Lifetime Income Benefit Rider Vs. Annuitization - YouTube

So, you're looking for income and you want to know the difference between a

lifetime income benefit rider. And what's called annuitization. And

annuitization really means creating payments. Now, with 10,000 baby boomers

retiring every single day. Most people are looking for income. Most people are

looking for contractual guarantees. They're not looking to trade the markets

and be Gordon Gekko. They want to make sure that they have a solid income floor

of guaranteed income in combination with their social security. In combination

with pensions, if you're so fortunate. Dividend income rental income. Whatever

you have coming in every month that guarantees that lifestyle that you want

to live. So, let's talk about lifetime income benefit riders versus

annuitization. Now, before we get to that, we're going to cover a lot. I've written 2

books on the subject. I've written a bunch of books but these 2 kind of

cover what we're talking about today. And what you're concerned about and what you

need to know the details about. I've written income Rider owners manual. And it covers

all income rider types, how they work, benefits, limitations, etc. And then I have

an immediate annuity owner's manual which is the granddaddy of all

annuitization products. So, it's going to be a lot of information at the end of

this video. I'm going to tell you how you can get those books for free and no cost,

no obligation. I guess that's what free means --no cost. But seriously, we're not

going to call you and we're not going to bug you. We're going to treat you like a

professional and hopefully, we can be your agent of choice when that

time comes. Or if it doesn't, that's fine too. Okay, so let's talk about income from

an annuity, any type. Was an income rider or annuitization? It's a combination of

return of principal plus interest and that lifetime income guarantee is based

primarily on your life expectancy or if it's set up joint with the spouse or

somebody (Life expectancies, plural) at the time you take the payment. There's a lot

of... I don't know. The media kind of feeds

into this a little bit. There's a lot of talk about rates and timing rates and...

The interest rates do play a role in lifetime income guarantees. But it's a

secondary role. The primary pricing mechanism, what drives the train is life

expectancy. Just remember that because you can't time it. Now, let's talk about

Innuitization because annuitization (the creation of payments. That's what

that means) start in the Roman times that's when immediate annuities were

actually first introduced. And those are the granddaddy of all annuitization

products. Again, return of principal plus interest based on your life expectancy.

And the value proposition is the annuity company's going to pay you for the rest

of your life regardless of how long you live. You'd lived 150, they're going to

pay you to 150. And they're going to continue to pay you... And even if there's

zero in the account. So, let's let's talk about annuitization from the standpoint

of the taxation. And I'm no tax advisor but I'm going to give you the broad

overview of how this works. All annuities can be used inside of an IRA, outside of

an IRA, inside of a Roth IRA. Whatever you choose it's the contractual guaranteed

nature. And those contractual guarantees based on what account you choose, that's

how you're going to be taxed. So, let's look at annuitization outside of an IRA.

Because inside of an IRA, everything that's coming out is fully taxed at

ordinary income, right? Nod your head. Okay. Now, the immediate annuity outside of an

IRA, non-qualified account as they say in the business, return a principal plus

interest. So, when we send you a quote, there's going to be a column that says,

"Here's your guaranteed monthly amount. Here's the amount that's not taxable of

that monthly amount. And here's the amount that's taxable." So, the amount

that's taxable is the interest part. In our business, we call it the exclusion

ratio. So, until the money's gone (okay?) that exclusion ratio is going to be

there. So, you're only going to pay a portion of the taxes on a portion

of that income stream. Now, when the account goes to zero and you've beaten

the insurance company and you live past your life expectancy, guess what?

Then all of its then taxable. So, let's go

over that again. Up until you use up all the

money, you know, it's an exclusion ratio. Combination return on principal plus

interest and you're only paying taxes on the interest portion. Once you get in the

annuity companies pockets for lack of a better phrase, then it's all taxable. But

doesn't really matter because they're on the hook to pay you even if you lived

150, right? Okay. So, we've talked about annuitization payments for lifetime

income. Let's talk about income rider payments for lifetime income. It's a

little bit more complex because there's numerous types of income riders.

Let's talk about the ones that are not annuitized. There are some attached to

variable annuities that can be annuitized. So, I know we're getting in

the weeds a little bit and that's the reason you need to get my book. Because I

do go over those. But the majority of the ones income riders that are pitched

today are the ones that are not annuitized. And you say, "Well, Stan. How can

it be a lifetime income stream is not annuitized?"

