Record Breaking 223 BILLION Purchased in Annuities | Important Updates in 2025
Denzel Rodriguez and annuity expert Daniel explain why 223 billion was purchased in annuities in 2025: higher bond yields now let a 55-year-old lock in roughly 10% annual payouts on deferred income. If the Fed cuts rates, future payouts drop, so timing matters.
Questions this video answers
Over 13 years (at time of recording).
Approximately $10,000 per year (≈10% of original principal) as a lifetime payout in the current rate environment described.
Speakers cite about 4.25%–4.5% (to be fact-checked).
Speakers mention prime at about 7.5%.
The example described a structured settlement placed into an annuity that cannot be accessed until the beneficiary turns 18.
Welcome back, Daniel. Appreciate you spending some time here on my channel today. We're going to be diving into some annuity updates in 2025. There's been a lot happening this year with our current administration, and there's a lot of things happening in the political world that is affecting our clients, both in good ways, maybe in some negative ways. And it's important you as the viewer, the customer, when you're looking at different kinds of financial products, how shifts in administration with new tax bills, new projects that are happening globally or even just domestically, even within your state, how it affects your finances. So just having the awareness, right, and being able to, you know, get, say, financial news, not just general political news, but like financial. Financial news that affects us ultimately helps you make better financial decisions or just having more awareness. So today, what I'd like to do with you, Daniel, since you've been in the industry for over a decade, so you've seen different administrations and how that affects the products that you provide with solutions that are attached to those products. Today we'll be focusing on just annuities. So, so you can do a little recap for us on what an annuity is, how they work, what they essentially, what's the purpose of them, and then dive into fast forwarding 2025. What's different, what's been changed.
Sure. Well, thanks for having me on, Denzel. I always love being here. And just to kick things off, you know, I've been helping people with annuities in retirement, like you said, for over 13 years. At the time of recording this, over a decade. And, you know, an annuity is interesting, Denzel, because it, it can be as complex and as simple as you want it to be. The actual literal definition is it's a contract between you and an insurance company which is effectively provides a guarantee. So really what that does is it allows you as the consumer, the individual, to transfer risk to an entity that's built to handle risk. And the. The one of the risks that annuities handle, probably better than almost any income vehicle, is what we call longevity risk. So the risk of outliving your money. So I call this retirement insurance. Basically, if you're going to retire, you're going to need to create income from your. What you've saved. And an annuity is going to give you a guaranteed paycheck for as long as you live. And if you're married, you can set it up to take it as long as you and your spouse live, and it won't run out. It's going to Provide that steady cash flow that you were used to getting while you're working for the rest of your life in retirement.
Gotcha. So we got annuity is a contract with guarantees. Right? A contract with a life insurance company.
Yep.
Right. Specifically, only life insurance companies provide annuities. Correct.
Only life insurance companies and what we call fraternal orders, which are essentially like life insurance companies. They're more like member run for their, for their, for their members. Kind of like a, almost like a credit union.
Okay, got it, got it. And you said something about longevity.
Yeah. So again, people are living longer than ever before. We know more about science, nutrition, medication, you know, overall fitness. And so the population of centurions, people living over 100, is the fastest growing population on planet Earth right now. And so as people are living longer and longer, they want to make sure they have a guarantee that as they get less and less hands on with their personal finances and they age, that they're going to have a paycheck that takes care of them and have that income so they can maintain their standard of living without having to worry. And that's really what an annuity does better than anything.
Gotcha. And then you mentioned retirement insurance. What does that look like for or the everyday person watching this video, that's.
