Social Security, Annuities, Income, Annuities: Q&A #2625

Speaker A: The Retirement IRA show represents the words and views of the show hosts exclusively and should not be construed as investment, legal or tax advice. All information is believed to be from reliable sources. However, we make no representation as to its completeness or accuracy. All economic and performance information is historical in nature and is not indicative of any future results. Any indices mentioned on the show are unmanaged and cannot be invested indirectly. Diversification and asset allocation strategies do not assure profit or protect against loss. Never make any investment or financial decisions based on information offered on this show without first consulting your financial, legal or tax advisor. Financial planning services offered through Jim Solnier and Associates llc. Uh, a registered investment advisor.

Speaker B: This is the Retirement and IRA show coming to you from beautiful northern Colorado. Join us as certified financial planner Jim Saunier as well as Colorado State University finance instructor and certified financial planner Chris Stein teach you about IRAs, 401ks, annuities, Social Security, pension plans and estate planning in a fun and enjoyable show. Whether you are listening live in Colorado or streaming from their website or itunes podcast, Jim and Chris want you to know that they're available to help you plan for your retirement. Just visit their website@, uh, jimhelps.com that's jim h e l p s.com and click the Meet the Team button on the homepage. Now here's Jim and Chris with today's show.

Speaker C: Hello once again, everybody. Welcome to the retirement and IRA show Q& A edition for this week. Pretty standard show set up for you today. Um, you've sent in questions. We're going to do our best to give you useful answers. Uh, Jim will be joining us momentarily from the beautiful state of Ohio. He's now bounced back. Uh, he was in Colorado for a bit, but just last night arrived in his eastern, uh, um, Fortress of solitude or whatever we might want to call it, um, last night in Ohio. So he'll kind of let us know if there's anything new on that front. And, um, yeah, this is still Annuity Awareness month, so we'll likely have

Speaker A: a

Speaker C: lean toward annuity questions. Maybe not all annuity questions, but I know that we'll tackle at least one Social Security question before we, uh, move on into annuity style questions. So, Jim, um, glad you made it there safely to Ohio once again. Um, is it as green and moist and luscious as you recall from your last time there's?

Speaker D: It is. Well, I've only been. I haven't even been here 24 hours yet. I've been here a little over 12, but I did venture out today. I had no groceries in the apartment. I obviously don't leave things that can rot in the apartment. I predominantly only eat salads for lunch. So I had to go out and replenish. And it is, it's green, it's beautiful. Today is just a gorgeous day. Now before I got here because I was watching the news last night, they apparently had some very bad storms and uh, was called F2 tornado. Uh, F2, I think that's the rating. Uh, a tornado hit in Indiana, um, northwest of Cincinnati, quite northwest of Cincinnati I think, um, kind of north central Indiana and caused some damage and they were showing that a lot on. And northern Kentucky just on the other side of the river had no tornado but some heavy wind damage that um, in Maysville, which a little bit of history, uh, buff here, I told you when I was thinking of moving to Kentucky or Ohio, I bought a biography on Daniel Boone. Uh, Daniel Boone originally quote unquote, retired if, if retirement existed in the realm that we know of it back then to Maysville, um, before eventually moving to Missouri. But uh, that's a little Mazeville claim to fame.

Speaker A: Interesting.

Speaker D: But 100 mile an hour winds hit Maizeville. Not a, a tornado, just a storm. So my point is it's absolutely gorgeous here today. But you can get these bouts of very bad weather. So if I do move and have my garden, I'm sure you'll hear me bitching and moaning about the wind just knocked everything down and the torrential rain

Speaker C: was so much that it washed your seeds away or something, right?

Speaker D: Yeah, exactly.

Speaker C: There's something everywhere.

Speaker D: There'll always be something. But the weather today, oh, it is not an ounce of humidity in the air. It's blue, um, skies, couple of puffy little white clouds here and there like cotton balls. And um, just gorgeous. Mid 70s. I would take this every day if I could. It is, it is beautiful. So I'll give it that much. Um, and we'll see tomorrow, which is Saturday. We're recording this on June 19th folks, a Friday. Yours truly will be venturing three hours north and a little bit west of Cincinnati. Not very far west, more northish, um, to Toledo. Never been there before. But I will be uh, driving three hours north to I believe it's called the Stranahan Theater in Toledo. I'm going to grab a hotel. I'm not going to spend, I'm not going to drive back down. But I have ticket to go see uh, the Neil Diamond Broadway musical A Beautiful Noise. It's touring the country. I always wanted to see it on Broadway, but I never got to New York to see it. I love Neil diamond, folks. I love his music, his voice. He's just phenomenal. And I was lucky that I saw him, uh, in Colorado, Chris. And shortly after that tour was over is when he announced he had Parkinson's and he was not going to be touring anymore. So I didn't know at the time and neither did he. I don't think that that was his last tour. And anyways, it's a Broadway musical on the life of Neil Diamond. And, uh, there's one gentleman who plays the young Neil diamond and they perform his earlier songs. And then the older Neil diamond and my mom and sister saw it in Florida. It toured down there. And they're the ones who told me about it. And I instantly. I didn't realize it was touring and I instantly went online and found the tickets in Toledo and bought them. So I'm looking forward to that. I'll report next week if it was good. And if anybody is a Neil diamond fan, uh, just Google a beautiful noise and see if it's playing anywhere near you. Um, I always love when these Broadway shows do go on tour. Uh, my mom and sister said there's a live band that plays. It's not recorded. And they just absolutely loved it. They said it was phenomenal.

Speaker C: Sounds like fun.

Speaker D: Yeah. So anyways, that's what I will be doing tomorrow. I'll report to everybody how it was. But are you a Neil diamond fan? Yeah.

Speaker C: I don't know that I travel long distances to see him, but I might if I had the opportunity.

Speaker D: Well, I'm not seeing him. I'm seeing a Broadway music.

Speaker C: Yeah. Something. I mean, back when he was touring, I would have.

Speaker D: Oh.

Speaker C: Had I had the opportunity, I would have gone to see him. So. Yeah.

Speaker D: Okay. So anyways, that's not much more to report about Ohio. I'll, uh, only be here a week. Short trip. I will be flying out next Sunday to Massachusetts, and I will spend, uh, about a week there with mom over the July 4th holiday as well. And I'll fly back to Colorado July 5th, but my sister and her boyfriend are going on a vacation and mom's 87 and she, she lives independently, but she definitely feels more comfortable knowing that there's people there. And it's also her birthday week and I just didn't want her to be alone for a whole week, especially over her birthday week turning 87. So I told her that I would cut my Ohio trip short again. Last time I did to go to Florida to Be with her now. I'll cut it short again to go to Massachusetts, but moms come first. So anyways, I will be flying to Massachusetts and then back to Colorado. Nice.

Speaker C: Well, it's a beautiful day here, too. So you're. You, uh, on this particular day, apparently Ohio and Colorado are sharing something in common because it's fairly low humidity here. Blue skies, beautiful at this point.

Speaker D: But when is it ever high humidity in Colorado?

Speaker C: I don't think it's. I would say it's never high. It's certainly higher at times, but no, it's. It's in the bone dry, probably teens, 20s percent humidity.

Speaker D: It's for Colorado is high. Yes, I admit.

Speaker C: So that's about it.

Speaker D: And what it is, too, is Colorado doesn't have the dew point. The. It's the dew point. It's not the humidity. Oh, you hear? It's not the heat, it's the humidity, but it's really the dew point, folks. When the, the dew point starts getting into the 70s, it's just miserable.

Speaker A: So.

