Using Income Riders, Asking Questions The Right Way | 7 Figure Annuity Sales Podcast | Ep. 280

Hey, welcome back to this week's episode. I am Chad Owen. This is my sidekick Caleb North. And we haven't done this in a while where we've introduced each other, but I really miss making fun of him when I'm doing that. So we're, we're gonna, we are gonna institute that again. We have retired boy wonder. He has now graduated to puberty aggressive teen.

Oh my gosh.

He's now went through the process, so now he's teenage wonder. And so we will work. Okay, so income riders are so important because honestly we did this survey and I actually just did a post about it today and it's about how many people use spias fee as fees with income riders or just straight mygas. And I'll tell you, it surprised me. It really did. Because out of this, you know, there's basically 75% of people, actually more than that, it's almost 80% used either a Myga, a FEA or SPIA, which is interesting to me because 21% used an FIA with an income rider. And that is disturbing to me, quite frankly, because when you have the vast majority of people that are concerned about outliving their income, why is only 21% using income riders? And I can tell you, I know why. Part of this is with these high illustrated rates, they can say, hey, we can get you something without a fee in it and look how well these are done. And you can pull out 6% or 7% and you're not gonna touch your principal. And we know that's not true. We know we can't be using current index strategies and performance to dictate what's going to happen in the future. And I think that's concerning because if we have a couple bad years, we're getting a 0% return. And you sit there and you go, okay, wait a second, while they took out their 7%, what is going to happen? And then if we're using the mygas that a three or five year MYGA and we're saying, oh well, hey, you're pulling out five and a half percent. What happens at the end of that three or five or seven year myga?

You don't know.

It's just concerning to me. Yeah, it's so concerning to me. Because the reality is, I think it, and I can't remember the exact numbers, quote me if I'm wrong on this, but it's like 60 to 70, 60 to 70% of retirees are more concerned about outliving their income than they are death. It's the and so if that's the number one concern. Yeah. So if that's the case, why is only 21% of the poll? Now granted, this is a, it's a decent sized poll and it was annuity specific. I mean these are people that write annuities. So I actually think this poll carries a lot of weight and I think we need to address this issue because, and here's my thought process, I think why a lot of times agents do that is number one. And I once again shared this on the LinkedIn post. They don't do clear fact finding. They don't find out that hey, you know what? One like yesterday, a client I met with, basically she made $1,000 a month in Social Security, he made $3,000 a month in Social Security, he made $4,000 a month in pension, $8,000 a month. They require $5,000 a month to live off of. Okay, everything sounds great, right? $3,000 surplus, not including, minus taxes, $3,000 a month in surplus. But if he dies, the pension had zero percent survivorship. That means that 4,000 is gone. The lower of the two, Social Security is gone. So that means now they're $5,000 a month in expenses. She only will be making 3,000amonth to live off of. It's crazy. And he was not a super healthy person. So most people would sit there and go, hey, look at this indexed annuity. Look how well it's performed. You can pause 6 and a half percent or 7% when you're never going to run out of your principal. We know that's not true. And yeah, well, there's my rant.

I and I agree, I the way that I approach the income rider part of the conversation and why I think they're so relevant is I think they are have such benefit that they have all but made annuitization obsolete. I think that the number of cases that need to annuitize their policies are so slim and few and far between that the income rider benefits wise is far superior to annuitization. And so it's made that almost an irrelevant concept. So the idea of 20 something percent of them using spias, there's no way that that mass number of people, how many was it?

20% SPIAs? Only 4% for SPIAs. 24%. Yeah, 24% for MyGas.

Okay, okay.

Yeah.

Okay, well that makes me feel a little more.

Oh yeah, yeah, 4% for SPIAs, which once again, why are people still using spias unless the person's under the age of 59 and a half that I.

Get the age of 59 and a half if it's an inherited IRA. But there are still indexed annuities that are sensitive to that. So you don't have to necessarily annuitize that you could end up with more total with withdraw in certain products that are allowed to take inherited IRAs post 2020. There's, there's alternative options. There are, but I agree.

But I still don't run into a lot of people. A lot of my inherited IRAs are still before 2020.

