A conversational YouTube video (Denzel Rodriguez, Dec 2, 2025) about annuity strategies to boost retirement cash flow. Speakers explain how annuities pool risk, how current interest rates and upcoming Fed actions create opportunities to lock in guaranteed returns, and how existing annuities purchased when rates were low can be exchanged or upgraded (sometimes without out-of-pocket cost) to raise lifetime income. Key mechanics discussed include distribution rates (historically ~3.5–4%; sometimes 5–6%), benefit base roll-up factors (example ~7% growth of benefit base), surrender charges, income riders vs. irrevocable annuitization, and legal uses (Medicaid planning, protection from lawsuits).
Chapters
We've got to understand annuities and how they actually pay out. What they're able to do is through risk pooling. Right. Life insurance companies are gathering all this money that we're contributing, plus the revenues and the fees that they get from other products. I'm assuming that they provide. So it's like a whole, you know, products in these companies. Then it's based off the 30 year bond for the most part. We have the next Fed meeting coming up in September, I believe.
Yep.
What you're saying is between now and September, rates are where they are. I believe it's 4.25 to 4.5% is the Fed fund rate. And somebody can fact check me or I'll have my editor do that for me. I think it's somewhere around this number. And then I know prime, which is what my audience is most familiar with as it relates to getting home equity, lines of credits, things like that. Prime is at 7.5%. So rates can potentially come down 0.5%, 0.25% and then can continue to come down. But we're still at a pretty, you know, high interest rate environment despite rates being cut. But what you're saying is, hey, between now and September, if you have any kind of retirement accounts that you've been growing and you're about 10 years ish or less out from retiring, that you're able to lock in some, in some cases a guaranteed like rate of return on, on that initial contribution is what you're saying. And then you're able to lock, lock in. Okay, you're able to lock in a certain distribution rate at that later point in time when you, when you actually retire, then you also said, hey, if you're someone that already has an annuity, so you already value annuities, someone wrote you an annuity five years ago, 10 years ago, that when rates were down, they bought an annuity, that the distribution was. What would you throw some numbers out in terms of a distribution rate that it was reporting back in 2015-2020, let's say. What would you say?
I mean, you could have a distribution rate like three and a half, 4%. You know, we could raise it up, you know, to maybe 5 or 6%. So people are going to think back to that example, I gave it a hundred thousand. They're going to think of 10%. That 10% was in reference to the original principle. But what happens is the insurance company will take that original principal and they will increase what's called a benefit base with something called a Roll up factor. And all that means is they're basically saying, okay, you know, and this is where people mistake rate of return for roll ups, right? Think of a roll up like the way Social Security grows between 6 and 7 and 8% a year as you wait, you know, that's what's happening with your annuity. So your 100,000 is growing by 7% in this benefit base, which is not actual growth, it's not real money. But why it's relevant is the higher the benefit base, okay? That's what the payout factor is based on. So if your payoff factor is 5% and you've doubled your benefit base over 10 years by growing it by 7%, well, now it's at 200,000. 5% of 200,000 is 10,000, 10,000 is 10% of your original starting principal. So that's why it's really relevant. So again, if you look at people, and this is really important, I mean, I've had so many clients that we have set up a retirement for and I can come to them. I mean, these are people I've worked with for the last, you know, decade. And you know, their income is say 500 bucks a month from this annuity and literally for no extra money or nothing other than just transferring it to an annuity with a higher rate now, their income is going to be 800 bucks a month for the rest of their life. And so it's like if you have a part of your portfolio that's a machine to generate income, then it would be wise to pay attention to an environment where you can literally just upgrade that machine and get extra income out for the rest of your life by just being aware of the interest rates. And that's really all that's happening right now. So anybody that has an existing annuity or that is earmarking a portion of their retirement savings for income should really be paying attention right now to, because before they cut these rates, this would be the time to learn about these types of products.
Okay. And we have already helped a few clients of my, I think one or two people that did that, where they essentially upgraded their annuity, they exchange it and it didn't cost them anything.
Right.
They didn't have to come out of pocket. And does it only apply to, to people who have annuities that they haven't been taking income from, or does it apply to people who have an annuity, haven't been taking income, have an annuity, and maybe they already turned it on?
It's a good question. So when you say it doesn't cost them anything, I just want to be 100% transparent and clear. Right. It doesn't cost them anything to contribute money out of pocket. But sometimes you may have a surrender charge or something that may actually lower some of your principal to go from.
The existing, from the existing annuity.
Okay, that makes sense. Yeah. So just to be fully transparent, like to explain it, right. You may actually go backwards a little bit in principle to move your annuity. But if your income for the rest of your life goes up, you have to weigh out your priorities, right? Say, look, I don't care if I take maybe a thousand dollar haircut or whatever it is to get an extra 500 bucks for the rest of my life. That's, that's a no brainer. So, you know, that's one of the things we look at one of the metrics we'll use to evaluate with our clients, like what their priorities are with that annuity. But to answer your question, you can take it from existing annuities that don't have income turned on or annuities that already have income turned on pending that you didn't annuitize. So there's different ways to take lifetime income from annuities. If your annuity is annuitized, that's an irrevocable transaction. You know, that would be like a mediated annuity or a DIA or just annuitizing an annuity, you know, and those are not as common, I would say most of the time people are using lifetime income from what we call an income rider, which can be stopped, it can be changed, it can be adjusted. And so the answer is you should find out. I mean, okay, yeah, evaluations for people all the time, where they go, oh, I have this, this and this. And then we call the insurance company and it's that, that and that. So it's like, you know, they can be confusing and there's a lot of features. So it's important to get an audit of it.
So to be clear, there are, you would probably argue there's a lot of people with annuities that are, say deferred and then they turned on the income rider, which is a rider that allows you to take income from that annuity and then you also have the option to stop it. That's, that's one type of annuity. And then there's other types of annuities where it's like an irrevocable trust. Once it's, once it's done, the decision cannot be reversed. So let's Say they had an annuity and they turned on income, so it annuitized, and whatever the contract is, that's what it'll be. They can't stop the income. It just is what it is. Right. Pay for life.
Yeah. So people, people Denzel will ask me all the time, like, why have two different ways of taking lifetime income? What's the difference? Well, annuitization in some cases can get you a higher income payout, but it's irrevocable. You can't make any changes, and you can't access your principal anymore. But the more common reason people are using these is really through their attorneys. So I like to think of these types of annuitizations as really more of like a legal maneuver, so they can be used in a couple different ways. And again, I'm not an attorney, but I have attorneys that recommend their clients to me all the time for a couple different reasons, the most common being to qualify for Medicaid. So a lot of times, if you have a husband and wife and they have too many assets to qualify for Medicaid, some states, like in Arizona, will allow you to annuitize assets in one of the spouse's name. Now, an Elder Laws attorney will be advising all this and working through it, but they'll bring me in as the agent to come and set up the annuity. And that basically says, you know, okay, this is now an irrevocable payment to one spouse. This spouse that needs the health benefits can qualify, and there's certain criteria and all this kind of stuff. The other reason too, and more famous example is like, if people are being sued, their attorneys will recommend they annuitize assets. So like, one of the more famous ones is like O.J. simpson. When he was going into like his trials and lawsuits and he was being sued, his attorneys recommended that he annuitized large portions of his liquid net worth to protect it so he'd have income for the rest of his life and it couldn't be taken.