Speaker D: So when you get the heat, the humidity, and a high dew point, uh, forget it. That's when you stay inside. All right, anyways, this is National Annuity Awareness Month, so we're going to continue with answering annuity related questions. But as we always do, Chris does a Social Security question. I know that caused a little bit of consternation with a listener who felt Social Security is not an annuity, but we feel it is only from the definition standpoint of what an annuity is. A lifetime stream of guaranteed income. We can argue the nuances, uh, as that gentleman did. He made a good case. But we will continue to kind of call Social Security an annuity because it is an annuity payment that you will receive for the rest of your life. But it is incredibly complex, much more complex than people know. And that's where Chris comes in. Chris kind of geeks out on Social Security and he's very good at it. So we have a question, Chris, that's hot question. Pot, psa, I would say. Okay, so I'm going to go through that, trying to see if he gives a hint. Nope, no state hint at this time. Um, so he's going to share kind of his experience trying to get delayed retirement credits. And then as I go through this, he does ask a few questions, but I think you'll be able to opine, um, on a few things as well. So this is a psa, folks, question on delayed retirement credits. Hi, Jim, Chris and the team. Thanks for the fantastic job. You and the team do to provide, uh, understandable information for your retirement distribution. The information you consistently and clearly provide is valuable to all of our, uh, do it yourselfers out here in podcast listener land. Well, I'm glad all you DIYers are finding what we're sharing helpful. But do remember everyone, this is educational. It's not specific bespoke advice just for you. We are not engaging in any type of investment advisory or financial planning agreement with any of our listeners. And we are not giving specific investment, legal or tax advice to you. We're just trying to give you a little bit of education. You do with it as you see fit. Okay? No state hint, Chris, so you lucked out. Let me see if he lists his state and uh, I'll make up a hint. You lucked out again, no state listed. So you don't have to listen to one of my silly ass hints. So we can continue. I want to share some information that may be useful to other listeners about my ongoing experience with delays in receiving my additional delayed retirement credits that I am due on my Social Security benefit. Before we begin for that one or two brand new people who have no idea what a DRC is. Chris, why don't you give them a little schooling, if you will, on uh, what he means by delayed retirement credits. Sure.

Speaker C: So the basics of delayed retirement credits, essentially Social Security, your benefit will be increased if from its base amount. And that base amount is considered to be what's called your pia primary insurance amount, which is nothing more complicated than your benefit if you were to claim it at your full retirement age, which for most people who have not yet claimed Social Security, their full retirement age these days is uh, 67 years old. So uh, if you choose to delay past that full retirement age, they reward you for delaying or postponing your claiming by increasing your benefit 2/3 of 1% for each month that you delay claiming past your full retirement age. Now that's, I said it that way because that's how they actually credit uh, you. The delayed retirement credits is on a monthly basis. It is not, uh, just uh, you know, waiting year and get 8%. That's how it's usually described to people. You get an 8% increase for every year that you delay past your full retirement age. Um, but it's actually they, they track it on a monthly basis. So if you take 8 divided by 12, that's 2/3 of 1%. So each month that you wait, you'll forego the benefit for that month, but you'll be rewarded with an increase at ah, 2/3 of 1% for each month you delay in your benefit, then for the rest of your life, those are delayed retirement credits, and you can earn those up until the month you turn age 70. So past that, there are no more delayed retirement credits awarded. So generally there's no reason to wait until after you've turned 70 to claim your Social Security benefit because you'll just be foregoing payments without any bump in your benefit. So that's. That's the summary of delayed retirement credits.

Speaker D: Correct. And had I stayed in that email, I'd be able to continue reading immediately. But someone clicked out. Sorry, folks. Okay, so I'm back in. Now he's getting into his issue. Chris after starting my retirement benefit In June of 2025 at age 69 and 3 months, I was expecting an additional 5 months of delayed retirement credits to increase my benefit beginning in January of 2026. I understood it would likely take two or three months for the Social Security Administration to process my additional delayed retirement credits. However, it's now mid June 2026. This is a brand new email, folks. It's the email of the week, if you will. It just came in this week. However, it is now mid June 2026 and I haven't received the delayed benefit increase yet. So I contacted Social Security twice, once by phone in April and once in person at my local Social Security office in June. After taking some time to do their own calculations, the agents eventually agreed that I was due additional delayed retirement credits, and each time sent a message to the Social Security Administration payment processing department. So in summary, folks, he met with two separate agents, one in April, one in June, one in person, one online. They both eventually agreed with him. He's entitled to it. They both sent communication to the home office, if you will, whoever's in charge of granting these and still crickets. So, he continued. They indicated they don't know when my additional delayed retirement credits will be processed and said it might take until September or even longer because of a Social Security Administration backlog. Hopefully, my benefit recalculation to include my additional delayed retirement credits will eventually occur. However, I wanted to warn other listeners that in today's Social Security environment, they may also experience very lengthy delays before their benefit recalculations occur. Armed with all the Social Security information that Chris provided on multiple podcasts as well as my own research, I believe I understand Social Security delayed retirement credit fit calculations. However, my discussions with actual Social Security Administration personnel, both by phone and in person, made it clear to me that delayed retirement credit benefit calculations aren't um, well understood by them. This has left me with an uneasy feeling not only about the processing delay, but also about whether the recalculation will be correct if it ever does occur. So now he's directing a, uh, rhetorical question almost to you, Chris. Are there any other steps you would recommend that I should take at this point, or should I just patiently wait and expect that this will eventually occur correctly on its own? Thanks for all you do. He gives his real name, but he also signs it AKA George. Interesting, Chris, that it's taking this long. It's ridiculous.

Speaker C: Yeah, and it's not the first time I've heard this. Um, you'd think that the awarding of delayed retirement credits would be something that they've automated at this point. And I had the understanding that for the most part, that's correct. But there's still a lot of manual coding and triggering and evaluating and communications that go on between the humans at Social Security, uh, that lead to sometimes strange delays in actions on their part and with the staffing limitations and the more and more people claiming Social Security. So the, the number of people actually being serviced by Social Security is increasing each and every day. Baby boomers. You all know who you are. Um, and that's not derogatory. It's just a demographic, ah, comment that you, um, know. I'm not surprised to hear this from yet another person that there's this glitch or delay. Now the, the good thing, the silver lining is that Social Security, though, there's delays that shouldn't be happening, in my personal opinion, uh, if it was better, um, funded and well run and maybe more automated, all some combination of all those three things, um, they're really good about awarding you, uh, retroactive fixes. So I think when this gets cleared up eventually, um, that you're gonna see now a credit for all the back delayed retirement credits back to January when you expected to have them awarded to you. Um, I don't think that there's anything else really that you can do at this point. It sounds like they've submitted the request to get this corrected, and it's just working its way slowly through the system with any issue. If it never gets resolved or if it just goes on and on and on and on. You can always contact your local, uh, representative in the House of Representatives, your local congressperson, and they have a liaison that they can put their own request through and that oftentimes can get things pushed through the system when it seems like no other efforts have, have done. But I would encourage Everyone to resist doing that until it's a very, very last resort. That is a useful tool for people who need to use it, who need to rely on it. And we don't want to clog up that very useful tool with just run of the mill impatience. So I think everyone needs to be more patient. It's just the reality of the situation. We can all complain, uh, about it. That's, I think, you know, are right to complain about how this should be better and should be fixed and somebody should address it. But, um, jumping the gun because of your impatience, uh, and sending it through your congressperson, I think is just going to clog up that, uh, channel and ruin it for everybody who might need to use it. So, uh, the other thing I'll say is just to add some nuance to this awarding of delayed retirement credits, what's not commonly discussed is how they actually grant them to you. He mentioned that last June, in June of, of 2025, he had, he claimed his benefit at 69 and three months, which was of course past his full retirement age. But they didn't award him at that time delayed retirement credits all the way through June of 2025. That's because they essentially do a once per year reconciliation, if you will, every January. They're supposed to look at the past year and determine how many delayed retirement credits you earned in the past year. And then they award them to you for the current. So in June of 25, when he claimed he actually for the remainder of 25, uh, is only paid for the delayed retirement credits Until January of 2025, the extra six months, he misses out on that for the last half of 2025. Then in January of 2026, what was supposed to happen and what he was expecting, and that's what he went and contacted Social Security to look into, is he should have been awarded those remaining delayed retirement credits, uh, from January through June of 25. So a half a year's worth. So he's essentially chasing a 4% increase in his benefit. He should have gotten that extra 4% bump in January of 2026. That's what he's missing. That's what they didn't give him. And the, he says that the Social Security representatives agree that he's owed that. Um, so there's this weird timing, uh, factor. So you won't see, they don't calculate them real time except in one instance. And that one instance is if you wait all the way to 70 to claim, they will calculate real time. All the delayed retirement credits you're owed up until that month and award them to you immediately as you claim at 70. So they tech, they, they have the ability to do it real time and not have this once a year kind of step up situation that costs people delayed retirement credits for some number of months. Um, man, they are lost. You don't, they don't make them up, they don't retroactively pay you. You literally lose them for that period of time from the day you claim until the end of that calendar year. Uh, you just don't get them. That's just how it works. That also shouldn't be how it works. That should be fixed. They should. And the computer has, I don't understand why this isn't automated through a calculation when you go claim. So it doesn't require any manual figuring on a piece of paper with a pencil and a calculator. Um, they should be able to award them to you up until the day you claim, even if you claim at an age other than 70. But that's not how it works. So he patiently waited for January of 2026 to roll around, for him to get his final 4% bump in benefits and he didn't get it. And he's waiting for them to fix it manually and that's what's causing the delay. There's humans that have to be part of this solution and there's a huge inbox waiting for those humans to work through it. And it'll take sounds like some number of additional months before that gets cleaned up. So um, that's the story. So that's at least the story as I see it and I'm sticking to it. So Jim, any questions from your end?