Interesting.

It's not that common. I get someone that passed away in the past three years, so. But if they did, of course we've got to abide by those rules that are out now.

Right, Right. But I do think that in this, in this day and age, when you've got corporate pensions as few and far between as they've been in decades, you've got people where really they're only quote, unquote, guaranteed stream of retirement income is Social Security. And that is never, has never been designed to be the sole source of retirement income.

So.

Yeah, and, but people are kind of thinking that, you know, I had someone the other day, because you talk about the surveys for Social Security. Well, what would happen if we just would have put our money into something back in the day instead of putting into Social Security? Well, that's true. I mean, that would be good. But the reality is most people are not disciplined enough to take that withdrawal. Yeah. So the pensions of the day, the Social Security, that still provides the income without having them think too much about, you know.

How much do I have to draw out?

Oh, it's true. You know, and yeah, I, I, I joke that Social Security is the federal government's legal pyramid scheme.

We can't say that one too loud now. We're both dead. Thank you. We're gonna end up in someone's suitcase now because you had to say something like that. Way to go.

But for those that are receiving the benefits, fantastic.

Nice knowing everybody here. Love y'. All.

Get your benefits. Enjoy it. But when I the way that I like to approach this conversation with agents, Chad, and the way that I actually encourage agents to approach even just the annuity conversation with clients is as an income conversation, even before a client says that it's necessarily needed. And it's because of the demise of corporate pensions, how rare they are now, and the fact that now clients have 401ks IRAs, 403bs, TSPs, whatever, whatever their retirement account is, and it's this big chunk of money that they don't know how much they can take for how long they can take it and at what frequency. They don't know how long they're going to.

You know it's interesting too though because we go back to the 401ks. You know, it's amazing to me how many people have a large 401k and then think they know how to manage it once they get out of that, but they have no other assets anywhere else. This really just kind of like right now just hit me and trust me, I'm going to use this point from here on out. But if you sit there and you're talking to someone who has a million dollars in a 401k and they think they can manage it, but they have very little savings, they have very little IRAs, no self managed money. What makes them think they can manage it once they're out of there? Because 401ks are literally kind of let it ride type deal. So think about that when you're talking to your clients.

Yeah, absolutely. It's funny, I was helping an agent with a case literally this week where we had hair under $100,000 in an IRA, yet about $5,000 in emergency funds and savings in a $1.1 million 401k.

Wow.

Yeah.

Where's this client? What's their name?

Right. We're going to try and put as much as we. And she, she understands the benefits of the annuity. She, she's got a surplus of income but she still wants more guaranteed lifetime income. Imagine that. Okay. This agent's dealing with, with this lady getting $800 a month surplus on her Social Security compared to her expenses and wants to leverage half a million dollars of that 401k into a product that's going to guarantee more lifetime income. And the thought process is lifestyle like you, like you've talked about.

Can you imagine though? What, how her life is going to change by the extra money she'll get per month?

Oh, totally.

I mean I have to worry about. Super exciting to me. Yeah, never have to worry about it. Never have to worry about it. But I've been looking at this post, Sarah, and I know we're going to be talking about this, but a couple things I was thinking about is why don't people use more income riders? And the reality, I think number one is incomplete fact finding. I don't think agents really do the full. Like I said, the person makes 8,000, but if he passes away, $5,000 a month goes away. That's a massive income need you Just look at the current circumstance and if you're not doing a complete fact finder, you're never going to know that. What are their projected future expenses? We know. Inflation. We know. And then we also have to remember to the lack of understanding of income riders. An income rider is not just for income. Yes, it's all counted as income, but income isn't necessarily just pay bills. I've shared this before. I had these two clients, 76 years old, and their idea of traveling at 76 years old is still backpacking Europe. That's what they do. They get on trains, they get on planes, they get on taxis, they get on whatever, the local buses. All they do is backpack Europe. So I asked them, I said, what do you got? And they had a ton of money. They had over $1 million. I said, what do you guys do next year? And he said, well, we don't know. I said, how do you not know? And they said, because we don't know how our stocks are going to do. And that's where we took 800,000. We left plenty of emergency funds and savings. We, we took 800,000. We created an income stream purely for their travel. So when I delivered that policy, I said, where are you guys going next year? They had it all laid out where they're going. And because they know even next year, if the market tanked after that, the following year, that's their base. That's their base, what they could use to travel off of. And then I also said, hey, if there's a long term care issue, of course now you're not traveling as much, but now you can use this income to help cover some long term care expenses.

