Why we Love Annuities but Dislike Annuitization | 7 Figure Annuity Sales Podcast | Ep. 240

On this week's episode, we're going to talk about why we love annuities, but why we don't like annuitization.

Hello, everyone. This is Chad Owen. I am the annuity sales coach, and we have our case design. Design sales coach. Yeah, we're actually. We're going to run with that for a while.

It's kind of fun. It's like my favorite thing to do is case design.

Well, that's why you have no life.

But that's why I end up at some coffee shop on Sunday afternoons after church writing blogs and trying to teach about these annuities and how they work. And I've got like 16 pages on my computer. Again.

Don't even tell me that because you haven't published it yet. So I don't even want to hear about how many blogs you have. I want to see some action. I want to see them put out there.

I know we should.

But I will tell you, it is easy when you're passionate about something to be able to do it, you know, just. It's not. I don't like this. I don't like that saying. I hate that. I knew what you were going to say. It's like, if you love what you're doing, you'll never work a day in your life. That's bull. That is so such a lie. I work my tail off and I love what I do. Probably 70% of the time, there's probably. And this is where this, honestly is what makes the difference between someone who's super successful and someone who's not is when the 30% of the. I don't want to, I don't like to. I don't. I just wish I didn't have to do it. They do it anyway. And, man, there's calls. I'm. I'm actually starting to enjoy calls now. But it's because, what about three months, five ago, something I said, you know, I'm gonna. I'm gonna stop saying I don't like calls. And it literally has shifted the way I look at that. I don't mind calls anymore. It's actually, it's something I enjoy. And I think it's because for decade, over a decade, I say, I hate making calls, I hate making calls. I hate making calls. Well, guess what? I'm gonna. I mean, think about that. If I go, I don't like my wife. I don't like my wife. I don't like my wife. I don't like my wife. Eventually I'm not gonna like my wife.

It's true.

But if I go, I love her, I love her, I love her, I love her, I love her. Why she loves me, I don't know. But no.

Yeah, we're trying to figure it out.

I know you are. There's a whole different case design on that. Yeah, I treat my wife like gold.

You do?

I do. Okay. So why we don't like annuitization.

Yes. So last week we discussed income riders and why fees shouldn't scare you. This week we're discussing the. And this is in air quotes also fees, free.

You're drawing. Taking people away from our YouTube channel if you keep using air quotes.

Oh, man. The free method of guaranteed lifetime income and why it often costs more than writers. It gets looked at as free, but what you end up giving up for it I think is a bigger cost, 100%. There was actually a recent forum, I was interacting on a thread of messages and the general topic was, what's something about annuities that you hate? And I commented one word, annuitization, because I just don't see the need for it. And that got some, that got some pushback. There's a lot of people out there that don't view it the same way. Industry experts even, that don't view it the same way. And probably because you, you're probably the most influential mentor for me in the business over the years, I'd say in life. But anyway.

I have kind of adopted your view of annuitization. I will say though, that I think personally I would see more value in annuitization if income riders had never been invented.

Well, of course I get that because annuitization is literally a pension. I mean, most, if you're doing a joint lifetime payout, that's most pensions, they have a single or joint lifetime. Now they do have some survivorship or base. 60, 40 or 75, 25. I mean, I get that, sure. But when you literally write a check to the insurance company, you can never have access to that money again other than your structured payments. And then you also at long term care, terminal illness, death. There's so many reasons why I just don't like annuitization. Because you're literally right and checked in. The insurance company is saying the money's yours now give me my allowance. Yeah, that's what it comes down to.

I made a list of the quote unquote costs to annuitization.

We just lost 5,000 viewers. And.

And it comes down to a couple of kind of overarching areas of these costs. Loss of control of the account and zero crediting opportunity. So you only have a death benefit when you annuitize. If you've annuitized for a period certain.

Period certain, or return a premium, right.

And you die before that period is up.

If you do period certain with life, okay, great. You get the death benefit potential in that period certain, and you have guaranteed lifetime income payments. But the benefit difference, like the amount of income that you actually get off of a period certain with life or life only versus what you could get on a FIA with a lifetime income benefit writer.

Well, especially with some of these very highs with income writers right now that have a potential for income, increasing income.

That's true. Once you've annuitized, you're locking that in.

That's it. And the reality, when you put a person in that situation, you, you are pretty much setting them up to fail within reason. I mean, if they're pulling in $15,000 a month and they only require $5,000 a month to live off of, they're fine. But, you know, that's not the case. Sometimes when I'm helping agents, I get this weird feeling aside going, you must have a different client base than I have, because often I'm trying to scrape every penny together trying to help them retire when they, they say, oh no, I can annuitize this, or hey, we can just do the proposed growth potential growth off of the annuity, and they can live off of that. And I'm like, I have a different client base because most of the clients I have, they are not in a surplus income situation. And we need to have that annuity to make sure that they do get in some sort of surplus situation. I mean, if they have, if they have an annuity, and I've lost count the number of times I've had to do this where they don't have money. And for example, if they're 75 years old and they don't have money to live off of, they require too much to pull out of their current funds. They're not working. I will not do an annuity because if you tell me you're trying to pull out 9% per year, and now, granted, it depends on what the situation is, because there are some payouts that can reach very high numbers. So I'm not saying it's never an answer, but I will say most of the time it's not. It doesn't work.