Speaker D: Oh, I think you did a good job covering all that. It's frustrating when you see something that should have been automated and should be automated with computers to just be stuck in this black hole of a bureaucracy. Uh, for all the things I like about Social Security, I, I still feel it's uh, a wee bit on the inefficient side. But if you look at the amount of people they're serving, they're doing the best they can, I suppose. Okay, now let's get into some annuity questions. So I have these broken up, Chris, into uh, old question from a year ago to a new question over the past month or so. Mhm. So I'm going to let you choose which ones we begin with old or new.

Speaker C: So should be doing old ones more so recently. Let's dive into a new one.

Speaker D: A new one. Okay. This one is more of a PSA as well. But I think we can opine a little bit on it. So he begins. Hi, Jim and Chris. In conjunction with your National Annuity Awareness Month, I thought I would share information that I received in my most recent issue of Kiplinger magazine. Now, he didn't send the magazine. He didn't send. Does Kiplinger still come out as a paper magazine? I have no idea. Um, I don't know for sure.

Speaker C: I only look at it online. But there are still some publications that if you opt for it and pay for it, they'll send you a paper copy.

Speaker D: But I'm not sure he definitely says, my most recent issue of Kiplinger magazine. I'm just wondering if he gets the paper.

Speaker C: I know all my talk about it like that, even though he's reading it online.

Speaker D: Yeah. But for me, I don't know why everything I have I get electronically except my hunting, fishing and shooting magazines. I. I insist on reading the actual magazine and flipping through it and looking at the pictures and so. So all of those still I get as actual magazines. The only actual magazines now. Everything. Even the newspapers from the Boston Herald, which I read, the Fort Collins newspaper, the Wall Street Journal, Barons, all of them are digital. But there's no way I want a digital hunting, fishing or shooting magazine. I have no idea. Weird. Okay. I don't know if you can share this or not. We can, listener. So thank you. But perhaps you can and coincide with your discussion topic about how to pick an insurance company as annuity provider. That's a good topic to chat about, folks. That's why I thought we would read this email. He says Kiplinger's annually, annually publishes results from their reader survey. So this isn't a deep scientific study. I think they just survey readers. Uh, so take that as you will. And they survey annuity providers and insurance companies based on. And here are the three metrics only. He makes it very clear they're only analyzing or surveying their readers on, uh, customer service most recommended, which I don't quite understand. I guess if you are Kiplinger's reader and recommend the insurance company, I don't know customer service most recommended and your overall satisfaction of working with them. And he wanted to share the top companies, but he wanted the caveat share. These ratings were based solely on those three criteria. So they do not take into account any company ratings. Use this information as you may on your show. So I'll share according to Kiplinger's readers based solely on, I guess, their experience with working with the Insurance company for some sort of customer related matter, they rated prudential first, followed by MassMutual, NY Life, TIAA and then Nationwide. That and 50 cents won't buy a cup of tea in China. It just simply means that some people felt the customer service was good. But where I want to take this discussion, um, is how do you evaluate insurance companies to consider? Because we've often got people to understand, Chris, that any annuity or any insurance product always comes with a caveat based on the claims paying ability of the issuing insurance company. My personal opinion is it depends. In my oh so humble opinion, what type of annuity are you looking to purchase? What is the annuity needing to do? Are you buying a noun or a verb? If you're buying the verb, that's the annuitized annuity. The annuity where you are truly looking to form a partnership with an insurance company for the rest of your life. And you're going to rely on this insurance company to faithfully issue a payment check to you every month, every quarter, every year, whatever payment schedule you have set up for the rest of your life. And if you utilize annuities in the realm that we believe in them, they are going to help support your minimum dignity floor of food, utilities, transportation, housing and health care. So in my opinion, if you are buying that type of annuity, customer service is okay, but it's the equivalent of buying a car. And you're going to search for the best color. I'm, um, going to buy whatever car has the best color. I think that's important. But it's probably number 10 on the list of things you should look for when buying a car. Same thing with an annuity, especially once the income payments are beginning, they should hopefully just continue automatically right into your bank account. And in the future, yes, you may have to call them for some customer service and that's important. But the financial strength of an insurance company that is guaranteeing you payments for life should take precedence. That should be number one. And the business structure of that insurance company, there is an A rated carrier out there now that shall remain nameless because they're not here to defend themselves, but they are a purely wholly owned company of a private equity outfit. I would not trust that personally. I would not trust that insurance company for any lifetime stream of guaranteed income. This particular private equity company didn't own an insurance company for 50, 75, 100 years. They just recently, recently over the past decade or so got into this. And I personally feel they're just filling the books with a lot of hokiness that we've spoke about in the past and tying a lot of things up in the Cayman Islands and Bermuda and reinsurance and wholly owned reinsurance subsidiaries and private credit and private equity and just, they just don't trust that type of company to guarantee they're going to be here in 20, 25, 30, 35 years. I, I don't know, it's just to me, not worth the potential headaches. That company may be fine now and the rating agency that gave it an A rating and I take a lot of what the rating agencies say with a grain of salt, but maybe that company is fined this minute, I just don't know. 5, 10, 15, 20 years from now and you're not getting younger, stronger and healthier, you're getting older, weaker, less healthy, forgetful, cognitive decline, whatever you want to call it. And you're not going to want to deal as someone 80, 85, 88, 90 plus trying to deal with insurance company that may or may not be around. That's my concern. So when you're buying the verb annuity, I tend to favor very storied older school insurance companies, preferably A rated companies that have been around for a hundred plus years. They don't all have to be around for 100 plus years, but they should be, in my opinion, just the cream de la creme. I like old school insurance companies because single premium immediate annuities, the type of verb annuity that I favor, this private equity company of which I referenced their insurance company, they don't offer single premium immediate annuities. Or if they do, it's a very small part of their book of business because I've never even seen a quote from them when we run quotes. But they do have annuities with living benefits. That's generally how these private equity owned, fixed, indexed annuity pushing insurance companies operate. Living benefit riders, we talk and we favor the old school mirror opposite of life insurance style annuity called a single premium immediate annuity where you give a lump sum payment to the insurance company, they give you money every year for the rest of your life. It is the mirror opposite of life insurance where you give the insurance company a premium every year and at the end of your life, your estate or whoever the beneficiary is on the policy gets a lump sum payment. It's the mirror opposite. So I've shared openly that a lot of these old school, highly rated insurance companies use single premium immediate annuities to help hedge and offset the risk of life insurance. Traditional life insurance, which is what these life insurance companies were um, originally created for. And I like how those two big books of business balance each other out. So I just tend to favor, it's my own opinion. You can all have different opinions, but that's just my thought. Now if you're buying an annuity for a shorter term period, if you're buying, not the verb, the action of income for the rest of your life, but you're buying something that you intend to hold short term. So you might be buying a fixed annuity most likely, but you could be buying a variable annuity. We spoke about them recently. You're probably looking to just hold this product for X number of years, two years, three years, five years, seven years, some people go longer. You might be looking maybe even at Mygas multi year guaranteed annuities where you might be able to get right now 5.5% for three years and then the insurance company promises to give you your money back. I'm less forgiving on those annuities or more forgiving, I'm not sure the correct way in your native English how to uh, put that. But I'm more forgiving if you will on the structure of those insurance companies. I still would only stay in the A ratings and not touch a B rated product with a 10 foot pole. A uh, B rated insurance company rather. But I would be more forgiving because right now there's no financial catastrophe happening, especially on a lot of these private equity owned insurance companies that are filling the books with these illiquid assets that are often intertwined with the mothership companies that own these private equity insurance companies, there's nothing yet working its way. There's no catastrophe like happened in the mortgage market in 08. There's nothing like that right now and nothing on the horizon. And if you stay within the um, guarantee fund limit system of your home state, which for most people listening is about $250,000 if you stay under that, you, even if you did run into issues eventually, you should get your money back. It won't be as fast as FDIC insurance by any stretch, but eventually that money may make its way back to you through your home state's guarantee fund. There's no guarantee. I hate, I love how they call it the guarantee fund folks, even though they'll tell you there's no guarantee. But I feel a little more comfortable with these other insurance companies for those types of products and that's really their forte. And you'll see that a lot of the companies that I would like for a single premium Immediate annuity do not compete against these private equity owned insurance companies in that realm. That's not their forte. And if they did, and you looked at the quote of say a three, four or five year multi year guaranteed annuity, otherwise known as a myga, issued by one of these A companies, they probably pay significantly less interest than the private equity owned insurers. And that only makes sense. The private equity owned insurers have to pay more because their ratings are substantially lower. And if an A company is paying five and a half and some brand new private equity owned insurance company using reinsurance from a wholly owned subsidiary in the Cayman Islands is also paying 5.5, which one do you think most people will go to Kris?

