Retirement Income Which Lasts A Lifetime

This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner, Hans Scheil, best-selling author and financial planner helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started. Let's get started with Finishing Well.

Oh, welcome to Finishing Well with financial planner, Hans Scheil, and today's show, actually one of my favorite topics, retirement income that lasts a lifetime. Like, we like stuff like that. And it seems so miraculous. And honestly, it just is really simple to me. In the book of James, chapter four, there's this line that says, you know, essentially, you have not because you ask not. And you're talking about asking God, right?

And when it comes to this kind of thing, you know, you think when you retire, you know, you don't have an income. But there are so many sources. And the beautiful thing is that if you ask for help, if you're humble enough to say, you know what, I don't get this. And you begin to ask for wisdom, God's going to provide it. And boy, did he provide it in my life.

I mean, literally, in this particular area through Hans. Today is just unbelievably helpful to take away any worry that you would ever have of running out of income. Yeah, it's. So today, we're talking about the tools that we use to create an income or for you to buy a future income. That's what you're doing with these is you're taking your retirement money, or some of your other savings that you've already paid taxes on, or a combination. And you're purchasing an income stream. And with these things, the longer you leave the money there, without taking an income, the longer you wait, the more you get. And once you start getting it, it's guaranteed to come in for the rest of your life, the income. Even if the account runs out of money, you still get the income. It's unbelievable, but it works that way.

Well, it is. And so the example that we have in the video is we have 100,000. We're a couple who are both 65. They put $100,000. And we used $100,000 just because you can do the math and multiply it out to any amount you want. So we've got it on a couple. We've got it on a single.

And so I'll just give you an example. So if we take the single who's 65, doesn't matter whether it's a male or female with this product. It's the same payout, even though women tend to live a little longer. So and what this is showing is if you put $100,000 in now at 65, and in 2030, you would be able to start an income, which is the sixth year. If a person has been sitting there for five full years, it would be $1,017 a month or $12,200 a year. So if a single 65-year-old put $100,000 exactly into this thing, let him sit there for five full years, and then in 2030, they could start an income of $1,017 a month or an annual income of $12,200 a year. And that money, once they start the income, is just deducted from their balance in their account. And if they live to, you know, 90, 95, 88, somewhere in there, they will have used up all the money in their account, but the insurance company keeps sending them checks for the rest of their life. So it's $100,000 in it, and then it's $12,200 a year every year for the rest of their life. And by the way, if this single person that's 65 dies at like 68 before they ever took a dime out of this, their beneficiaries are going to get their $100,000 plus the interest that it gained paid out to them.

Or let's take another scenario. If this person died at like 77, so they, you know, the first five years, they didn't take anything out of it, and the sixth, they started that income, and then they died like six years later, there's going to be something left in that account, a substantial sum. That's going to go to the beneficiary. So you're not parting with all of your money right off the bat if you met an early death with this kind of annuity. You're just, you're simply flopping the money down, and you're buying a future income. Now, if this same person got to 70 years old, and they said, you know, I don't really need the money now, I'm living off of other stuff, and my other stuff has done so well, I'm going to just live out of that.

And I'd like to just leave it there. If they wait till 2034, this is going to be a $17,850 a year income. And $1487 a month for the rest of their life. So these things can work as an inflation hedge as well, where it's just this account that's going up every year, not a lot, they don't pay really high interest rates, and there's charges inside of these things for the lifetime income that you can collect.

But nonetheless, it's an account, it's growing. And the longer you postpone taking the income, the more you're going to get. And then if you die during any of this period of time, where there's still money left in the annuity, that's going to be paid out to your beneficiary.

So it's a, you know, it's, it's, it's very good. You know, it's less, because that money is going to come in over the life of both of them. So in other words, if one of them dies at 80, and the other one lives to 95, they're going to be collecting that 920 a month till the 95 year olds gone. So it's covering two lives as well. So it's going to be paid out to the beneficiary. So in other words, if one of them dies at 80, they're going to be collecting that 920 a month till the 95 year olds gone. So it's covering two lives instead of one. That's why the income is a little bit less. Yeah, it makes sense.

Oh, yeah, absolutely. So, and then on the board, what we showed is we have another type of annuity that you put $100,000 in now, it doesn't matter male or female. And it pays out $1,843 a month for 60 months, or for five years. And you say, Well, what would I want that thing to pay me $1,843 a month for five years? And then it stops.

So it's 70. You know, I don't get any more money. Well, yeah, I mean, you do all the math on that you've gotten a pretty good little return on that. But we usually put these two annuities together. So we're going to start the one that's going to start sending you a check right now. And just when that stops, we're going to turn on the income from the other one.

And by putting the two together, we can get a better lifetime payout, either for two people or one person. Make sense? Oh, absolutely. Yeah. And a deal.

Again, you know, helping set up something. Because again, one of those worries is are you going to run out of income and to know that, you know, as time goes on, it just keeps going and going just, you know, so similar to social security in so many ways, right? Well, it is.

So it's very similar. It doesn't have an inflation component to it. So that's a downside compared to social security. But it has a lifetime payout component.