Yeah. So the greatest cost to annuitization is not what you pay to have it, it's what you don't get when you do it. And to make that line that out or whatever. If you use an income rider on a fixed indexed annuity, you're getting oftentimes comparable income amounts. They're going to be less. Fixed indexed annuity with an income rider is, is not going to pay out as highly as if you were to annuitize it. Because now the insurance company has that lump sum that they can do with what they want and they're going to make their payments to you. But you get comparable income amounts for a fee that is most of the time covered by the index strategies of the product anyways and has the potential to protect that death benefit regardless of time period of when you die and you maintain control of the account as the client. It's like those are the things you're foregoing when you annuitize. But it does beg the question, even FIAs have a maturity date.

Okay, how do you navigate that?

Give me a situation.

Okay. Client buys an FIA with an income rider and maturity date is.

And I can probably handle this myself, age 100. What are the odds they live to 100?

Okay, so let's just say they do live to 100. Walk away with that value that's left in there.

Just take it.

Yeah.

Or you could at that point annuitize.

It could.

And.

If you're looking at an account value that's in there and it's significant, why would you ever annuity ties that? Well, sure, there's just walkway and then you're Gonna Live to 101.

Right. I mean, so the argument there, and I ask for agent's sake. Right. Is because even if we're using fixed indexed annuities with income riders, we can't get away from that maturity date. We can't get away from annuitization in totality. But you can in effect.

I don't know, it's just by just simply client and you. 18 plus years, it's ever lived beyond 100.

And not every FIA is going to have 100 as a maturity at 8.

A few in early 90s, maybe mid 90s, but I don't think I've had anybody that's that old. Now granted, being in business for 18 years, even if I would have had. No, yeah, that could have. That could easily happen. But I've really done annuities strong for the past 15 years, 14 years since 2008. So that's an interesting scenario because. Well, back in those days though the income riders, if you had a good income rider, you did not have a good index. Nowadays you can have a good Income rider and a good index. True. So times have changed and I think it will only get better, too. I really do. I think annuities are adapting very well to longevity. I really, really do. Way better than Social Security.

Sure.

I mean, way better.

Yeah. The oldest person I ever knew lived to be 103. Happened to also be the wealthiest person I've ever known. Had. Had no. Basically no breaks on the amount that he could live on. His wife lived to be 99.

Why did you get any money from that? You clearly were not the favorite.

I wasn't the favorite, but argument being where there is surplus, where there is more than necessary. They're tense. And this goes right back to what we talked about last week with lifetime income benefit riders. Where there's surplus, there tends to be more joy. There tends to be.

Just happier living.

Yeah.

They do more things, and because they're doing more things, they're living for more.

You mean the rocking chair doesn't get them? No, I don't.

Not nearly as frequently.

Oh, we do. You know what we do have? Stress and rocking chairs books. So if you want to bulk order them, go to stressandrockingchairs.com once again, not a shameless plug that has helped more agents close deals. I would say, and I'm not saying this because I wrote it. I'm saying it because I had. I wrote it and I had a team that put it together to help me write it to where anybody could understand it. In other words, not using financial ease. Because it's easy for me to talk over someone's head. Fortunately, I have learned very well not to do that to clients. If I start to see them kind of tilt their head like a puppy, I'm like, okay, wait a second. I just said something that they don't understand. And. But that stress and rocking chairs book people buy, you buy in bulk of 50 and you hand that out. Well, I'm not the author. Okay. Then you say, my mentor wrote this book. Yeah, I did it for years. I've only had that book, I think, for five years. Probably four or five years. Five or five. Five ish years. But the point is, is I. Before that, I had to use my mentor's book.

Yeah.

And you know, I'm telling you, if you're going to use it. We talk about annuitization, we talk about FIAs, we talk about fixed annuities, we talk about variable annuities. Sure. We talk about the importance of income in a way that people can understand. Right. But didn't plan on talking about that. But I'm telling you, when I hear the stories that you tell me about an agent that handed out a book.

I've had a handful of agents that have told me. So this means there's more agents out there that it's happened to and they haven't told me, but a handful of agents have told me. And Caleb, I left the book with a prospect, a client that I met with once. They went through it and they called me back asking how can we move forward with the concepts in this book. Yeah, I mean it does like you want to use the term does a selling for you while it, while you're gone.

Whole seminar system based off of that. We are.

It's going to be good.

So annuitization versus okay, let's go.

There are situations where annuitization is necessary. It's the option. But most of the time incredibly rare. It is rare.

Example 50 year old that needs income right away annuitization. Someone who literally have to squeeze every little penny out of every little dollar and they're over 80. That's another reason.

Sure. I mean there's time frames on inherited IRAs depending on when they're actually getting around to you. There are FIAs that will honor the what is what. It's the secure. Not secure. It was a secure act but it was basically this concept that you have to draw the principal and the gains on inherited IRAs within a 10 year period if they died after January 1st of 2020.

It's not often I see you forget something that you read.

I know. Well, that was that we just had secure 2.0 and so got my wires crossed in my brain now that I.

See all the time wires crossed.

There are FIAs that will do that. But if they reach out to you four years, you know, here in 2023, 2024 and the client died, the original IRA owner died in 2020. Those products FIAs are probably not going to be the option you're going to have to do. You know, a five year period certain on a spia or something like that.

If you're trying to maybe four or five annuitized annuities in my entire career, it's rare.

And where, where it's needed. There's almost always some kind of alternative that maintains more client control. But where there's not, that's your option and you go with it and you find the best available product for them.

Well what are your few wise words to say to wrap this up?

I don't know that I have any. Maybe that's it. Maybe that's it themselves. Those are the words I have not.

Well, hey, I hope this helps you guys. You have a great day. And of course, course, happy selling.