Speaker C: Well I would stick with the A old proven type company.

Speaker D: Exactly. So often on these types of products the lower rated questionable companies are they going to be here in 30, 40, 50 years? Are paying more. Personally I would be okay with that if again the person knew fully the risks, stayed under their state guarantee fund minimums and probably didn't buy a product that took longer than five years to mature. Most MyGas sell around three to five years. You can go longer, you can go shorter. But opening annuities is such a pain in the hiney, it's not worth it for a two year product. But I would not trust a company like that for a lifetime stream of guaranteed income. Now if you narrowed it down to two companies then sure customer service at that point might come into play. If both companies are equal across the board, hey here's I'm doing a short term product, I'm willing to not use just an A carrier. I will go lower, I'll go to the A, the A minus the A. I'm willing to do that. And you identify two companies. Now you might want to look if you're trying to make your final decision, do some googling and see if you can find any customer service critique. And that might come into play. But I wouldn't lead with customer service, I would lead with what am I trying to do with this annuity. If I'm buying a verb to give me income for the rest of my life, I would only go A plus plus. We've had clients overrule as in the past and go A plus and that's fine. And I could be okay with some of the companies they chose. But if you're going to start looking at the A's or a private equity owned insurer or uh, God forbid going into the B ratings, I would only tie that to money that is below my state guarantee amount and on a uh, product that matures in three years, maybe five tops. What say you, Chris?

Speaker C: I think that's a good idea. And on the customer service thing, I did want to comment. A lot of people are probably ranking these based on their experience opening the annuity and the paperwork and getting that done. You if this is a one time transaction where you are getting simply that old basic style income annuity, the spias that we talk about, once that's all set up and the income is started, you're never going to go through that again. You're just going to start receiving those payments and that's autopilot. It's not like you're calling them up every month to do something or change this or change that. It just is what it is. So yes, even with the most well rated companies, people might get frustrated with the policy opening paperwork and that interaction because for whatever reason, insurance companies, a lot of them still live in 1992 and everything is dealt with on a very similar way. You know, maybe because that's the, these old stodgy companies, they don't like change. But um, if you can get through that, you don't really need a lot of customer service. Now if you're buying a product from them where you're making changes, maybe a different allocation in your variable annuity and there's all that kind of stuff, then ongoing customer service is probably an issue. But if it's a, you know, one time activity that you're going to do with their representatives and the agents, etc. I would probably go with the strongest company financially and just put up with the frustration on the front end knowing that it's just kind of a one time deal. I think it's pretty rare for there to be recurring issues once income has turned on. Once it's, you know, simple income like from a spia, uh, if there's other moving parts that you're having to interact with the insurance company to call and understand and make changes and then they're updating it and you got to respond and this kind of stuff, that's a whole different deal. But a lot of these that we talk about, right, are so simple and straightforward. You don't really need much customer service on them. So I agree with you that the customer service aspect is probably a little bit overblown and the top line consideration should be the strength of the annuity and the strength of the product that you're buying from them, or the strength of the company and the strength of the Product that you're buying from from them.

Speaker D: All right, I think we beat that horse to death. Let's go to the next question, and it is an old annuity question, and actually a very simple one. We. I could run with this, but I think I'll keep it short. Hi, Jim. And it's a very pithy question similar to my answers. Hi, Jim. Just totally blew you off. Hi, Jim. If you wanted to purchase a guaranteed stream of lifetime income in your retirement, when would you consider a DIA instead of a QLAC inside of an ira? Let's explain what this person is saying, because every QLAC is a dia, but not every DIA is a qlac. Okay, what does all this mean? DIA stands for what, Chris?

Speaker C: Deferred Income Annuity.

Speaker D: Is it a verb annuity or a not once you explain verb. And I would assume everybody is, but it's like one or two new people. Like, what the hell is Jim talking about?

Speaker C: So what we have, the way we started to talk about this quite a number of years ago, is that an annuity, if it's during its deferral period, is something that you could take back from the insurance company. It looks more like an account balance. And you could do things with it. Transfer it to another insurance company, distribute it to you, things like that. We call that the noun annuity. It's still an annuity, but there's things going on that you can treat it more like a bucket of your own money that you could do other things with. The verb annuity is when you transform. You take an action and you take that noun and turn it into something else. You, you turn that lump sum amount that you might have access to in other ways, and you instead, uh, transform it into a regular recurring stream of income. You annuitize it. And once you've done that, you no longer have access to that noun. That account balance is no longer yours. You've literally given it up. You've moved it. There's, you know, so all these things are actions, right? Transformation, move, transfer, give up. Those are all actions. So that's why in our minds, that sounded like, you know, we're doing an action that's a verb, right? We're going to change this into ultimately what an annuity all annuities will evolve to, because all annuities have this annuitization date at some point. We've talked about that in the few in the past. And, um, that transformation now you've got this stream coming into you, which is a regular recurring action by the insurance company. And that's what we mean by the noun annuity versus the verb annuity. And a DIA is the verb. Even though you're delaying the turning on of the income, you have transformed your lump sum instead into this income stream. You have taken that action. You've applied the verb action, right. You have given up the money. The insurance company now owns it, for lack of a better word, and has replaced it with a promise from them to pay you an income stream. But because it's a deferred income annuity, it's starting in more than 13 months from today, uh, from when you buy it. And that could be a year from now, five years from now, ten years from now. There's a deferral period and then the income will start. But during that deferral period, you no longer have an account balance. The noun is gone. You've immediately upon the purchase of the dia, transformed it into the, what we call the verb annuity.

Speaker D: Perfect. Thank you. That's very good and hopefully helpful for those of you who don't understand when I say verb or noun. So as I said, every qlac is a DIA, but not every DIA is a QLAC. QLACs are relatively new. They came about, they were proposed in 2010 and first came about in 2015. Proposed by the Department of Treasury. They are Chris's personally favorite annuity.

Speaker C: I have nothing against the annuity. I have something against spending too much time talking about that particular annuity.

Speaker D: When they first came out, I did two shows which Chris into his mind. No. Yeah, Another year from now, it's going to be 50 shows. We, we did a few shows, a couple. I talked maybe 30 minutes total about a QLAC. And it's just burned in Chris's head. You all know me, folks. I don't ramble and go on and on and on. I'm to the point. Okay. Anyways, I jokingly say that Chris's favorite annuity, but he does not favor them, nor does he hate them. They're just a tool. But they are a form of deferred income annuity. So why did the government have to come out with an annuity called the QLAC if Diaz already existed? Chris, at the time when these were proposed in 2010, something happened when you were 70 and a half. What was that?