What I call an annuity. Right. It's like if you're approaching retirement and we see this all the time, it's a very daunting approach because you're looking at this journey where you might be 30 or 40 years without ever earning another paycheck. And so you want to make sure that you're going to have enough income for 30 or 40 years. That's a long time. And so I, I call it retirement insurance because basically you can just buy an annuity and it's going to ensure that you won't run out of money in retirement. And that's why people are flocking to them. You know, it's interesting, we haven't seen this many people buy annuities since right after the Great Depression. So right after the Great Depression, a lot of Americans lost confidence in the banking system as a, as a place to store money. And so they went to insurance companies because they saw during The Great Depression, wow, 50% of these banks failed and there was less than 2% of any insurance companies that had even an issue. So they recognized, hey, these institutions are built for crisis, they're built for times like these. We want our savings to be guaranteed and insured and we want to be able to know that it's going to be there when we, when we need it. And so we're seeing that again today. Annuity sales are growing in the tens of billions, according to Limra, because Americans want control, they want certainty, and they want predictability in their retirement. You know, for you and I, I mean, we can stomach some variables and some, some volatility, right? I mean, we could try some stuff doesn't work, you know, it's okay. We're going to have time to keep working and make it up and we get to learn and grow and make mistakes. You know, when you're 65 years old and you've saved all the money you're ever going to save for the rest of your life, you really don't want that kind of variability or those kind of mistakes or that possibility of losing any of that money. And so that's really where annuities serve people the best. And the reason why I say they're the best for income is they're really the only vehicle outside of a pension or Social Security that can provide that guaranteed check. And what I mean by that specifically is once you run out of money in that annuity, the checks keep coming. That's how you transfer the risk away. An insurance company can pool risk over millions of people and billions of dollars, and they can make sure that, hey, if your pot of money runs out, your income doesn't stop, your check doesn't run out, it goes on forever. So that's why people are using them, because they go, I don't know if I could manage my pot of money and make sure it doesn't run out. But if I can use the leverage and the benefits of a company that's built for this, I can get checks for the rest of my life with this pile of money. And so that's why I say it's one of the best sources of income. The other reason why I think it's one of the best sources of income is if you look at, and this ties directly to interest rates today. If you look at a 55 year old and it doesn't matter what insurance company, there's 2,000 insurance companies in America. Most of them offer annuities, okay? So it doesn't matter which one you pick, but with the interest rates as high as they are today, Denzel, that 55 year old can go to an insurance company, they can transfer a portion of their 401k retirement savings, IRA, whatever, into an annuity, they can let that annuity defer for 10 years and on average they're going to see about a 10% payout from their original deposit. So let me give you some numbers, okay? I know you like examples and numbers. Let's say you have $100,000 and you roll it into an annuity of 55 and you're going to retire at 65. Well, at 65, you can contractually guarantee yourself a payment of $10,000, 10% of your original principal for the rest of your life. So where else can you go and put your money where you're going to get a guarantee that you could pull 10% of it out for the rest of your life? It's very difficult to do with other, with investments or other accounts. And so that's why the annuity is going to be the optimal choice for creating cash flow in retirement that's stable and predictable.
So 100,000, you're saying 10% at age 65. So 10 years later. Yeah, someone originally puts in 100,000 one time contribution. And let's say that was a rollover from a qualified retirement account such as a 401k, a tsp, a 403b, a 457, any really kind of retirement account that's provided by their employer or even if they're an entrepreneur and they're, they've been contributing dollars into this account that's going to unlock after 59 and a half. And instead of taking distributions directly from that account, you're saying it's more efficient to roll some of those dollars into an annuity 5, 10 years ish or less before you're actually going to retire.
And if you have a shortfall in what you need to live your basic standard lifestyle and expenses. So for example, let's say with your Social Security and you, let's say you don't have a pension, but you have Social Security and your Social Security payments going to be, let's just say, $3,000 a month. But let's say you need $4,000 a month to live your ordinary lifestyle in retirement. Well, what we would do is we would come in and fill that thousand dollars a month with a guaranteed lifetime income annuity payment. So that way your Social Security and your annuity are going to meet your minimum threshold. Your criteria for your basic standard of living. Now again, we would be intentional and go beyond that, right? We would look at Tom Hegna calls us having a paycheck and a playcheck. The paycheck covers the bills, the playcheck covers the travel you've always wanted to do, the mission trip you've always wanted to do. The giving, you know, to your grandkids or whatever it is, you know, we would cover that with guaranteed lifetime income as well. But if you do that properly, Denzel, and that's always step one in our process at nations first, if you do that properly, then you've removed the risk of ever running out of money because you're going to have that filled with a lifetime guarantee.
Okay, got it. So we're looking at, in your example here, someone being 55 years old and this is relevant to today's rates is.
