credited. But that's a, that's a solid strategy for inflation protection but you don't know what it's going to do. That's the problem.

So I mean there's ways you can ladder annuities too to help with that, you know, ladder income riders but that's a whole nother topic.

Well next week we're going to talk about the do's and don'ts and when these individual strategies apply and when they.

Do not good, I'm looking forward to that. Well, I hope this helps you guys. You have a great day and of course happy selling.

Sam.