What Is A Deferred Income Annuity? - YouTube

Welcome back. I'm Stan the annuity man. Today's topic is what is a deferred

income annuity. Deferred income annuities are relatively new products. But after

this video, you're going to understand it in full and you're going to know if it

works for your specific situation. So, we're going to cover a lot today on

deferred income annuities. We're going to cover what is a deferred income annuity?

What does it solve for? How does it work? Kind of the history of it. We're also

going to go through benefits and limitations, the quoting process and at

the end, we're also going to talk about where it fits in your portfolio? And if

it even fits at all. Also too, I've written an owner's manual on deferred income

annuities. Would love to send you that for free. The link is below and it comes

in this really nice Willy Wonka gold package. So, what is it deferred income

annuity? A lot of financial journalists call it a longevity annuity.

What's longevity risk? It's out living your money. So, deferred income annuity

solves for outlook and your money because it provides an income stream, you

can't outlive. Now, it's the cousin of the single premium immediate annuity? So, it

deferred income annuities the same exact structure as a single premium immediate

annuity. The difference is the income stream starts 13 months up to 45 plus

years later. So, an immediate annuity is income right now up to about a year. A

deferred income annuities when you want to defer say 13 months up to 45 years.

And remember, deferred income annuities saw for contractually guaranteed income.

It's a transfer risk that you're giving to the annuity company to pay you or you

and your spouse for the rest of your life. So, what do you defer to income

annuities solve for? I call it income later. You need income guarantees at a later

date. Remember, there's 2 questions you ask for any annuity purchasees. What do

you want the money to contractually do? And when do you want this contractual

guarantees to start? So, let's say you said, "Hey, Stan. I need income to start in

2 years for me and my wife. And this is the amount we need." Okay, great.

That's a deferred income annuity quote. So, I got a call the other day for

a guy says, "I need income in 2 years or 3 years." Actually his was 3 years.

He said Stan I need income in 3 years for me in the life. I said, "Fine. Do

you want to use IRA or non-IRA money? He said, "Um, IRA money." Okay, great. So, we did

that. With deferred income annuities, you can defer up to age 70 and a half

with an IRA. So, he was 65. We deferred to 68. And was a joint life income stream

for him and his wife. So, I told him when he dies, the income stream continues

uninterrupted and unchanged for the rest of his wife's life. And then when she

died, 100% of any unused money would go to the beneficiaries. He was

pretty happy with that. I think it's important to go back over the fact that

a deferred income annuity and a single premium immediate annuity are pretty

much the same structure. In fact, they are the same structure. The difference is

when you want the income to start? So, always remember, if it's 30 days to a

year and you need the income to start, it's a single premium immediate annuity.

After that, it's a deferred income annuity. But both work the same, both

they're simplistic transfer of risk products that provide a lifetime

guaranteed income stream. Let me give you an example of deferring a long time with

the deferred income annuity. Sometimes I call this handcuffing strategies. You're

handcuffing your children or people you don't want to give a lump sum. One of my

sayings, I always tell people that your children and your family members are

going to show up in a Ferrari at your funeral. You just want to making payments.

You don't want them getting a lump sum. So, I had a client the other day and he

had kind of two wandering and big woody kids that he didn't think we're ever

going to be employable. Hopefully that's not true. And they're just meandering

through life. And he said, "You know what? Let's buy deferred income annuities on

both of them. Let's defer it for 30 years." So they

can't touch it they can't cash it in. But 30 years from now and they turn 50 (They

were in their 20's) they're gonna get a lifetime income stream that they can

never outlive. "Even though they hate me?", He said. That income is going to hit every

single month. Their guy said, "Yeah, it's not that bad because that income streams

coming." I call it handcuffed from the

beneficiaries but it's a good way to plan for the future if you want income

stream to start for say a child or a grandchild or someone in your family

that you don't want them to have access to the lump sum. So, that might be a

thought for you if you have that situation. We can quote that and we can

handcuff them but yet take care of them from a lifetime income stream standpoint.

Understand this: What deferred income annuities and single

premium immediate annuities, lifetime income is based on your life expectancy

at the time you take the payment. So, the older you are, the higher the payment.