What you're very, very relevant.
Very relevant.
More important than that because like we talked about, I mean, I've been in this space for over a decade. So I worked in 2013, 2014, 2015. Rates were very, very low and they remain low for a long time now because of this inflation. We've had and we've had the largest and fastest rate increases we've ever had, meaning we've had higher interest rates previously. In other periods of US History, they've been way higher, but they've never gone up this much this fast, ever. And so that creates an opportunity because now you have an administration in place that is very vocal about wanting to lower the rates. They want to get rid of Jerome Powell. Trump wants to get these rates cut. He knows that's good for the real estate market, he knows it's good for the stock market. He knows it's good for the economy in the short term, so he wants to lower those rates. So I've been on a mission going around the country telling people, look, if you're approaching retirement within the next 10 years and you're looking at securing a portion of your portfolio with guarantees, this is literally the best time in the last 30 years to do it. Because if they cut those rates, that will lower that example I gave you earlier, it'll lower the payouts of annuity.
Okay, so the distribution rate comes down based off of whatever the rates are, and that's based off the federal funds rate, or is that based off prime? What specifically?
It's interesting, right, because not all interest rates are equal and they don't move equally. Right. The fed funds rate drives everything, but then they really goes off of the bond market. So annuities are basically looking at the 30 year bond and that's what insurance companies are able to purchase to be able to back these annuities up. And so they're looking at the bond market. So as those interest rates fall, the payouts that the insurance company can offer through the annuity fall as well. And so they're directly correlated.
So when rates were increasing, the life insurance companies are purchasing those 30 year bonds at those higher rates, essentially.
Yeah. And they're increasing immediately in real time.
Say that again.
They're passing through those rate increases immediately at real time. So that's where the value of a good independent insurance agent comes in. Denzel, like for us, you know, we have a software that tracks all the companies in real time and they're all competing. So again, for me, I'm not loyal to any one company. I'm not like a specific insurance company captive agent. I work with, you know, basically any company I want. And so I can look at who's got the highest rates and they're competing. And so it makes it fun because that's where we can offer some value. We can go to people who either have annuities right now and they can look at exchanging them for higher rates, or we can just look at people that are coming into the retirement preparation mode and we can try to help them pick, you know, the best rates with the highest rated companies we can find.
Gotcha. So quick updates here. 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 or credits, things like that. Prime is at 7 and a half percent, so rates can potentially come down 0.5%, 0.25%, and then can continue to come down. But we're still at a pretty high interest rate environment despite rates being 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 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, 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, 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, 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. 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 $1,000 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 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 premium 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, 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.
Okay, can the, can that also be the case with people who get injured? So like my, my wife works in workers comp. As a lawyer and she often talks about when they're always typically trying to settle. And so when you settle, the person that got hurt can either take a payout or take a annuity, essentially like a lifetime income. Would that also be the case in some of those kinds of situations where the attorneys are writing these kinds of annuities or they're bringing someone like you, an agent in to write the annuity to settle a case as well? So it's like different, different use in that example. But am I on the same path?
Yes, you are. So that's a whole other market of annuities, and they're typically referred to as structured settlements. So I do those as well. Like, so, for example, you know, the girl across the street got attacked by a dog and her parents had to sue the person's homeowner's insurance to cover the medical bills and take care of the damages. Well, that lawsuit that they won essentially or settled had to get placed into a structured settlement in the child's name and be placed into an annuity that they couldn't touch until they're 18. So again, that's really common. Like, you know, and again, the attorneys and the courts aren't setting those up. The attorneys and the courts just know that the annuity is the vehicle that's going to be needed for that instance. And so that's why those are kind of more like in the legal realm where you would. Most people aren't purchasing structured settlements, although you can. Most people aren't purchasing them, you know, on the open market. They're usually typically, I'd say 90% of the time using an annuity and attaching an income rider, which is that feature that says, hey, you can take this payout percentage from this account for the rest of your life, and when it runs out, we will still guarantee that same payment for as long as you live. That's what the rider does.