Speaker C: That was when you reached the age of required minimum distributions from your tax deferred retirement accounts. And that caused issues if you held an asset inside them that didn't start to pay out until after 70 and a half. So that's the trouble with having a DIA, uh, deferred income annuity inside of a IRA, for instance, the most common or simple version of a retirement account with an RMD age. So it wasn't practical to have a DIA inside of a IRA because you might run into RMD issues because the income didn't start till maybe 75 years old or 80 years old. Yet you were forced by the IRS to start taking money out at 70 and a half. And so because of that, you couldn't really hold a DIA inside of an IRA.

Speaker D: Exactly. And that's why treasury proposed QLACs qualified longevity annuity contract. After the 08 market crash and housing debacle, a lot of retirees were taking it on the chin. And the government realizes when they started embracing and pushing. I don't want to say pushing because the government didn't. Government, yes, in the IRC came out with section 401k. Uh, it was a gentleman named Tom, I believe, and I might be pronouncing it wrong, uh, in the 1980s is the first one who proposed the theory of a 401k. Then an article from the New York Times featured it. And as Mr. Banya has said in an article that I read on the birth of the 401k, he's called the father of the 401k. His, uh, phone rang off the hook after that article came out. And that's how 401ks came about. So it was in the tax code. Anyways, the government realized as more and more people, more and more companies rather, were giving up these pensions and going with section 401k of the tax code and offering what are, uh, called defined contribution plans, where your employer just defines the contribution you can put in and the contribution that they may put in, otherwise known as a match to entice you to put money in. How much you're going to receive in retirement was a big question mark. Well, people started realizing in the Department of Treasury, if you will, that, wow, people took it on the chin. Why aren't more people buying lifetime streams of income inside their IRAs? And it dawned on them our very own rules that say, hey, you can't defer these dollars into your 80s if you live that long. You've got to start taking money out at the time 70 and a half. Today it's 73. And for many people listening, myself included, it'll be 75 unless they change the rules yet again. So the government said, gee dias, deferred income annuities are a good idea. It puts the risk in a pool, the markets can crash, but you still have this guaranteed income. And if you're alive because you have longevity, these income payments can work for you. Hence the QLAC was born. And the government said you can buy a DIA inside your Iraq care. But we're not changing the rules. You must begin taking payments from a deferred income annuity when you re reach retire. Excuse me, rmdh. Unless your deferred income annuity is a special deferred income annuity that crosses its T's and dots its eyes and follows these rules that we, the Department of Treasury is mandating. If insurance companies do that and they'll be allowed to sell a QLAC, they can call it a QLAC. We, the Department of Treasury will not force RMDs from that QLAC until the person is 85. So it allows you to take today it's 210,000 from your IRA. Put it in a QLAC. IRA. The verb. You don't have access to the money anymore. It's a verb. But when you get to a certain age and you choose the age when you buy the QLAC can't be later than 85, the annuity will start paying out, but it's still coming from a ira. So they are considering that a distribution, the QLAC distribution to be coming from an ira. And ever since, and I like talking about this, whether you buy a DIA or a SPIA or a QLAC inside your ira, the income that those annuity products push out will be considered once you reach RMD age to be part of your total IRAs. RMDs prior to RMD age. And I don't know why you would buy a QLAC and take it out before 75. You theoretically could. But QLACs are truly designed to defer the dollars to late 70s into your early to mid-80s. But prior to that, if you have a SPIA inside an IRA or a traditional dia, or to a lesser degree a QLAC inside an IRA and you are younger than your required beginning dates, you don't need to take RMDs yet that payment you're receiving is just a distribution from an ira. That's all they're going to treat it as. But once you reach RMD age, it is now part of that RMD calculation. And we've spoken about this in the past. Just I think two weeks ago, Chris did a quick quote based on a question we had and the payment for a single, I believe it was a single, 75 year old male, Chris was almost three times the RMD calculation for the first year at 75, wasn't it?

Speaker C: Yeah, it was. It was like 2.9 times. It was almost three times.

Speaker D: So where am I going with that? When you buy these verb annuities, whether she buys a DIA or a qlac, I know I've gone down a bit of a rabbit hole here, but the payment that you receive once you reach RMD age is going to be significantly greater than the RMD itself. And since Secure2, and I believe it was section 204 of Secure2, but don't quote me on the section, but since Secure2, you are allowed to use the extra money you are taking out of an annuitized annuity IRA and use that extra amount, which is quite substantial to offset RMDs from another IRA or group of IRAs you may own. Meaning you don't have to take money out of those IRAs if the annuitized IRA is kicking out enough money to cover your RMDs for all your IRAs. And that's very possible when you do the math, at least at first. So I think the verb annuity is a very potent strategy inside IRAs now because the payments are so significantly greater than the RMD mandated payments from the the current RMD tables and rules. So she asks which one should she do inside an ira, a DIA or a qlac? Well, if you need the money before or right around RMD age, I don't think it matters. But if you are truly looking to buy a product today to pass on some of the risk of market returns, inflation, risk, investment uncertainty, and replace it with the knowledge knowing if you live into your 80s, you're going to have this annuity kick on that's going to pay a substantial amount of money by then. The longer you leave a DIA or a QLAC in the deferral phase, the more money you get and it grows X, but it grows in multiples and the longer you wait the more money you will get and it is quite substantial as time goes on. So these are really designed for the younger you to purchase now to help protect the older you with a bit of a guarantee. I'm not a huge fan of Diaz and I'll let Chris explain why we still favor putting a reserve. But I'm a, uh, more fan of a QLAC because during the if somebody truly as a younger them wants to put some money aside for the older them and take care of their minimum dignity floor needs in case they live well into their 80s and beyond, I would be receptive to a QLAC because during the deferral phase from whenever you purchase it to age 85, you don't have to take RMDs from that annuity. It can kind of sit there. So it can reduce your IRA balance today by a little bit and increase it a massive amount in the future when that big payment can offset RMDs from other IRAs you may have. So inside an IRA prior to RMD age, I would consider a dia, yes, if it pays more than a qlac. But if you cannot buy a DIA inside your ira, if you wanted to defer the income past RMD age, because the DIA IRA will begin paying out, a QLAC IRA is allowed to defer. So, kind of a long answer, but I wanted to give a little bit of feedback. But Chris, why do you and I, again, and we get many of you listeners disagreeing, uh, with our opinion on this, but why do we tend to favor the younger you determining what you need and putting those dollars aside as a reserve as opposed to saying, wow, I'm going to need $10,000. I'm just making this up, folks. I'm going to need $10,000 a year in 13 years when I'm 78. Let's just pretend you're retiring at 65. I'm going to need it in 13 years. I've crunched the numbers nine times to Sunday. I feel really good on that. So I'm going to buy this deferred income annuity that's going to guarantee me $10,000 a year in 13 years. Why are we hesitant on that? It's our own personal belief. You can take whatever belief you want, but why are we personally hesitant on that?

