Deferred Income Annuity | Pros And Cons - YouTube

Welcome back. I'm Stan the Annuity man. Today's topic is deferred income annuity,

pros and cons. And this is a big one because with every annuity type, there's

limitations and benefits. And I'm going to explain them to you so you can make a

very good decision whether a deferred income annuity fits for you or not.

We are going to cover a lot today about deferred income annuities. We're going to

talk about what is a deferred income annuity; what does it solve for in your

portfolio. We're going to talk about specific benefits and limitations. We're

also going to talk about structuring choices, how you quote it and where it

really fits in your portfolio. Also, too. I've written the book on it. You need to get

this as part of the learning process with deferred income annuities as a

deferred income annuity owner's manual. If you go to the link below, I'll send

you one for free and it'll come in this really nice Willy Wonka gold foil

package. So, what is a deferred income annuity? In my world is income later.

It's an income later guarantee you. It need income in the future. And the

deferred income annuity can guarantee that that amount, that payment amount at

a future start day. Some people call it a longevity annuity. A lot of the financial

journalists talk about that. What's a longevity risk? It's solving for

payments that you cannot outlive. That's what the deferred income annuity does.

Remember, the income stream is contractually guaranteed. You can't

outlive it and you construct it with you and your wife. And with deferred

income annuities, income starts typically as soon as 13 months and as far out as

45 years. So, what does deferred income annuity solve for? It solves for income.

It solves for pension income. When you think about Social Security and you go,

"Well, I'm 63 and I'm planning on turning on my Social Security at age 70." A lot of

you are doing that because you get the higher path because you're going to be

older, right? Same exact principle with deferred income annuities. I need income

to start later. The later it starts. The older I am, the higher the payment. And

with the deferred income annuity, it can combine with Social Security or whatever

income streams that you have. Also in place for that income floor. I call it

the income floor. That guaranteed amount of income that's come in to your bank

account every single month that you knows going to be there that's not going to

be affected by the market and that you can never outlive. That's what deferred

income annuities solve for. So, let's talk about the pros and cons. You know the

benefits and the limitation. The pros of a deferred income annuity is that its

contractual. Once you get that contract and once you see that guaranteed income

amount on that page, you're going to get it. regardless what happens politically,

economically; it doesn't matter. Its contractual. You've transferred the risk

to the annuity company to pay you at that specific time that you've chosen.

Another benefit too and another pro is that with most contracts that that are

not like only, you can change the start date one time after the policy's been

issued. Which is kind of good. Life changes, things change. Maybe you need the

income to start at a later time as opposed to when you filled out the

application, you can do that with deferred income annuities. It does give

you that flexibility. Also, a pro it's customizable. You know, you can you can

set up any way you want. You also can set it up to what I call

handcuff the beneficiaries to make sure that they don't show up your funeral and

a Ferrari that they paid cash for that they're making payments because they

will show up to your funeral in a Ferrari. Some other pros about deferred

income annuities is they can be used in an IRA, a non IRA or a Roth IRA. There's

specific rules with a traditional IRA part of it you can't defer it past

seventy and a half. And we'll cover that in a future video which I would

encourage you to go to. About qualified longevity annuity contracts, if you're

deferring. If your doing a deferred income annuity in an IRA and deferring

past seventy and a half, so go to that. But those are the pros of a deferred

income annuity. Let's talk about the limitations of a deferred income annuity.

They're rigid contracts. There's no liquidity. They're irrevocable. Most of them

don't have any type of liquidity provisions. And if they do, anytime an

annuity come and give something away like that, they're charging for it. They

have the big buildings for a reason. They have the big logos on the plane for a

reason. They're not philanthropist. So, deferred income annuity limitations

comes down to there's no... there's no market growth. In other words, there's

opportunity loss. You know, if I just and if I to put it in the market, I would

have done better. That's an apples and oranges comparison.