Okay. And that just speaks a lot to the safety of this product. When you see the courts, the judge, the lawyers are all in alignment that the annuity is the best financial product. They're not setting them up with some sort of retirement account. It's no, here's the annuity that can solve this problem, which is huge. From a, from understanding the, the contract and the guarantees, longevity, the insurance that this product provides. Now the. Would you say the only thing that really affects the performance of an annuity is really the bond market and when the feds decide to decrease or increase interest rates. So when interest rates get increased, it's a benefit to pre retirees or people who are retired that don't have to worry about their variable rate loans, where if they're debt free, if they have a variable rate mortgage and they don't carry a mortgage, they don't carry any kind of variable debt rates, it doesn't affect them. The reverse for those that are watching that aren't anywhere near retirement, like you and I, rates coming down benefits people like us, entrepreneurs, business owners, people that are trying to get out of debt because now they can go and borrow at a cheaper rate, they can refinance, they can restructure debt to save a bunch of money on interest. It's just, you know, more money gets poured into the economy. So if you're on the service side now, people have more money to essentially work with. People can now go get qualified for that mortgage at a lower rate. That's where rates coming down benefit those that aren't retired, those who are close to retirement and about to retire, and they're sitting on a million dollars, 500,000, 1.5 million in a few different retirement accounts. And now they're trying to figure out how do I preserve this money and make sure that it provides the amount of passive income that I need. You really need to be paying close attention because you could be securing an extra 1, maybe 2% higher distribution rate between now and September if they do in fact decrease rates. So if so, give me an example. I don't know if you're able to answer this. We're at that number with the Fed rate being between 4, 4 and a half percent right now. I know it's not above 4.5 if rates come down a half a percent.
Yeah.
What does that do to the annuity industry? Does it equally go down by 0.5% or is it a higher. How do we interpret rates coming down in this example?
Okay, to answer your question, it really depends on how the bond market reacts to those rates. Right. So. So really, you know, just because the fed funds rate comes down and we see this with, like, inverted yield curves and weird things that happen, doesn't necessarily mean the bond rate's going to move, you know, exactly like the interest rate is. Sometimes the bond market knows more about, you know, the future of interest rates than we do. Right. So, you know, it's really going to depend. But, Denzel, the reason I love being on your channel so much is you. You unpack so many amazing things. So can I go back to your point before we got to here real quick?
Yes.
When I was talking to the attorneys, there was a team of attorneys setting up this annuity for this girl. And I was just the agent, you know, on the call, listening. I. I asked them so many questions, and I said, is there any other vehicle? Could they go buy stocks? Could they go buy bonds? Could they go put it in the bank? The judge would not allow anything else other than an annuity for this little girl because of the guarantees from the insurance company. So that's really powerful to highlight. Right. I mean, that's what it's, you know, when you're talking about, you know, a decision for a minor and the parent has a fiduciary obligation and a guardianship obligation to make sure that they're monitoring this asset properly till that child turns 18. The only thing that was suitable that the judge will allow, what? Annuities. That's a great point to touch on, you know, which I want to make sure people understand. The other thing that I want to touch on that you talked about was when you lock in that 1 or 2%, you're locking it in for life. So a lot of people misunderstand, and they go, oh, well, rates are high today. What about when they drop? It doesn't matter. If you lock in at a lifetime income annuity and a high rate, you have that rate for the rest of your life. So you're locked in. And the third point that I wanted to raise, based on the question you kind of asked in the middle there was, you know, do interest rates only affect the performance of annuity? There's different kinds of annuities. There's ones that just offer a fixed rate. There's some that are indexed to, like the S&P 500. Now, interest rates play a role in how much you get to keep out of the performance. But again, there's other things that drive the performance of that annuity. Right. It could be an index. It could be a variable annuity where it's just directly in the market. So there's different types of annuities, but interest rates overall, to answer your question, yes, have an impact on those. And however the bond market reacts, that's how you'll see insurance companies react. But I like to keep things really simple. You know, I like to think of things in frameworks, especially if it's stuff I don't understand. I happen to understand this well. But if you're not familiar with like the different places in life where you would use different things to go back to what you said, if you're approaching or in the decumulation phase of life, which is like the second half, then, yeah, interest rates moving is significantly important for you. It's bad for annuities because they go down in rates and it's bad for bank products. A lot of people, a lot of seniors, keep a lot of money in the bank and they love shopping interest rates with CDs, money markets, savings accounts. So it has an impact on all of that. So that's important for that phase of life. For our phase of life, the accumulation phase, where we're trying to get to a place where we can even have the ability to be in a decumulation phase. It's phenomenal because things that appreciate in value as we're building wealth will go up and debts that we're trying to reduce, we have a better chance of paying those off with lower rates. So again, you really got to place yourself in, like, what area is your priority at this stage in life? If you're really thinking much more about that decumulation phase where you're going to be using your money, then these interest rates matter tremendously. And this is a really important time to sit down with my team and we can just do an audit of what you currently have and what you're looking to accomplish income wise and make sure you're on that trajectory.