Speaker C: So during that deferral period, the two things that make the payment 13 years later higher, uh, work in your favor. One, you've given the money to the insurance company. In this case it's 65 in Jim's example. And so they get to use it, invest it, earn money on it for the next 13 years before they start paying you money. That's part of it. The other part is each year between 65 and 78, you become there's one year less in your lifespan. So the insurance company is going to have to pay you for a shorter period of time. So those two things, as time goes by, as those 13 years roll by, increases the payment promise that they make to you at, ah, 78 years old. However, you've made an irrevocable decision at 65. This is where Jim and I start to lose, you know, our attraction to putting money in the insurance product in an irrevocable manner. That's what a DIA would do, or QLAC for that matter, and wait until later. And we prefer not ignoring the need. You know, it's good that you crunch some numbers and predicted you need X amount $10,000 a year in Jim's example at 78. But instead take that money, set it aside, invest it in an appropriate way, don't set it in a box, but pursue some growth over the 13 years, variety of ways to do that and let then the 75 to 78 year old you reassess your situation at that point with your now known health status, your understanding of what your minimum dignity floor expenses actually are at that point. All the other factors that were predictions before you now pretty much know. I mean, you still don't know how exactly how much longer you're going to live. But a lot of things that were fuzzy have become clearer. And the younger you will have still taken care of the older you because you've set aside the money and now you've emboldened them or empowered them would be a better word, empowered the older you to go out and buy additional income if it still makes sense. So we prefer that we kind of look at the pros and cons of this. And the pro of our proposed approach is that you maintain control of that money. So if it turns out you don't end up needing or wanting the extra income you haven't now you don't regret having made that decision back when you were 65, you are still more flexible and ability to have the ability to adapt to changes in how your life has unfolded over that 13 years, we value that quite a lot. And it's that value that we see offsetting the simplicity, the set it and forget it benefits of buying it at 65 and then just letting it turn on at 78. That's kind of our position on that. But again, there's plenty of people who value the I just want to take care of it now, I want to deal with it. I'm confident even if I miss the mark and I don't quote, need it, at least it's not like it's worthless. I'm still getting $10,000 a year year when I'm 78. That can be put to use in other ways if it's not needed for my original intended purpose. Um, and I'm okay with that. I'd rather just deal with it now. And there's some people who pursue it that way. We just tend to lean towards maintaining your own control and liquidity on those dollars until later on and then the older you making the decision to annuitize to make that irrevocable decision at that time.

Speaker D: Right. And we have had a lot of you listeners write to us over the years on this position. M sharing that they disagree because they like knowing that the younger them have put in place the plan and the older them doesn't have to worry. And that's fine. We have nothing against it.

Speaker C: Right?

Speaker D: But sadly we do this for a living. And sadly we have seen there's a positive to this and a sad part of this. We'll talk about the sad part first. Many people in that I'm using a hypothetical 13 year period, uh, things happen to them that they never imagined. Some die, some get health issues where longevity is no longer an issue. Some have suffered spouses who've passed and money that they thought they would need or do for this, that or the other thing is no longer needed. In other words, life gets in the way and slaps you in the face sometimes. And to me, since you are buying the verb, the irrevocable decision, it's like someone today telling me, Jim, what kind of truck are you going to want in 13 years as, as you enter your 70s to do your fishing and hunting? Tell me right now and uh, I'm gonna go, uh, reserve that truck for, for you. I would be. How the hell do I know? Yeah, I don't know what truck I want yet. No, no, they got to tell us today. Oh, but so much can happen. Um, tell me today, what truck do you want? I know I'm going to want a truck in 13 years, but I don't know. 70 something year old Jim, what kind of truck? Maybe it's not the best analogy in the world, but you get my point. Now there is some good things that have happened to people as well during that 13 year deferral period. Perhaps you get a very large inheritance. Perhaps you were single but now you're married. We have seen, yes, a lot of bad things happen to our clients just by the nature of the business we're in. But we have seen a lot of good happen as well. The point is, I don't think, Chris, any plan, any plan has ever truly worked out as initially projected. That's no reason not to project your retirement. But we often tell our clients everything we're going over with you is etched in jello it's going to change. Now the reserve dollars you put aside very similar to the person who says hey, I adamantly know I'm going to need $10,000 a month in 13 years, great, but I guarantee you in 13 years that could be 13,000 or might only be 8,000. He might be on the target, but I doubt he's on the bullseye. And it's why we preach to not only people who work with us, but you do it yourselfers. Any retirement plan is not a set it and forget it, it's a monitor. Doesn't necessarily have to be monitored every year. Some I think there is a value to monitoring every year, but only certain numbers. And some of those numbers that I would have no problem with people wanting to monitor every year is yes, their minimum dignity for and the inflationary pressures on them. But also if you take, take the approach that we need to cover these shortages in your minimum dignity floor between your Social Security and pension, if you have one in an income annuity that needs to be monitored every year or maybe every two or three years. So in our approach, if interest rates are rising, the amount you need to reserve might be dropping or vice versa. If interest rates are dropping, the amount you need to put in over that 13 years might be rising. Mortality tables will definitely be changing over that 13 year period. So it's going to be important to constantly update your minimum dignity flow shortage, your inflation projections and the amount of reserve you put aside. It just gives you more flexibility if its actual pool of dollars that you're doing this monitoring and adjustment to rather than trying to say oh goodness, I bought this DIA, I at least, wow, five years ago I thought I was going to need 10, now it's looking closer to 8 or vice versa. Just eight years ago I thought it was 10, but it's closer to 14. It's too many variables folks. I always say your retirement planning is an explicit promise to the older you that you're going to cover their mdf. And if you can do that, they will give you permission to spend on fun. Your promise for your permission. But when you make that promise to the older you, they don't expect you to nail it today. They just want you to be monitoring it and making sure that as it gets closer and closer to them needing it, those dollars are there. So it is an irrevocable decision when you buy a dia. But when you do something similar to our approach and uh, we call this the post delay period MDF shortage, that's truly what we're Talking about here, the delay period shortage is from retirement until all secure income is turned on, usually HC70. The post delay period is the income you're going to need later dollars that you put aside for that. In our opinion, those are as good as annuitized because they're pulled out of your portfolio and they're not available for fun. They are earmarked specifically for additional minimum dignity floor protections. So they truly are out of the picture for anything but that. You just haven't bought the verb yet. You've kept the noun not at the insurance company, but at whatever custodian you're using to help manage your assets. But they are earmarked, they're off limits. They have a lockbox, as Al Gore would say during his presidential run for Social Security lockbox when he was talking about that. You kind of put them in a lockbox, if you will, and they're earmarked, but they are completely flexible and liquid. Anyways, that's my thoughts.

Speaker C: Well, just consistent with what we've talked about on a fairly regular basis here is, is it's, there's, uh, a difference between setting aside money for your plan support to, you know, earmarked for certain things in the lockbox, as you were mentioning, and then looking into the future and having a false sense of, I, um, guess control over your future, that you're overconfident in your ability to predict the future and you commit to some actions today when it would be better. There's not a huge advantage to committing today. And that just opens the door to regret, uh, or having made a mistake early on where if you had just waited a little bit, let things clarify, then you, um, you know, hopefully are empowered to make better decisions at that point with your own money. Uh, but setting it aside, putting in the lockbox still makes perfect sense because the need is probably there. Addressing the issue is probably never going to go away. You're probably close enough that the issue that you're worried m about does exist out there. It's just the true nature of it, the shape of it, the size of it, etc, that's going to be off a little bit and waiting to get a little closer before you commit. Still makes sense. Just give yourself some, some ammunition, if you will, when you're heading out on this journey. Just make sure you got the ammo there in the lockbox and uh, then deploy it when it makes more sense. That's really, you know, the crux of, of our suggestion in this regard.

Speaker D: Perfect. All right. Do I have time for one more or not.

Speaker C: I. It would have to be super short. And whenever I say that, it never is. So we should probably.

Speaker D: You can keep it super short.

Speaker C: I can keep something. I have control on this.

Speaker D: All right, I'll let you choose. We. We have one who's talking about. About. He has a TSP and was suggested to buy an annuity. Oh, we have another one who has a wicked cool state. Hint. Um, wondering about life, um, expectancies being extended and when he should buy a spear. Which one would you want?

Speaker C: M. Well, that's probably a coin toss. Uh, let's do the tsp.

Speaker D: Okay. This one is just a matter of opinion and I'll let Chris run a lot with it. I'll read it, set it up, let him answer it, and go from there. This is something we have seen so many times in our career with government employees. This is from last year. This is, um, a year ago. Question. I am listening to your Edu shows on annuities in 2025. I am currently working with an advisor and he is recommending. I'm not going to name the insurance product or company he did give it. I am a government employee and will be retiring soon. This is over a year ago. Chris was probably already retired. I have $400,000 in my TSP account. 60% of that is in the G Fund. Do some quick math. What does that come to, Chris?

Speaker C: 240,000 in the G Fund, which is kind of the stable value money market fund style position in the tsp.

