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Now let's get started with Finishing Well. Welcome to Finishing Well with Certified Financial Planner, Hans Scheil, and today's show is really a cool name, I like it, Annuity Income Writer. I was thinking about it, income writer, and I think you're going to find out what all that means, and it's going to be really exciting for you because everybody could use a good ride as far as some more income, but anyway, you know, Jesus in John 14, he said he was the way and the truth and the life, and no one comes to the Father except through him, and so interestingly in that phrase, in that verse, you get an idea of what the destination is as the Father, and Jesus is the way.
Well, interestingly, if you look in the Hebrew deeply, you'll find there are two different ways you could translate way, and one of them has to do with like if I gave you directions to my house, I would be telling you the way, and Jesus is clearly the directions, there's no doubt he is, but also if I was telling you the way to my house, I would give you some street names, and those streets are also the way, and Jesus is clearly that as well, but in the 27th Psalm, he tells you both Hebrew words are mentioned, but also even a cooler thing that I really think is more of an input rider, as I was going to say, somebody ride along with you, so it says in Psalms 27 11, it says, teach me thy way and lead me in the right path because of mine enemies, and so in that idea is not only is God going to teach him the path, but then he's going to guide him, and that would be the Holy Spirit, so if you could imagine directions to my house, and I could even give you a map, but it wouldn't be the same thing as if I sat right next to you and said, hey, turn right here, and oh, you're right at my house, in other words, having guidance is critical to the equation, but when you think about what God set up for us, we have Jesus who is the way, he is also the road, but then we have the Holy Spirit as an input rider, right, he's there, and the neat thing is, as we're going to talk about about these annuities, is the longer you hold on to him before you turn on the income, the more interest that you get, and the neat thing about riding along with Jesus, the more you turn to get his input, the more interest that you will accumulate, which will help you take a whole lot better path in the long run, and so I know that was a lot to say, Hans, I love this income rider. I've talked about income riders really indirectly quite a bit on this show and in our videos when I'm just talking about taking an amount of money, whether it's in your IRA or it's not in your IRA, it's in non-qualified money, and putting it into one of these annuities that has one of these income riders on it, and I haven't really gotten into the basics of the income rider. What I've done in the past, and I'll continue to do, is I'll just show you or tell you how much monthly income you can get starting in five years and then starting in six years, so it's a way to buy a guaranteed income for life, and so what the insurance company is really saying through the use of these riders, if you leave your money with us for a period of time, we will guarantee you a monthly or an annual check if you wait to take the money, okay? So if you wait two years it's so much, you wait three years it's so much, and so on and so forth, so there's an incentive to wait to start it, and then once you do start it, we can tell you exactly how much it's going to be right now at that particular date, and then once it starts, it's going to continue sending payments to you for that amount for the rest of your life.
Right, so I'm sure that many of our listeners like me are not that familiar with the term rider, so I know it's an insurance term and it's something that is connected to a policy, but I think it would be but I think it would be really helpful for our listeners to even understand what does that mean, rider? Okay, well it means it's an extra benefit on the policy. I mean that just, you kind of stated it, it's a rider, it's something that's attached to an otherwise self-sufficient policy, so you got the annuity policy, which is, you know, in the example we used in the video, we're putting a hundred thousand dollars into this annuity, and that annuity is going to earn interest once a year for the life of the annuity, so it's nothing more than a savings account with an insurance company, and the annuity all by itself, the benefits you're getting out of it is you're getting interest every year, which might be more than you could otherwise get at a bank or a CD or that kind of thing, and you're also getting a guarantee that you'll never lose money on this thing, it'll never go backward, and then if it's outside of an IRA, you're getting tax deferral, so if you're comparing it to a CD, you don't have to pay any tax on this accumulating interest till you pull it out, so that's an annuity all by itself, and then if you add the rider, and this is just one of many riders that are available, but it's one we use a lot, this is an income rider, and so we attach this to the policy, the cost of it is 1.25% a year, so it's not cheap, so in other words of this hundred thousand dollar policy, if we add this rider, you're paying 1,250 bucks a year for this rider every year, and that's enough to run some people away, but when you just look at the cost, and you don't look at the benefits, I mean it's worth paying the money for, okay, and so the insurance company is getting money from you, is the cost of the rider, and then what you're getting in return is the right to start collecting an income out of the annuity, and once you start the income, that amount is guaranteed for the rest of your life. Yeah, like Social Security, you get that until you pass away, right? You do, and if you write this thing on a husband and wife, it's when the second one passes away that the money stops, so let me give you an example, and it might make a little more sense, let's pull it out of the video, is if we had a 65 year old man, or woman, this doesn't make any difference whether it's a man or a woman, age 65, single, puts $100,000 in here, and they said I want to start taking my guaranteed income for life immediately. Well, right from the very first month, they could get 7,100 a year, or almost 600 a month, for the rest of their life, so if this 65 year old lived to 100, the insurance company is going to be paying way more than they put in here.