Absolutely. So that's the next action step. For those of you that are still watching present, you're dialed in. Your next action step is doing an audit on an existing annuity, if you have one. See what opportunities you have. I would, I would argue even if rates come down come September, there's still opportunity on the table. Especially if you purchased an annuity prior to Covid when rates were at zero and even maybe like 2021, I think is when rates started to go up after 2021, going into 2022. So that's when rates were at zero and that was, you know, annuities were only paying, I think I haven't I seen an annuity that was only paying a 1% or 1.5, something like that. Yeah, distribution rate that's, you know, super inefficient compared to say, numbers today. Right, right. And that person could easily switch that over and get themselves a much higher rate. And it doesn't cost them any money out of pocket. And to your point, there may be a surrender charge to it, so you might go down in principle, but it almost doesn't matter or doesn't have an effect because of what the benefit income benefit or roll up. As you mentioned, those that specific language has an effect on the actual distribution of that particular money of those of those dollars. So that's huge. I've got links below for you to.
We're really at the entry level, scratching the surface in this video. I mean we do so much more. So when we audit an annuity, maybe we can't improve it, but nine times out of 10 we inform the client of something that they were unaware of that they needed to adjust. It may be as simple as just changing, updating a beneficiary, but it's a really good step. It's a good practice, especially if you have an agent that isn't servicing your annuity. Like it's good to check on them once in a while. But not only do we look at how we can maximize the income to align with their goals, we're going to look at can we do a bridge strategy to pump up the income even more from that annuity by deferring it maybe another year. We're going to look at the taxation and distribution of the income from that annuity and how to keep as much of that as possible. That's all just part of the process. So we take it a few other levels beyond just maximizing income. We look at several other options to see how we can really maximize every dollar from that account.
Yeah, that just came up. I just popped up another question here. With the big beautiful bill passing recently, there's quite a few deductions that W2 earners can receive or claim would. Do you think there's a world now where you might be getting cases where let's say someone is retired and the amount of guaranteed income they have from their Social Security, their pension and annuity is actually more than what they need and maybe the gap is actually quite large. Is there ever a world where it makes sense if they have the kind of annuity that they can turn off and let it defer in this higher rate environment that we're in almost take less money simply because their tax bracket, almost like in a way they would still net the same amount of cash flow. Because now we've got a, we've got the SALT deduction that they've implemented. They've got child tax credits that have increased. And if, and if wife or husband has a side business, the qualified business income deduction increased. So when you look at these percentages, maybe there's a world where actually taking less income, you end up with the same amount of cash flow simply because of how they're taxing you less on every dollar. Yeah, there's a world where that might be the case.
100%. Right on. So, you know, one of the big deductions for my industry is they raised the standard deduction for people over the age of 65. And that. And that really had a massive impact on how their Social Security could be taxed for certain filers. If you're single, up to 75,000, if you're married, up to 150,000. And so the big beautiful bill passed on a Friday. By Monday morning, actually it was Monday afternoon, I had a video out to every single one of my clients saying we need to meet now because of the change in deduction. And remember, it's only 25 through 28. But again, it's just like you said, now they can recognize more income and keep more of that money. But instead of turning the annuity off, what I would maybe look at or my team would look at with our CPA and different people, is is that an opportunity for Roth conversions? Is that an opportunity to purchase more things that produce income down the road.
For you or maybe acquire rental or something?