Deferred income annuities are contracts. They're not investments. You're

transferring the risk so the annuity company will pay you for the rest of

your life at a specific time in the future. But the limitations are that

it's a rigid contract. You're not getting any type of market growth. And

also there's no trackable interest rate during the deferral years. And you saying,

"Well, that's crazy. Why would they do that?" Well what they do, the annuity

companies is they enhance the payout, the longer you allow them to hold on to

the money. I'm from the south. So, I say "The longer it cooks, the more you get." So,

that's the limitations of a deferred income annuity. So, pros and cons that

deferred income annuities, which outweighs the other. I'm not sure you can

lean either way. There's arguments against the deferred income annuity.

There's arguments for deferred income annuity. It really comes down to what

you're trying to solve for. And it really comes down to the two questions: What do

I want them the money to contractually do? And when do I want those contractual

guarantees to start? Understanding the limitations and the benefits both. And

weighing them both will allow you to make a good decision. Maybe that the fact

that there's no market growth or it's a very rigid contract means you don't buy

one. That's fine but you have to know both good and bad going in. So, there's no

pound the table reason to buy it or not to buy it. You just have to understand it

in full. So, I got a call the other day and the gentleman said, "I'm not sure when

I need income but I know I'm going to need income in the future. And I kind of want

to plan for inflation." And there's no annuity on the planet that perfectly

addresses inflation. Even though an agent will tell you they have it, they don't. So,

how do we go about doing it? This gentleman had $400,000. He said, "I want to

plan for future income. But I don't know when I want to start that." So, here's what

we did: We split the purchase up. We bought four contracts, 100,000

each and we deferred them differently. So, he was 60 years old. So, we had one

starting at age 67. One starting at age 70. One started at age 72 and then the

other started at age 75. Now, he structured it so he could change that.

But now what does he have in place? He's later'd the deferred income annuity

purchase for income to start at different increments --different years in

the future. Forget inflation. He's solved for. Let's talk about structuring choices

with deferred income annuities. Once again, customizable. You just have to tell

me what you're trying to achieve. And if it's joint, who that person is. I'm going

to need dates of birth because it's based on your life expectancy. Not

interest rates. The way the pricing is is they're looking at life expectancy at

the time you take the payment. Interest rates play a secondary role. And the

income stream is a combination of return of principal plus interest. So, you can

structure the mirror ways. You can add cost-of-living

adjustment increases to the payment which sounds fantastic on the surface.

But the catch is this: If you add that, then the annuity company; because they

have the big buildings, they're going to lower the payment so if you're

interested in an increase like a "COLA:" --cost-of-living adjustment.

have me quote both. Have me show you how they price it in with and without. But

understand that you can structure these things exactly how you want them to work.

So, how you even quote or defer to income annuity? Well, first of all, you have to

find someone like me that represents all carriers. We're going to quote all

carriers. I have no favorites. I'm going to go into the quote. We're going to quote

every single carrier based on the parameters you give me. It's like buying

a plane ticket. I don't know who's going to finish first. And every 7 to 10 days, the

quotes change like a gallon of milk. So, the quoting process is I quote all

carriers, I send you the PDF of that quote. You have to make a decision 7 to

10 days. You don't have to. There's no urgency to buy an annuity ever. It's a

contract. But but if you want that specific quote with that specific

carrier then you'd have to move on it and lock that quote in. But that's how

you quote it. Tell me exactly what you want to solve for. Whether it's a lump

sum, how much does this lump sum solve for contractually from a guarantee

payment standpoint. Or, "Hey, Stan. We need this amount per month. How much

would it take to create that?" Either or, it's a commodity quote that will run

through all carriers for them. So, you've got the pros and cons of these things.

You've got the pros and the benefits of deferred income annuities. And the

limitations and the cons of deferred income annuities. So, where does it fit in

your portfolio? It fits for future income needs. So, if you don't need income in the

future, guess what you don't need a deferred income annuity? But if you do

and if you think you do and if you want to solve for it for maybe you or your

spouse or partner, then they might fit and you might want to quote it. Now, what

you need to do is part of the education process is get my deferred income

annuity owner's manual which I'll send you for free. And this really nice shiny

package. And I also encourage you to go through my video on qualified longevity

annuity contracts and the rules of them. Because guess what? That's a deferred

income annuities too.