That make sense? Absolutely, yeah. And that's what you're paying a premium for, but if this 65 year old would just wait until the next birthday, to his or her next birthday, which could be a month from now, or six months from now, as soon as they turn 66, then they could collect 7,800 a year, or 650 bucks a month, for the rest of their life, so I would say that if they had a birthday in a few months, it'd certainly be better to wait those few months to start getting that income, okay? Yeah. But if they could wait till their second birthday, which could be less than two years, but it'd be, you know, you turn 66, but then you wait till you turn 67, then the income would be 8,598 years, or, I don't know what that works out to monthly, but certainly more than the one year, and if you wait till the third birthday, or after that, 9,450 a year for life, and it just keeps going up, so what we do is we take all this and put it in financial plans, so like if I was looking at this single guy, or lady, and I was looking, and they're 65, and minimum distribution, we're using IRA money, so if we could set this 100,000 aside till age 73, which is going to be eight years from now, the payout is 15,210 a year.
Wow. For life, okay? So, people sit here and they look at this, and they say, you know what, that all sounds good, but I gotta wait eight years for my money. Yeah, if you need the income right now, we have a way to deal with that, but of course you have to wait that long, and you really wouldn't have to wait that long. You could start it in three years, and it'd just be 9,450 instead of 15,210. I mean, so we can tell you right now how much income you can get for life if you can tell us when you're going to start it, and we answer all those questions for you when we're doing a financial plan.
I just came up with $100,000. myself, and so what we do with these a lot is we got somebody who's 65, and they're just retiring, and they're thinking about starting their Social Security at 70, and so they're going to wait five years, and you know, they are a little unsure of that because they'd like to have the income coming in now, but we know we can count on X amount of money, whatever the Social Security statement says, starting at age 70, and that may not be enough of their income, but we can put that down on their sheet, and then we can calculate how much income are they going to need to live off of at 70. Let's say it was, let's say their Social Security check was going to be $3,500 a month if they waited till 70, and then we had calculated that they're going to need $7,000 a month to live.
Well then, we could set up one of these for another $3,500 a month, and then work backwards to figure out, we're going to put more than $100,000 in there, but you know, maybe it's two, three hundred thousand dollars, and now we've got their $7,000 a month guaranteed for life. Yeah, and this is a good point to remind you, we got to jump in here for a second, remind you that the show is brought to you by CardinalGuide.com. At CardinalGuide.com, we got the Seven Worries tab, and obviously one of those is income, and that's what we're talking about today, and so very cool. The show notes and all that show all these annuities and all these things in great detail are all there. It's a Seven Worries tab. Again, it's under income, right Hans?