I mean, it's just going to send you these checks. So the way we get around the inflation is we ladder these things. I'm going to get in to some examples in the second part of the hour, where we've done exactly that with people, where we ladder these things. So I want to add an extra point that is going to talk about the there's a there's an extra kind of frosting on the cake piece is that if either you or your spouse, if you buy this couple annuity, or you as a single need long term care, you need help with the activities of daily living. Right. At any point in the future, the income coming out of this will double.

And it will double for five years. So it has some kind of built in type long term care insurance. Yeah, that's another one of the worries, right?

Yeah. Well, yeah, I don't like to rely on this solely for long term care insurance, for a couple of reasons. One is you can't use it on both of you.

If you're couples, you can only use it on one of you or you could use it part on one part on the other, but it, it has an upper limit to it. So it's really only like insuring one person. And then the second problem with it is it if the thing you start the income, and then it runs out of cash value, you're still getting the income, and you're 90 years old or something. It's not going to double the income after the policy has run out of cash value.

Okay, right. So it has some limitations on it. I don't want to oversell that. But it is a nice benefit, especially for the people that are absent long term care insurance. Yeah, absolutely.

And another one of the things that you can do to help protect your family. Well, this is a good point to remind you that this show was brought to you by Cardinal Guide, cardinalguide.com. And there at the, at Cardinal Guide, you're going to find the seven worries tabs. And one of those worries, obviously, is income.

And so the show would fit under that idea. And you can go to that tab, find a video right along the same lines as retire income that lasts a lifetime. And you can see the board and these examples we're talking about and really get some idea of how that money is allocated and the ways that all that works. Again, that's all at cardinalguide.com, as well as Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement.

And of course, you know, your situation is always different than anybody else's. And so why not contact them at the contact page at cardinalguide.com and help them to sit down and look at your situation. Because again, how long you need this money to sit there and, and how much income you actually need all those things, as we talked about in the second part of the show, in the laddering ideas, just absolutely beautiful.

So we'll be right back with a whole lot more on the retirement income that lasts a lifetime. 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. Welcome back to Finishing Well with Certified Financial Planner, Hans Scheil, and today's show, Retirement Income That Lasts a Lifetime. And so it's, it seems too good to be true, but like, wow, with Social Security, we see that and here with different ways to handle our investments, we can do the same thing. Well, that's right.

And so when I did the video and fixed the board on it, and I'd encourage you to go check that out if this topic interests you, we've got a couple of examples. One is taking $700,000 on a couple and seeing what kind of income we can generate for life from that, and then doing 700,000 on a single, and then we took 300,000 on a couple and 300,000 on a single. By buying a combination of these annuities, you can accomplish several things.

So let's talk about the couple. So we put 200,000 in that annuity that starts immediately and pays out for five years. On these people are both 65, it pays 36.87 a month, every month for five years or 60 months.

And then we took $400,000 and put it in that annuity where the income starts later, which we're going to start the income at the end of five years, beginning of the sixth year. And that's going to produce 36.80 a month then for life. So it's like 36 from the one annuity for five years, just when that one stops, kicking in the other one at 36.80 a month for life. And then we added to that an inflation kicker by putting 100,000 into that same kind of annuity that starts later but waiting 10 years to start it, and that's going to give them an additional 13.47 a month for life. So they'll have an inflation kicker where their 3680 income will go up to about $5,400 a month starting in, I guess, 2035. So that's how we can mix and match some annuities using 700,000 for a couple. When we go to a single, the amounts and the annuities are the same but the payouts are different. The 3687 a month is the same on the five-year immediate payout annuity, 200,000. But the 400,000 annuity that starts in the sixth year is 4,000 a month starting in the sixth year for life.

And then the 100,000 that we put in for the inflation kicker is 1487 a month, making their income 5,500 bucks a month, a little more than that for life starting after they've had this thing in force for 10 years. So don't let the age 65 throw you. If you're in your 70s and, you know, you've seen the markets and your savings grow significantly, then maybe you're getting a little nervous about taking some profits.

These things are even more favorable from a monthly income standpoint if you buy them in your 70s, early 70s, mid 70s, then certainly than they are at age 65. So call us up and we can look at this. Can you? So does that make sense to you, Rob? Well, it actually didn't.

I'm sorry. Okay. So why would it, I'm trying to understand why it would be more profitable in your 70s than it would have been in your 60s. You lost me there somewhere.

You've got less time according to the insurance company to live. Oh. If you buy this thing at 73. I get it. I get it.

It just clicked in the light. Until 78 to start the income, it's going to pay out a lot more money at 78 than what I've shown here on somebody that waited five years till 70. So much more favorable. And we have a lot of people in their 70s who can't qualify for long-term care insurance. They've got savings and retirement savings to buy these kind of things. And they'll buy this for both the income for life on two people. But they'll also buy it for that long-term care doubling benefit where they'll pump some money into this thing and it's buying some hidden long-term care insurance. And so I would suppose then that if somebody even got into their late 70s and early 80s, the same kind of thing is true that the insurance company is like, well, yeah, right?