Absolutely, yeah. You can put it in whatever you want. One thing that I think is really cool, especially to capture the high interest rate environment, is for some people you could purchase life insurance. So let me give you an example of that. This is crazy. Let's say, for example, by the taxes changing, you're going to recognize an extra 1% of your income. Okay. From that payment. It's not a big deal. Right. What are you going to do with 1%? Well, if we took that 1% and put it in life insurance and you were taking a distribution from a $250,000 taxable Iraq, you could essentially go out and buy something called a gul, guaranteed universal life. And what that's going to do is guarantee you a $250,000 tax free payment. So what have you done? You've effectively replaced your Fully taxable IRA with a tax free distribution for either your spouse or your children. And some of these guls even have riders that will pay you out for long term care or chronic care. So, for example, you might actually create efficiency in distributing your own wealth back to yourself tax free just by using the new changes in the bill. So, I mean, the possibilities are it's really an exciting time to be evaluating retirement because there's so many different moving parts that we now can take advantage of. And so if you're, if you're in it and you're sincere and you're dedicated, you know, as a professional in the retirement space, there's, you can do amazing things for clients that we haven't had access to before.
Man, I'm pretty sure we can go all day. So again, action steps, action steps. Those of you that are watching, I will have links below in the description in the comments section. Get on Daniel's calendar. It doesn't cost to do an audit to just bring as much information as you can to the table so that you can really maximize your time. Because we are in this window here where you do want to take advantage and not waste time. And you want to make sure, you know, with your team, you've got, like you said, you've got software that can scan so many different companies. And I equate that to someone wanting to buy a car today. Like what if you wanted to buy a car that cost 35,000 and you go to your local dealer, but you not knowing, 10 miles away, they're selling that same car just in a different color for $30,000 and it's a $5,000 savings. And maybe they're offering a 0.25% difference in financing rate. So now you're saving an extra thousand or more in interest for a total of say 7,000 or more in tax savings. And that the fact that say it's an American made car now you're able to claim, I think a deduction, if I'm not mistaken, on the interest that you pay. So we're talking little tweaks and leveraging other people's skills to get the full picture. So please, if you're watching, you're 10 years out or less or a little bit more out from retirement, you're thinking about retirement, you're processing these things. Let's have a conversation with Daniel and his team because there's a lot of folks I talk to that are also trying to retire early. When I talk to those people that are trying to retire early, let's just say before 59 and a half, but they're contributing to accounts that you're not going to be able to touch till after 59 and a half. So it's kind of like, hey, what are you doing with your dollar? It's not, you're not actually solving for what you really want to do if you're trying to retire before 59 and a half, let's say by 50 or 55. Well, you need to have a conversation with Daniel, his team, to essentially solve for that because it's a different conversation altogether. We're talking an extra 10 more years before you're able to turn on, say, Social Security and other benefits that can come along the way. With an annuity, there's no age limitation. Correct. In terms of when you can get one and when you can turn it on, there's no penalties in terms of you have to be a certain age to claim these. The annuity payout. Correct.
Well, again, these are complex, right. So it depends on how you take the payment. So you can annuitize prior to age 59 and a half and do what's called a 72T. And yes, you can get out of the 10% early withdrawal penalty if you're taking an income rider prior to age 59 and a half. That's where the IRS actually will impose a 10% penalty on the interest that you've earned from that annuity. And so it depends on how you structure. There are, there are plenty of scenarios where you can structure lifetime income prior to age 59 and a half. Just using.
Because I was thinking about the kid that is young that got attacked by the dog and won't be able to access it till 18. So that's where I got a little.
Interesting structured settlements, actually. They're insane. Like, you can do things with those that you can't do with just like purchasing an annuity. So they're very unique products, but what they do is they actually produce the income tax free. So. So, okay, it's. Yeah, it's insane. So that's how there's kind of like that. Not that issue with the deferred interest and the, and the rule. And basically the reason I think for that rule is Denzel, if you think about it, it's just like an IRA or 401k, right. If you're, if the IRS is letting you defer interest, they don't want you taking it before age 60, essentially 59 and a half. The same with an annuity. An annuity is going to defer, grow Tax deferred interest and then you're going to pay the tax when you pull it out, just like an IRA or 401k. And so it's similar in that realm of retirement account where if you touch it pre 59 and a half, there's a 10% penalty unless you annuitize it with that special rule. But for the structured settlement case for a little girl across the street, we built hers where it grows at a fixed rate until she's 18 and then it pays out. Now they chose a 10 pay, but you could have, they could have chosen a 20 pay or even a life pay and it comes out tax free for the rest of her life. So it's pretty cool what you can do with those. There's some, some really unique products in that market.
