Erin: Jordan, good to see you. Today, we’re going to talk through top annuity income strategies, finding the right fit for you. Annuities can be a great way to create guaranteed income in retirement, but not all annuities are created equal. So, what matters most is figuring out if an annuity and which kind fits into your personal retirement plan. And Jordan, when people hear annuities, there’s often a strong reaction. Why is that?
Jordan: Yeah, it’s like the you said the “A word”–sometimes it’s like, what did I say? But there’s a lot of negativity in the news. A lot of them are misunderstood. A lot of people got these when there was lower interest rates and they’re like, “Oh, they’re not performing that well based on the interest rate environment.” But I think first of all, it’s misinformation and people don’t understand them and how they fit into a plan. That’s the main thing.
Erin: All right. So, there are of course several different types of annuities, fixed, indexed, variable to name a few. How do they create stable retirement income and how do they vary in risk?
Jordan: Yeah. So let’s just kind of break that down.
The fixed annuity is basically a guaranteed interest rate. If you like CDs, you like fixed annuities, a little bit higher interest, plus it’s tax deferred, so you’re not paying that interest each and every year. So you get a more compound interest.
Fixed annuities or fixed index annuities, I should say. They’re tied to the market indexes. So you could make double-digit returns potentially and not take any risk based on the annuity you choose. But if the market does good, you do good in your annuity.
Then there’s the variable annuity that you’re kind of directly in the market in a lot of cases where you could make, you know, 20 30% but you also could lose 20 30%. But you got to make sure that you know why you’re doing it and make sure it makes sense based on your plan. You don’t always realize you can take very little risk or no risk in some of these products and still make double-digit returns, but it has to be based on what you’re trying to accomplish.
And you asked another part of that. How do you get guaranteed income? Well, products are structured different ways, but we kind of look at what’s the best guaranteed income source for a lot of our clients and based on your age based on the product. We kind of tailor it to you to say, hey, at age 65 or age 70, you might get a guaranteed income stream by this, you know, guaranteed income product to help sustain your lifestyle. But that’s based on an individual plan case by case,
Erin: Right And I just– maybe you can dive into this a little bit more. I think you’re answering the question, but how do you help a client determine which, if any, is right for them? I mean, there’s so many different kinds.
Jordan: Yeah. You got to have a plan. You got to know what we’re trying to accomplish. Do they even want guaranteed income? Do they want to take a lot of risk? If they don’t want a lot of risk, maybe we go the more fixed index side, which you’re not directly in the market. If they want to take more risk, maybe we go more on the variable side. But even if you’re taking risk, you can take smart risk. You can still get competitive returns. And some of the variable annuities that you know we could recommend, they have buffers on them so that you’re not taking the full market risk or they can actually leverage this where you can make over 110% of the S&P 500.
But all is based on the plan and what you are trying to accomplish.
Erin: And timing of course is everything in retirement planning. So, when is the right time to buy an annuity?
Jordan: Just reinforcing part of your plan, right? Just based on what you’re trying to accomplish. I will say, you know, we had lower interest rates for a few years. So maybe you got an annuity over the last, say, three to five years. Well, let us review that because you might be able to upgrade your annuity to get better growth and better income.
So right now could be a good timing from an interest rate perspective, but there’s no perfect time to get any investment. It’s all about your plan, your goals, and then seeing if these tools, because annuity is a tool, it’s a product helps accomplish that. But never should all your eggs be in one basket.
Erin: And of course, we have to talk about social security, which functions as a government provided inflation indexed life annuity providing guaranteed lifetime income. Determining when to claim social security is one of the most important decisions you’ll make in retirement. And that decision has to take the rest of your retirement plan into account.
Jordan: Correct. And I didn’t mention earlier everything is about a plan, but it’s all about taxes, too. And social security can be heavily taxed based on when you decide to take it. But you mentioned earlier, it’s kind of it’s a form of annuity, right? You get guaranteed income. People love getting guaranteed income. But I think for most clients of ours, Social Security is not going to cover all their living expenses. But we got to make sure we have a plan to say, “Hey, this social security is going to cover this amount, maybe cover this amount, so that every January 1st, they wake up with a lot of guaranteed income coming in.” So they have that peace of mind. But social security, taxes, different products and investments, it all fits part of the bigger picture of having a plan. And there is no set it and forget it strategy for social security. We need to look at you on an individual basis. Look at your health. Look at the taxes. Look at your family history and then make an educated decision on that.
Erin: Well, if somebody would like to talk through if an annuity is right for them, what kind of an annuity is right for them, how can they reach you, Jordan?
Jordan: Yeah. Again, we will never just show you one annuity. We want to create a plan and see what products fit inside that plan. But to start that conversation, 847-499-3454 and see if we can help. And if you have an old annuity, we will review that complimentary and see if we can upgrade it to get you more income or more growth and get you a better product potentially.
Erin: Yeah, certainly worth it again if it hasn’t been looked at in the past five years. And if you enjoyed watching this video, we encourage you to please like and subscribe. Jordan, thank you so much for your time today.
Jordan: Thanks, Erin.