Exactly right.

And so that we have to understand that income is not just income. Riders are not just used for income. It's lifestyle, it's legacy. And when I say legacy, I mean living legacy. I'm going to take my grandkids to Disney World because that's a memory they'll never forget. I'm going to take my entire family to Mexico or Hawaii or whatever it is. These are on a big RV trip. These are living legacy. You know, most people, my grandparents didn't have a lot of money, but I'll tell you, the memories I have with them, I'll take over any dollar amount they ever would have left for me. Yeah. And then of course, I think the reluctant use of income riders and this is going to strike people the wrong way. But hey, you know what? I've never been afraid of offending people for the right thing. And a lot of times I think, agents think, well, if I do a three or five or seven year annuity or I do a ten year annuity with an income rider, without an income rider, I've guaranteed in 3, 5, 7, 10 years. Where if you use an income rider, unless you're an idiot, like there's some people out there that will literally replace indexed annuities with income riders and they totally, they churn or twist and they take the existing policies five years later. There's a guy in New Braunfels that does that all the time. New Braunfels, Texas. We're not going to say that, but he calls himself expert and he'll literally. I got letters from my clients that we rolled stuff over. But in he sold annuities before and the reason why they called me is because they were getting letters to replace business. He just wrote five years ago with income riders and he would say, hey, you know what? We got a 30% bonus. And they would look at that. And the reality is the bonus covered. Well, it depends obviously. Let's just use something more realistic like a 12% bonus that covered the, the surrender charge. But they didn't take any consideration income value. And so when you're looking at that, they look at always, obviously if you have an income rider, don't ever look at ever replacing that business. I've done it one time in 20 years and it was for a very specific circumstance. But the reality, you know, when you're looking, when you do an income rider, you're probably never getting any more business from that money there.

Sure.

And so I think often people think, hey, you know what, if I don't use an income rider then I future business. And I just don't, I don't like that.

I agree. I want to hop back to the fact finding portion of that and actually go back to fact finding. But I want to go back one step before and talk about for me why I think the need for the income rider is so prevalent. And I'll be quick about it. Like I said earlier.

Yeah, the priests do because the corporate pensions aren't there.

So people have no typically one source of guaranteed retirement income. And I'm not talking rental income, I'm not, I'm talking about guaranteed retirement income. And you can make an argument that even Social Security is not necessarily guaranteed. Those things can change. We don't know what, what that's going to look like.

Unlikely.

I agree, it's unlikely.

Unlikely.

So what we'll call it guaranteed a guaranteed retirement income stream. But the point being that's typically people's only source of guaranteed retirement income. So what we have is people with 401ks, 403bs, whatever we call them, defined contribution plans. And the pensions of old were defined benefit plans. Well, what we're talking about doing is going back to a defined benefit plan to where that income benefit is defined and guaranteed. And we're leveraging the current defined contribution play, the 401, the, you know, the 403B, whatever it may be, or there are individual IRAs to actually do that. And now when you get to fact finding, I think, Chad, there's a couple of layers here. I think one, you have the agents that will look at a lead, they'll get a lead form, and the client on the lead has said, you know, I'm looking for the best rates or whatever. And so they go into it trying to sell the $100,000 annuity that, you know, has the best rates and don't even bother fact finding at all. And then the next layer you have are those that will ask the questions. Maybe they'll do some fact finding, but they don't go layers deep enough to actually figure out what the need is. And then you have the third layer there where they are asking the questions. They're doing the fact finding. They're going to the depths, but they're asking the questions the right way. And this is huge for me when it comes to the income piece. If you as an agent ask a client, is this a plan for income or accumulation, they are going to give you an answer to that based on their understanding of income and accumulation. But you can't be.