It is under income, that's correct. And then, of course, my favorite part is the contact Hans button, right, where you can get his phone number, email, however you want to get in touch with Hans, he would love for you to do that and create a customized plan for you. And, of course, Hans' book, Complete Cardinal Guide to Planning for and Living in Retirement, it's all there at CardinalGuide.com, so we'll be right back in a minute with Inuitie Income Writer. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Oh, welcome back to Finishing Well with Certified Financial Planner, Hans Scheil, and today's show we're talking about an Inuitie Income Writer.
And very cool, when we left our hero Hans, he was on a roll talking about this one example that, oh my goodness, it's a gift that keeps on giving. Well, yes, so what we were doing is we were talking about this particular annuity with a guaranteed income for life, it's the annuity income writer, and we were talking about an example of a person who's 65, they just retired, and they were going to start their Social Security until they met us, and their Social Security was going to be like $2,500 a month, but they need significantly more than that to live than this person does, and let's say they need $7,000 a month, or $6,000 a month, but it'll be $7,000 by the time they're 70. And then we're sitting here and we run the numbers, and we say, well, you know, their Social Security is going to be $3,500 a month if they wait till they're 70. So that $3,500 a month is going to give them half of what they need to live from 70 and beyond. And then the other $3,500 a month, we're going to create out of this annuity, and we're just simply going to, because they need $7,000 a month to live, so we're going to put about $300,000 in this annuity, and it's going to then produce a guaranteed income for life of $3,500 starting right when they turn on their Social Security. So now we've got seven grand a month taken care of for life on this person by using $300,000 of their IRA money and then delaying their Social Security five years.
So you say, well, that's great. What are they going to do in the meantime? Well, so now we need to create really a $6,000 a month income because, you know, it's going to, with inflation, it's going to, they're going to need 7,000 by the time they're 70. So we got to create right off the bat, a $6,000 a month income. And we're going to do that out of the remainder of their IRA 401k. I mean, before we get into this exercise, I'm assuming these people have more than $300,000 in there or this person does inside of their IRA. And then we're simply going to use the balance of their money or some of the balance of their money, like another 300 to $400,000 is probably a little bit less than that to 6,000 a month for five years, but it's probably just a little short of five years because they're already 65. And at some point in the year in turn 66. And we've run and possibly sell them another annuity that stops in five years.
So I don't want to get too deep into the example when I don't have the benefit of the visual aid. But the beauty of being able to set aside some money, and then let it accumulate. And knowing at certain points in time, which is like a day after your birthday, every year, you have an increasing amount of income that you can turn on. And then once you turn that income on, it's guaranteed that the insurance company is going to pay you that amount every month, as long as you're alive.
I mean, it's, it's, it's great. All right. And when you think about that, you know, the thing that just blows my mind is obviously if somebody lives to in their late 90s or something, you start to collect way more than, than you put in. But by the same token, if somebody passes away shortly after they start to annuity, right, then their heirs get it just like they would have gotten the other money, right? Yeah, so their heirs, I mean, this type of annuity using the income rider, your principal is not gone if you meet an early death.
Okay. So if you pass away, let's say this person sticks it there at 65. And they're deceased at like 69 before they even turn the income on.
Well, then that 100,000 would have accumulated interest for four years. And it would just pay to their beneficiaries the full amount that's in there and divided up amongst the beneficiaries. Now, let's say they lasted past 70 turned on the income at 70.
And then they died at 72. And so now they've collected two years of income checks, but then they passed away. Well, then their heirs would get a little bit less, because all those checks that they were paid was deducted from the balance. So this person, if they passed away at 72, and they'd collected a couple of years checks, starting the income at 70, they could their heirs would receive a smaller amount because it was all the checks that they'd received would be deducted from it. So the end of the deal is that if you pass away early on one of these things, before you even start the income, or even pass away early in the income being paid out, your heirs are still going to get something significant out of these. But if you live a long time and collect a lot of money out of this thing and then pass away, there's not going to be anything in there to pay to you.