A lifetime income benefit rider pays you for life. And in essence, it's a

withdrawal. Okay? In essence, they're subtracting from

the account and just paying you for life. But it is what it is. So, it's not a

combination an exclusion ratio like annuitization. When you have the majority

of income riders... And again, i'm saying that in a broad stroke. The majority of

income riders being sold out there now, when you take income it's last-in-first-

out accounting. Meaning, gains first so that you're going to be paying gains first

on that income stream. Now, does it make it better or worse? annuitization

versus income rider? No. In my world, it's all about contractual guarantees. I

only focus on the will do, not the might do. The will do is the contractual

guarantee part. So, if you wanted income and it doesn't matter whether is.

Whether it's now or in the future. We're going to quote all products to see what has

the best contractual guarantee. I got a call the other day and the guy said, "Hey,

I want income in 7 years." Seven? Yes, 7 years. I said,

"Great. Okay, we're using he's an IRA or non-IRA money." He said, "Non-IRA money." "Great."

Okay, so we quoted all income riders and we also quoted a deferred income annuity

which is in annuititzed product, okay? So, when the

quotes came back, I sent them to him and we got on the phone. He set a

phone appointment we got on the phone. And I said, here's the kind of the bottom

line. Doesn't make one better than the other.

With the income rider, all of that income stream from the start is tax last-in

first-out gains first. On the deferred income annuity, a portion of that because

we're using non-IRA assets is not taxable. So, you have to weigh which one's

makes more sense to you. Time, value, money. Whatever calculation we want to run but

with non-IRA money, we'll look at both. We'll look at the taxation of the income

stream which is very important. And then you can make a decision which one

works. Interestingly enough, what he did is he bought one income Rider, split the

money. Bought one income rider, one deferred income annuity which it's

pretty interesting way to go about it. There's no perfect answers out there

just bad sales pitches. Never forget that. No one has the perfect answer what we're

going to do is show you all the best quotes, give you the best information and then

explain everything then leave you alone so you can make a good decision. So, you

know, where the lifetime income benefit riders and annuitization fit? Hey, it's

for income. If you need income, you need lifetime income guarantee. That's the

unique benefit proposition that only annuities have that no other product has.

So, when you see how these cats on TV and radio or whatever say, "I hate annuities."

Do you hate lifetime income? I'm going to say, "No, they don't." There's an agenda

behind that pitch. It's a very good one to get business for whatever agenda

they're on. But they know better. They know that people love their Social

Security payments. That they love their pension payments. You're going to love your

income Rider payment and you're going to love your annuitization payment. Why?

Because you can never outlive it. And if you set it up joint with a spouse or

partner, then they can never outlive it. And the majority of us out there that's

really worked hard for the money, I'm assuming you have. Heck, you're watching

this video to find out how these things work. So, you can make a good decision. You

worked hard for your money. You need to understand how these lifetime guarantees

work. That's the reason you're here. But there's no perfect answer. They both work

well. They just have their limitations and unique benefits. Alright. I hope, I

solve some answer to some questions. Solve some

problems for you. And you got a better understanding, I do encourage you I've

gone deeper in this. By the way, I release videos every single workday

forever. So, they're always coming out they're informational. They're

educational. I did a video, this one here on the

best variable annuity income riders. Now, I didn't just limit it to variable

annuity income riders. I went deeper and I did the index side too. Which leads me to

why you need to get the book. Because the book it goes even deeper. And you can get

that for free. In fact, you can get all my owner's manuals for free. And let me tell

you how to do that in just a second. But first of all, what I'd like for you to do

is click the subscribe button. You know, these are going to be informative videos.

You're going to learn a lot and you're going to find out how these products can

work and complement your portfolio. To get the books, you're going to see Stan

the annuity man description down there and the words "show more", click the words

"show more". You'll see a drop down and then underneath there, you'll see how to

get the owner's manual. I'll send them all to you. I've written

6 of them on all different product types. No obligation, no cost. We just want

you to educated. So, if you decide to move forward and get a quote and talk to us,

you're going to understand what you're going to buy. Remember, there's never

urgency to buy an annuity. There's an urgency for you to understand

annuities on your time and on your timeframe. And from that, thank you for

watching. See you next time.