Absolutely. So you just call me up, send me an email, tell me your age, how much money I can send you a proposal or certainly talk to you on the phone and give you an idea of what we're talking about. It's a way of buying a future income. You can do that, you know, let's just say all the way up to 85. You know, there isn't a lot of sense in it beyond that. And, you know, most people that are buying these, but we have a lot of people in their mid 70s, late 70s, couples, single people that will plop some money into here and they'll just delay taking it for a few years. They'll just look at the numbers, but at some point it makes sense to just start taking the income knowing that if they need long-term care, then they can then double it. So we just have to sit down with an individual to show you that.

Okay? Yeah. Now we ran the numbers on the 300,000 person and there's really not the money at 300,000 to put the inflation kicker in there. So, you know, on the couple, this thing, you know, the 100,000 in the five-year payout thing is still 1843 a month.

That doesn't change. Then we put 200,000 in that delayed annuity that you're going to start in the sixth year when the other one stops and it pays 1840 a month for life. You know, starting in 2030 and it just, for a couple, if one of them lives a long time, they're going to be really glad that they bought this combination of things. Some people buy it without buying the five-year payout thing. They just buy the $200,000 piece, the couple, and then just wait five years to turn it on because they don't need that immediate income. And when we run the same numbers on a single, it starts out at 1843 a month for five years.

And then in the sixth year, the 200,000 thing bought them 2034 a month. So we can use chunks of money to create really whatever income you need on top of your Social Security. You can buy these things in a Roth, so this will be tax-free income for life. You can buy these with regular IRA money and then convert them to a Roth before you start the income.

That's an appealing feature. So when you buy it with the IRA money, then you're going to pay tax on it at that point? No. When you buy it with the IRA money, it's just going into an IRA, so no taxes. There won't be any taxes until you start taking income. Okay. So if the money goes into a Roth at that point in time, isn't taxes paid then?

That's what you're loss means. Yes. Yeah, that was your question. Right. Yeah, you'd have to convert it to a Roth before you'd put it in there and you'd have to pay the taxes. Right. But probably a smarter move would be, we show this to a lot of people, is taking 500,000 of IRA money, putting it into one of these, and then not planning to start the income until the sixth year, and then do a Roth conversion of 100,000 a year for five years.

You can do partial Roth conversions inside of one of these annuities. Wow, that's fascinating. Okay, but it takes a while for your mind to get around that. It does.

It won't work out that perfectly because you're going to have some growth that you're going to have to. So the numbers will be a little bit different. But actually, inside the annuity, it's being converted so that when you go to take the income, once it's converted to a Roth, that income is tax-free. Correct. Right, okay. And then the people that are using it for the doubler effect for long-term care, that's a further benefit.

Even the doubled amount is tax-free because it's coming out of a Roth. So it works out well for people. Right, right, right, right. And so it's fascinating to me that, like, so if I'm, you know, to go back to your 300,000 illustration, that essentially when you combine the two right of what you had, you know, at the end of that, was I right that it seemed like it added up to more than $3,500 a month in the latter?

No, no, because you're not, this is the couple. Right. And because 1843 a month is coming out for five years out of the original 100,000 in the immediate annuity. Right. But it's stopping in five years. Oh, oh, oh, okay.

You're going to get more checks for 1843. Okay. And then the other one kicks in for the first time for 1840 a month, but it's not going to stop till both of you are deceased. I see. So it, okay then, I'm sorry, I just needed a clarification. So obviously what's happening is between the way you laddering it, that essentially that level of income is going to continue for life, but you're kind of using the ladder so that you can get something come immediately and at the same time, then just continue it on for life, right? That's correct. So between the two, we can get more from the insurance company than if we just stuck all 300,000 and then started the income immediately for life. We get more doing it this way, is breaking it up in two pieces. Right.

And that also clears it up for me why it is that if you were to do that at an older age, it would be even greater as far as the payout, so to speak, because. Correct. Okay. Correct. You know, and we might, you know, we might use, well, I mean, we just, we got a lot of options.

I'm just showing you one way, but we do a lot of it according to the way that I've done these examples. As often we run out of time before we ran out of shows, we're going to remind you that the show's brought to you by Cardinal Guide, cardinalguide.com, and at cardinalguide.com, amazing stuff, really, especially when it comes to income. So when you look at the seven worries tabs, which is just a menu piece there at the home page, and you click on this idea of income, like here we have a video, here we have a radio show, and you can see show notes and as well as all kinds of detailed information on the board that give you more information on these examples, and it's all there at cardinalguide.com, as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, and my favorite part where you can just click on Contact Hans or Contact Toms, because as you can tell, your situation would be aimed for your particular needs, and so contact them. They would love it, and it's all there at cardinalguide.com. Great show, Hans.

Thank you, and God bless you. The opinions expressed by Hans Scheil 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 Whale 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 Whale, 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' bestselling 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 Whale radio show on the website and send us a word. Once again, that's CardinalGuide.com. CardinalGuide.com. This is the Truth Network.