Let's talk about the benefits of deferred income annuities. They're

simplistic products, they're easy to understand. No offense to 9-year olds but

you can explain it to a 9-year old and that's kind of you know always to people.

If you can't explain it to a 9-year old, you either shouldn't sell it or you

shouldn't buy it, right? So, it's very simple. It's a transfer of risk or

transferring the risk to the annuity company to pay you for the rest of your

life. I love the fact that deferred income annuities are customizable. You

can customize the quote however you want. And if it's something crazy and you

can't, I'll tell you. But there's 30-plus ways to structure a deferred income

annuity. Also with deferred income annuities, you can use it in an IRA, you

can use it in a non IRA account. You can use it in a Roth account. There are rules

within the IRA that we can explain to you. Can't defer past age seventy and a

half. But before that, you can use a deferred income annuity. And one last

thing. With a deferred income annuity, let's just say you purchase one say, "I

need the income to start 7 years from now", okay? Most carriers allow you to

change that income start date one time after the policy is issued. So, you life

might have changed you might say, "Hey, you know I needed it starting 7 years.

But now I need it to start in 5 years or 9 years." Remember, the older you are, the

higher the payment. The younger you are lower the payment." Right? And the payments

are a combination of return of principal plus interest. But it's primarily based

on life expectancy. But understand there is a little bit of flexibility. You can

change that start date the only caveat to that is it's life only. Most carriers

won't allow you to do that. But most of the deferred income annuity quotes that

we run are not life only. They have a guarantees that 100 some of the money is

going to go back to the beneficiaries if something happens to you before that, the

money is gone. And with that, you can change the income start date one time.

With all annuities there's limitations, nothing's different with deferred income

annuities. They have limitations. Number 1, they're rigid contracts. They're not

really liquid. You can't call me up and say hey, "Send me X amount of money out of

that contract." It's going to pay you back but it's going to pay you back in

payment form. Another limitation is that there's no market growth potential, okay?

So, a lot of people say, "Well, you know... I need my money to grow by X percent."

That's not deferred income annuity. And another

limitation with the deferred income annuity is during those deferral years,

there's not a trackable interest rate that you can follow. In other words, you

put it in in 7 years from now. There's no interest rate. What the

annuity companies do is they reward you for the longer you allow them to hold

the money, the more they're going to enhance and increase the payment. So,

there is somewhat of a return in there, it's just not a trackable return. And

some people feel that's a limitation. Let's talk about structuring deferred

income annuities. You can set it up a myriad of ways. Again, what do you want

the money to contractually do? When you want those contractual guarantees to

start? Those are the 2 questions that you have to answer. From that, you can set

up for your life. You can set up joint. You could set it up with you and your

grandchild. You can set up however you want. Remember though that is primarily

priced on your life expectancy at the time the payments start. So, if your

spouse is 10 years younger than you, then their age and life expectancy is going

to drive most of the pricing. Interest rates do play a secondary role. The life

expectancy drives the train. So, with structuring the annuity quotes, just tell

me how you want it to work. I'll tell you if it's possible. And it is possible.

We'll quote all carriers for you. There's a bunch of carriers out there that quote

deferred income annuities. So, you need to quote all carriers. Remember, these are

commodity products. And annuities are commodity products. Not one's better than

the other. And quotes change like a gallon of milk every 7 to 10 days,

they expire. So you need to quote all carriers be specific with the parameters

you want to quote. And then go with the highest contractual guarantee with a

carrier that you feel most comfortable with.

So, where do deferred income annuities fit in your portfolio? Or do they fit at

all? If you don't need future income, you don't need one. But if you need future

income or if you want to provide future income for someone in your family you or

someone in your family, then maybe they do. That's what they fit their income gap

filler. It's a future pension plan. It's a transfer of risk and what I would

encourage you to do is do your own homework on your portfolio in your needs

and say, "Here's the income stream I think I need in the future." And then let's

reverse engineer that quote to provide that guarantee. Well, we've covered a lot

today on deferred income annuities. I hope you have enough information to make

a very good decision. But there's one last piece that you need.

You need the deferred income annuity owners manual. I will send you that for

free and under no obligation. And send it in this really nice gold full package.

But I encourage you to look at my next video, which is on multi-year guarantee

annuities. I think you'll like it.