Speaker D: Exactly. Okay, so 240,000, folks. My advisor is recommending I move the money in the G Fund to a fixed indexed annuity. His logic is that the TSP G fund returns are about 3% right now. I don't. This is over a year ago, folks. I don't know what the TSP is paying. Excuse me. The G Fund in the TSP is paying right now, but it is a fully government guaranteed liquid safe money holding that pays a little bit of interest. Like a high yield savings account almost. It's their version of a 401ks stable value.

Speaker C: So as of June of 26, the G Fund interest rate is 4 and a half percent.

Speaker D: 4 and a half. So apparently a year ago is about 3. He said if I move it to a fixed index annuity, I can get an average return of 9%. Do you have the button? There you go.

Speaker C: Yeah.

Speaker D: All right.

Speaker C: Wow. I, uh, hope you put that in writing so you have that to take somewhere.

Speaker D: Exactly.

Speaker C: And get him in trouble. Oh my M word.

Speaker D: Fixed. No fixed indexed annuity comes with any the way you have it worded. If your advisor really did word it that way, that this fixed index annuity is averaging 9%. That's bogus. It might be during a certain time period. It did understand these types of annuities are sold with hypothetical illustrations. Everybody forgets that damn word. Chris, what does hypothetical mean in your native tongue?

Speaker C: Uh, means could possibly happen.

Speaker D: I call it in my native tongue. It ain't freaking real. It's not real. I don't know what a fixed indexed annuity would pay. And anyone from a fixed index annuity company would admit it if they were on this show. They maybe the agents are, uh, selling them under this, but they are not sold with oh, it's going to get nine. He's the annuity he recommended to you maybe does show a back tested. If you bought it exactly on this day in this year, it would have performed this way. Remember, fixed index annuities don't go off a calendar year. The illustrations generally run off a calendar year. But if you buy a fixed index, June 19, 2026, when we're recording this, if you bought one today and it opened today, you would be indexed from June 19 to June 19 to June 19, not January through December. My point, there is a lot of these illustrations use timelines and time frames that make them look good. But do not take what's in a hypothetical illustration and convince yourself that is what you're going to earn anyways.

Speaker C: Yeah, and by the way, the G Fund rate hasn't been 3% since mid-2022. So if this person also told them that recently in 2025 it is, uh, three. That was total BS as well. I mean, this sound, this guy's just. If this truly came. This person is getting very misleading advice.

Speaker D: Okay, so you have 240,000. He's saying that this fixed index annuity can get an average return of 9% and I would be able to draw income from it after the first year. Now, that sentence or that part of that sentence, that part is true. The first pot. Oh, it's average 9% in this hypothetical bogus BS illustration I'm showing you. Ergo, you can imagine the future will do the same. That's just not going to happen. There is no guaranteed return coming in a fixed index annuity. Some in the first year. If you allocate the money to the fixed account, we'll say for the first year, we guarantee to pay you this much. But the amount you're going to allocate to the indexed amount, we have no idea what you're going to get. And they don't know because nobody knows what the markets are going to do. And on fixed indexed annuities, the insurance companies can change the participation rates, the spreads, the cap rates, whenever they want.

Speaker C: And if he wanted that kind of uncertainty, why would he be in the G fund? I mean, he's taking an allocation to something that's usually thought of as boring, principal protected, stable, and adding all this uncertainty, uh, to it. Liquid at any time. Yeah, exactly.

Speaker D: And, um, put it in something that's not going to be fully liquid. This particular annuity you're looking at had a 7 to 10 year penalty period where you could not get your money out for that time period outside of the free withdrawal.

Speaker C: Which means this advisor is probably making 20 grand plus on a commission.

Speaker D: Oh.

Speaker A: See you.

Speaker D: You. You. You rained on my thunder. Sorry.

Speaker C: How about the parade? I. Huh? Uh, it's rain on your parade or stole your thunder. One or the other. You just mixed them together, which is cool.

Speaker D: Not in my native tongue, but okay, fine.

Speaker C: I rained all over your thunder.

Speaker D: Jim, let me get to this so we can stay short. All right, so rain on your thunder. Parade. Um, uh, whatever. You stole my thunder. Okay, so he continues. It gets a little bit. So I can begin taking income in the. After the first year. Every single annuity you buy, we talked about this before. Has a lifetime stream of guaranteed income guarantee built into it. Some annuities, such as a fixed index annuity, put most of their oomph in potential growth during the deferral phase, not necessarily in income during the payout phase. The fact that the insurance company would let you turn income on after one year, I don't necessarily think that that's a feature that makes it a strong sale. It's a feature that's available in any annuity, not just the one this, uh, advisor was recommending to you. He said, ah, in addition. Ready for this one, Chris? I will get a bonus of 11%,

Speaker C: not of money to take out, and

Speaker D: a guaranteed return for the first year. We don't have enough time. And I'm not going to name this annuity and dig into it, but I've warned all of you, whenever your advisor uses the word bonus just in your head, replace it with the word bogus. So as he's talking, or, uh, she's talking to you, every time they say bonus, just imagine they said bogus.

Speaker E: Yeah.

Speaker C: Ah, it's a type of shell game. They're handing you something with their right hand that they're taking other things away with their left hand. That's essentially what's going on. They're not. Insurance companies aren't just giving away free gifts money. There's always an offset in the insurance company's favor. That's in fact just the way it is.

Speaker D: In fact, Chris, whenever you buy a bogus annuity, otherwise known as a bonus annuity, read the disclosure. Because they're telling you right in the disclosure your cap rates, your spreads, your participations are often lower than in non bonus products. They are not in business to give you 11% more money up front. So they're going to make it up somewhere. Bogus annuities exist to entice people to buy them. Oh, I'm going to get 11% right off the bat. It doesn't work that way. And they're going to make it up by giving you less potential growth or higher fees or a mixture of both. And it's all disclosed to you in the annuity offering. Documents that you never read, but it's right there in black and white. I've seen them sometimes right on the application where you're signing that you never read because the applications have so much text in them and they're 30 plus pages long, I kid you not, 30 plus pages long. Whenever you hear the word bogus, substitute the word. Excuse me, bonus. Substitute the word bogus. Very similar to what my FTO field training officer told me, uh, back when I was a rookie cop and I've shared this on the show, he said every time, Jim, when you're out and you're dealing with the public, just imagine when you're calling them sir, you're actually calling them asshole. But you can't say that to them. It'll make you feel better when they're being really awful to you or something to that effect. So when I used to follow this person, uh, around during my FTO days and every time he'd be saying yes sir, yes sir, I would be smiling because I know in his head he's thinking that for good or bad, that's how he dealt sometimes with the public. That's why I say whenever you hear the word bonus, just substitute the word bogus. And if it still makes sense to you at the end of the conversation, maybe it's something worth considering. But I'm telling you, insurance companies don't exist to give you extra money. They're going to get it from you and you're not even going to know they're taking it from you. And it's all discovered. Disclose to you is your. Did the advisor point that out? I highly doubt it. Oh by the way, if you do buy this bogus annuity, I do want you to look on page 36 paragraph 4 in 8 point font where we clearly say you're getting less cap rate, less participation, lower spread and you will likely earn less money over the long term than a non bonus annuity. But I just want to make sure you see that they're not doing that folks. Okay, back to this. Here's the other thing that you got to watch out for and we don't have time to go into it but he wrote this next. Chris, I asked my advisor about the cap on a potential return and he told me there is no cap on the return. Okay, then you are buying whenever you see no cap on a fixed indexed annuity. And this particular insurance company that he named is a private equity owned insurance company. That just grates on my nerve. Anyways, they are using, if there's no cap they are using a proprietary index that is probably brand new and its potential return is going to be so, so minimal to begin with. This, this irks the hell out of me when you see proprietary indexes within these annuities and the NAIC and I believe FINRA maybe or the sec, some of these regulators have issued warnings on this on uh, proprietary indexes being used and the regulators are looking at trans trying to curtail this practice. If you are going to buy a fia, in my also very humble opinion, make sure the index that you are going to index your potential returns to are ah, some of the main indexes that are traded regularly and you can track and follow whether that index is The Dow, the NASDAQ 100, the S P500, the Russell 2000. Just a real freaking index, not the Joe Schmo. I just created this index out of my. You know what? I'd watch out for that. Especially when you see an FIA say no cap, they're just screaming proprietary index that is never going to match this hypothetical illustration we're showing you.