So what I want to move on to is the example of the couple, same $100,000, but now we have two people aged 65 married, and they put $100,000 in this thing. And if they started the income right away, it'd be $6,428 a year, which is not really that sweet. But the income would continue as long as either one of them's alive. So it pays out till the second person passes away. So the income's a little bit less. But generally, if people wanted to start the income right away, we wouldn't sell them this product.
We've got things that'll pay out more immediately. But the real joy in this is if they wait like five years, and in the fifth year they start the income on their $100,000 that they deposited at age 65, they're going to get an income of $10,340 a year for life starting in the fifth year. If they waited till the end of the 10th year, the income is $16,660 a year.
And that's for life based upon $100,000. Now, granted, your money is sitting there for 10 years before you collect the thing. And the reason I picked 10 years is after the 10th year, the increase in the income is not worth waiting for. So if you end up buying one of these things, and then you later decide to delay the income, my suggestion is you don't delay past 10 years.
That's when it's time to turn on the income. Yeah, and the beauty of this particular one, right, is that, you know, it's the perfect thing. If you're, like my case, just a whole lot older than your wife, then you know that she has that protection, no matter what happens, right, for life. Like she could live on in the hundreds, I hope. Well, yeah, I mean, my thinking with this thing, and that describes our situation quite a bit, is that my wife's life expectancy is, just as you sit here and look at it, we don't know that's going to work out, is a lot longer than mine. I mean, she has relatives that have just lived past 100, a number of them, and they're women on her side of the family. And, you know, in looking at my history, you know, I'll be thrilled if I make it into my 80s. But, you know, that could be different, that could change.
But, you know, I could even be, my dad died at like 72. So, that's not too far away for me. And I just, to be able to set this up, leave it alone, wait till I really need the money in retirement, which for me, I intend to work as long as I possibly can. So, it conceivably, we could wait till the end of the 10th year to turn these on. And even if I did retire before that, I might still wait to collect on these, because if I don't need the money, I mean, just to let them bake longer, so that I'm really setting up her lifetime income to be very significant. Yeah, that's the whole idea.
And, you know, it's a beautiful strategy. And again, that I love the whole idea of the seven worries tabs. And here's one you can just do away with, as far as income. But that's a critical aspect in retirement is the income, right? Your assets, according to video, and Tom, I think was eloquent in saying your assets are not near as important in retirement as they were prior to it. Well, they are to the extent that they can create income, because you don't need to save more money in retirement.
That is interesting. A lot of people do, especially that have a lot of money saved. I mean, people that are somewhat miserly become more miserly when they're in retirement. And they just live off their Social Security, and then they save money, which is fine if they're saving to pass it on to their kids or whatever the deal is.
But on the other extreme, there's a lot of people that are afraid to spend their money, because they're afraid they're going to run out of money. And they don't put numbers to it typically. And that's what they come to us for. And again, as always, we want to remind you that this show is brought to you by Cardinal guide, Cardinal guide.com. And of course, if you're like me, you would need more information on this kind of thing. Well, that's where you're gonna want to find the contact Hans page, because, you know, what he's given is just one example. There's lots of examples that would fit your situation, how long you plan to work, you know, what's going on with both spouses, health, all sorts of things, you know, maybe long term care needs all sorts of neat ways that these things could help you.
And again, they customize that for you. And it's all there at cardinal guide.com. You know, under the seven worries tab under income, there's all sorts of resources, you can research yourself or, again, just contact Hans or get his book, the complete cardinal guide to planning for and living in retirement. And, of course, that, you know, the amazing thing from my standpoint, is, you know, just to get rid of these worries in that you just know that my wife's going to be taken care of that my kids are not going to have to take care of me all sorts of things like that.
All available at cardinal guide.com. Great show, Hans. It was wonderful. Thank you.
Thank you. The opinions expressed by Hans Schile and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and unless otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation.
Finishing well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal advisors are independent of each other.
Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's CardinalGuide.com. CardinalGuide.com. This is the Truth Network.