That's, that's incredible. I have one last question for you. This is relevant to a client I'm working with now. Yeah, they have inherited an annuity from their mom that passed away and it's two sisters. So they each get. Not each. They receive $500 a month and they just like flip. So one month one sister gets it, next month the other sister gets it. That's just kind of how they, how they handle the income between each other. Have you ever seen or are you, or have you worked with cases where people inherit an annuity and if, and if that can be restructured?
Absolutely, yeah. So the first thing this is. Yeah, this, this could be a whole other video. But the first thing you do is gotta call the claims department at the insurance company. Got to find out what the options are. Sometimes the parent has chosen an irrevocable option, so they're just going to get what they get. Sometimes it's a fixed number of payments, sometimes it's a lifetime payment. But a lot of times, or in some cases they have the ability of creating their own annuity. And again that applies to interest rates. Right now if the bonuses on new annuities are really high, which sometimes you can get an upfront premium bonus to roll over an annuity, it may make sense to rebonus that annuity and take a higher income payment with the higher interest rate environment that we have today. So it really, that's again, it would be a perfect example of let us audit the company and your options with you. Let us call, get all the options for you and explain them to you. So if there are better options. But you know, one of my favorite things that I really like to do, Denzel is and it doesn't come up all the time. But when you have a grandma or a grandpa that really wants to set something special up for grandkids or their kids, you can do joint life annuities with someone that's not your spouse. So one of my favorite ones I ever helped a lady with was she, like, loved her granddaughter so much. And her granddaughter had always struggled financially, and she and the grandma had done very well. She was 95 years old. And we set up a joint lifetime income annuity with the 95 year old and her granddaughter. And when I called that, I mean, you know, and I was very close to the client. When she passed away, I went to her funeral. I was very emotional. She was like a grandma to me. But when I was able to call her granddaughter and go, your grandma set up a $500 payment for you for the rest of your life, she was like, I mean, blown away. It was so beautiful. And the crazy part about it is when you talk about legacy, now, this girl gets a check with her and her grandma's name on it every single month for the rest of her life.
So think about, like, the emotion with that emotional. Yeah.
Oh, my gosh. It's so powerful, man. It's so special to be a part of. So there's no limit on the creativity and what you can do, and that's what makes it so special.
Last question. We're going to close out here. I know you guys are probably overwhelmed at this point. I just. I get too excited. Can you have a joint lifetime income annuity on anyone? Or does there has to be some sort of interest, kind of like life insurance? There has to be some sort of insurable interest?
Yeah, that's a good question. They do look at that. It depends on the company. So again, you got to look at the company's criteria on, you know, how they're going to set it up. Sometimes having a trust involved can impact that. So having a trust as the owner, sometimes they'll have different guidelines for the trust or how the trust is written. So again, that's the beauty of being independent. We can go to almost any company, and it's amazing how many times. Denzel. I've gone to 30 companies and it's a no across the board. And then I'll find one company who's like, yeah, we specialize in that, you know, and it happens all the time. So it's pretty cool, like, to be able to find that for people. We just had that example the other day, almost that exact same example. And we got all these no's, and then one company, a really great company, was like, yeah, we have a whole system for that. And it's just, it's really cool. You know, these institutions, some of these companies are older than the tax code, so some of the things they have the ability to do are really, really profound, especially on the tax side, too. So, again, yeah, that's why I would really encourage anybody who's curious or wants to learn more to reach out. And I'm happy to make myself available and, you know, for your audience and actually personally take some calls and see how I can help, you know, wherever I can.
Beautiful. Thank you for your time today. Enjoy the rest of your day, everyone. God bless. And we'll be talking soon.
Bye now.