Speaker C: Yeah. To take Jim's car or truck example, it's like saying you can go drive as fast as you want in this car, but then they turn over the keys to this old junkie.

Speaker A: Hugo.

Speaker C: Yeah, you know, great. I can go as fast as I want. No limit. Well yeah, if you can get that thing up over 38 miles an hour, good luck to you because the thing is at uh, its core is such a pile of crap. That's the, that's essentially what's going on

Speaker D: as you see on the news yesterday, I was watching the Denver news here because I can get it off of YouTube TV. I don't think it happened in Denver. I don't know where it was, but an 85 year old gentleman was arrested for drag racing. The other car got away. He was 85 doing 110 in a 45.

Speaker C: No, I didn't see that.

Speaker D: They arrested the poor old man. Good m. He said he wasn't drag racing the other car, he just enjoyed driving fast. Um, yeah, so anyways, when you were saying that in the Hugo, I thought of the 85 year old gentleman who was on the news being arrested. Okay. Would I be better, you think, to keep my funds in the TSP and just use a 4 or a 5% safe withdrawal rule, or do you think I should switch to the fia? Not having a loss is very interesting to me. But I have been searching the Internet and watching YouTube videos to learn more about fixed indexed annuities. That's your first mistake right there. If you're watching YouTube videos on FIAs because there are so many of those influencers, as they call them, recognize A, uh, fixed indexed annuity is not regulated by the securities and Exchange Commission, nor is it regulated by the Financial Industry Regulatory Authority, otherwise known as finra or Darth Vader, as I used to call him when I was registered under FINRA. That's a joke. FIAs are uh, sold by insurance agents and they are regulated by 50 different state insurance regulators who in my again, oh so humble opinion, do a horrible, horrible job on policing the rap that's out there on YouTube and Instagram and X and all these other social websites where they're pretty much saying and doing anything. It's the Wild West. Don't rely on those. In my humble opinion, he says to me they all sound too good to be true.

Speaker C: Yeah, go with your gut.

Speaker D: That's.

Speaker C: Your gut is trying to tell you something. That's a good gauge of things. And now we can't possibly. You've given us, I think, a false trust choice. Either, you know, G Fund or the fia. There's a whole lot of other choices and it would all depend on what are you trying to do. You need to step back and decide what you're trying to accomplish. Uh, like Jim always says, you'll. You know what, how can we tell you what to do with your money unless we know what the money needs to do for you? You need to ask yourself that question in the mirror. What does this money need to do for me? Then seek out the best approach to accomplish the that I it may or may not include an fia and if it does, it's likely not this one that's being described because this one sounds like one of those sold at a free lunch seminar that is um, obtuse, obscure, the wording, confusing from a questionable company all to enrich the person selling it. That's what it sounds like. I might be wrong. Maybe I'm being too critical. I don't think so. I've seen too many of these.

Speaker D: This particular insurance company is not a fee based fixed indexed annuity. It is a commission based product most likely paying anywhere between 6 and 8% commission. So on 240,000, you do the math and that's why someone is pushing it and telling you to take money out of the fia. He did not. You are right, Chris. He did not begin by saying my advisor, after careful consideration after we did this, after we did that, he gave

Speaker C: him bogus numbers as the argument to buy it. Oh, you're only earning three when it was really four and a half or five. And this can, you know, beat it by just an astronomical amount. Teasing them with that 9% statement and then oh, here's all the other bells and whistles I'm going to throw at you. And never once mentioned the downside of any of this. That is a classic. That is a classic scummy insurance sales approach. Classic. Which is why annuities and other insurance

Speaker D: products get bad names.

Speaker C: Get a bad name because this kind of stuff goes on and the insurance company of insurance industry is to blame for this because they allow this to happen. They allow this to happen so they can't complain about having to overcome this bad perception that a lot of people have. Even though there's a lot of good apples out there in the industry, there's all these bad apples that the good apples aren't trying to fight hard enough against. So they get all get painted with the same brush. That's just.

Speaker D: And bonus annuities exist for one simple reason, to sell. And the regulators should have closed this scam down a long time ago and not allow bonus annuities. And I have seen bonus annuities being used as uh, the reason and the defense on recommending someone who is in a penalty phase on an annuity and facing a 8, 10, 12, $15,000 penalty perhaps to get out of the annuity by saying hey, you can make it up on this end with the uh, bonus. Oh my gosh, it's horrible.

Speaker C: Creepy.

Speaker D: And fixed index annuities are not Regulated by the sec. They are not regulated by finra. These insurance agents and there's a lot of the good ones out there, there are good insurance agents out there but oh, um, more than I care to ever imagine are not good. They're selling crap ass products. They're pushing these things using a bonus or uh, a bogus to get you to sign up for something so they can walk away with a 6, 7 8% commission on your $240,000 and then off they disappear. And all what they have to do is something that is suitable for you at the time you bought it. It's just, it's horrible. The insurance industry is so loosely regulated and again the SEC recognized this and try to regulate fixed indexed annuities. And we can all thank Tom Harkin of Iowa who killed that permanently. And that's what you get. These are the people, our uh, politicians who just sticking in our face. And I hate them just as much as I hate insurance companies and insurance agents who do this because they give in my opinion a very valuable product for retirement purposes. Annuities, especially single premium immediate annuities, they give them a bad name and they get people because if you listen to this right now you're like oh my God, annuities suck. Well yeah, perhaps in this particular case we can't say for certain because as uh Chris said ah, we don't know everything in this but based on what little he showed me and told me you've got one side of the story. This thing is the best thing next to sliced bread and you should buy it immediately and you didn't get everything else that I'm trying to share with you. Anyways we're going to wrap up because I cold Chris, we wouldn't go long on this but this, this again is a year old so he's already made his decision. But hopefully you vanguards you are going to be the one out there. So if you hear someone say I'm thinking of buying one of these annuities, I want to get a 30% bonus or whatever it might be. Just oh my God. Timeout. Bogus, Bogus. Let's look at this. What are you trying to do? Get all the disclosures of that bogus annuity, tell them you want it, you want a sample policy or you want all the offering documents, Chuck it into AI and start asking AI to find out all the disclosures on this bogus annuity or bonus annuity and you'll see what I mean. Anyways, that's about it. Thanks for listening folks. Sorry I went on that little bit of a tirade. Chris is all calm, cool and collective and I go a little crazy.

Speaker C: I got a little riled up there too.

Speaker D: Yeah, but it bugs me, Chris, because we're trying to help people understand that there can be a place for annuities and retirement. Retirement. And then you get stories like this. And I fault the regulators, I fault Tom Harkin and everyone else who voted to support that. What is so wrong with putting protections in place on fixed indexed annuities? But now they're gone for good and you get all these influencers on social media pushing these things and it's just, it's horrible.

Speaker C: Well, on that positive note, thanks everybody for listening and sending in your questions. Keep it up. We've got a little longer to go here in Annuity Awareness Month, but, uh, um, hope you're extracting a little bit out of each one of our shows that we do. If you want to send in your own questions, send them to Jim. Jimhelps.com that's Jim. H E L P S.com Put in the subject line that it's a question for the podcast and Jim, uh, will take a look at it and hopefully we'll, um, feature your question on a future show. So, Jim, you have a nice weekend in Ohio and uh, everybody else stay safe and healthy and we'll be back with you next week with a brand new show.

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Speaker E: This podcast episode includes a discussion on annuities, which are insurance products that involve fees, expenses and investment risk, including the possible loss of principal for variable annuities. Annuities often have complex features. Surrender charges and holding period requirements and withdrawals may be subject to taxes and penalties. Any references to protection, benefits or lifetime income generally refer to fixed insurance products, not securities or investment products. Guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. This content is for informational purposes only and should not be considered investment advice or a recommendation to purchase any specific product. For additional information regarding annuities, please consult a, UH, qualified Financial Professional to determine what may be appropriate for your individual situation.