Most of the time they're going to say, yeah, if you ask it that way, the time, they're going to say accumulation.

Exactly. Because they, they don't necessarily understand the way income works in annuity products. And accumulation is a lot more familiar to them. And so they may be coming into it with the mindset that I need to try to grow these retirement accounts as much as I can so that I can make systematic withdrawals and call that income. Okay.

The way you pose the question is that reminds me. Yeah, it is. Do you want to plan for living or do you want to plan for dying? I mean, that literally tells them, well, of course I want a living plan. Well, the only way to have a living plan is to have the income. That's really what it comes down to. Remind me, Caleb, for our webinar that we have, we have a webinar once a month for any of our agents that are basically, they sign up for the pro, pro plus inner circle. And it's very important, you know, if you're not part of that, you want to be a part of that. You want to sign up. Because there's some things that we talk about that we don't talk about on the podcast. And Caleb, remember that thing I told you that I asked people now remind me for the webinar we have coming up next Friday to use that saying. Yeah, but I'm not going to share it here. But if you want to sign up, go to our agents academy.com and sign up, because it's a doozy. It literally has changed. I just got a deal. The guy was going to go with a Myga. And so we're doing 100,000aMyga. He's. And then I'm sitting there closing everything. He goes, you know what, can we go in and write that other application for another hundred thousand in the income producing one that we're talking about? And I'm like, sure. Well, he just called me today and he goes, you know what? I think I'm going to probably liquidate more and can we just do 200,000 in that? The product. The income producing product. And I said, absolutely. I mean, you're never gonna. No. I mean, he had emergency funds. Yeah, exactly. Sorry, we're closed now. You missed a shot. That's it. But you know, you're right. We've got to ask this from the standpoint of I can phrase. Good salespeople can phrase a question in any way they want the answer to be. You know, and that's. I think we have to be really careful on how we do that because we got to make sure we're getting the information that we need to make the best decision for the client.

Yeah. And the way that you word that, is this a plan for living or is this a plan for dying? You're getting to the purpose of the money, avoiding their preconceived notions about how either of those happens. Because here's the reality. They could assume that the way that they need a living plan is by way of accumulating tons and tons of money and then withdrawing it. Okay. But they understand what a plan for living or a plan for dying is. They may not understand what accumulation versus income actually looks like in practice. So they answer it based on incorrect preconceived notions. And that doesn't set you up, I guarantee you. Agents, if you're asking clients, is this a plan for income or a plan for Accumulation and Chadworth, and you got a bunch of accumulation answers. And Chad were to come in behind you and ask them, is this a plan for living or a plan for dying? And they said, is a plan for living. You would win every single one of those cases and agent would be out on the deals.

Yeah, that happens so many times. I get a deal from someone who asks the question that way and they go, well, accumulators said, what good is an accumulation? I mean you're, you need income. So if you want to plan for living. And we need to figure out something with income, not accumulation. Accumulation is the side thing. Is accumulation important? Absolutely. But if you have something that you're thinking is accumulation and you think you can make some sort of hypothetical guarantee, which is an oxymoron, you can't do that. You've got, I mean, I'm telling you, it will increase your business. So many people ask me, Chad, how do you write so much business? And it's because I solution based sell. Everything I do is a solution to a problem. That's what it comes down to. Yeah. So I think that pretty much. We wrap this one. Holy cow. We went a little long on this one. But can I add one more thing?

I tend to do this.

You always do that.

It's pretty on brand. I want you to think about, think about the flow of retirement planning. We have two words that we use when we're talking about retirement planning. While they're working and they're contributing. We call that the accumulation phase where you are accumulating a retirement nest egg and then you retire. And now you get into what's called the distribution phase. There are agents out there that are working with clients that are in the distribution phase and positioning more accumulation that they've done for the last 40 years. Yeah, it's like you're, you're in the wrong phase for that at this point. So anyways, that's just another little sidebar. Little thing.

That's a good point. But I hope this helps you guys. Of course, you should be. You should be. But I hope this helps you guys. You have a great day and as always, happy selling.