The Truth About Annuities: Not Your Grandpa’s Retirement Tool

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5.30.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Money Matters with Mike, with your host, Mike Zeno. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you too. So now let's start the show. Here's Mike Zeno.

Speaker3:
What's up people? Welcome to the show where we dive into the strategies, the insights, and the tools you need in order to secure a confident and stress free financial future. I'm Mike Zeno, and my mission is to help you protect your nest egg, outsmart retirement risks, and live the life that you've worked so hard to achieve. Whether you're nearing retirement or already enjoying it, we're here to guide you along every step of the way. And boy, do we have a ton of great information to discuss today. On today's show, we are going to show you how to make sure you're on a path to success when preparing for retirement. And as always, I have the distinct honor and privilege of being joined by the one and only my co-host and producer extraordinaire, Mr. Matt McClure. Matthew, how are you today, sir?

Speaker1:
I am doing very well, Mike. I hope you are too. I know it's been a it's been kind of rainy and dreary here lately, but I, you know, I feel like we're going to make the sun come out today with all the great stuff we got to talk about, man.

Speaker3:
No doubt. You know, I actually took a break and decided to, uh, go up with a few of my buddies up to Wisconsin to play some golf. Uh, thought I would escape the rain and the dreariness. And it turns out that, uh, in between, like, 80 degree and no humidity days, the four days that we were there, it was 50, 40 to 50 and raining and 30 to 40 mile an hour winds. Wins. So, uh, yeah, that was not a lot of fun playing in there, but we had a lot of great times and a lot of great memories. So I am back and ready to rock and roll and teach people how to secure their safe and prosperous retirement.

Speaker1:
There you go. The people of Wisconsin have have Mike Zeno to thank for bringing the weather with him. Um.

Speaker3:
Yeah. Right. Going up there.

Speaker1:
But, uh, no. Yeah, we do have a lot of great stuff to to cover here on the show today. And helping folks get prepared for their retirement really is, you know, what it's all about. And a lot of different topics to talk about as far as that goes on this week's show. We've got some, uh, questions that we're going to answer about annuities. We've got, um, you know, really how to safeguard those hard earned savings and investments that you've got as well as you get closer to retirement. All of that coming up, of course, you know, we also want to just say thanks to you for listening to the show, uh, as well, because, Mike, as you always say, you know, without the listeners, we don't have a show. Right. So thank you so, so much. Whether you're listening on the radio throughout the Carolinas or if you're listening to the podcast, we appreciate that as well. You can get the show wherever you listen to podcasts. You can also find previous episodes on the website. That's Money Matters with Money Matters with Mike comm is the website once again. Also, don't hesitate to go on the socials and search for the show as well. Money matters with Mike on Facebook or on YouTube. Um, we've got a lot of great content there. It's all about spreading the word far and wide. Right, Mike, as far as we can, we're casting a wide net here.

Speaker3:
That is 100% fact.

Speaker1:
Absolutely right. And I mean, Mike can help you with so many different aspects of retirement, not just here on the radio. I mean, this this show is all about education. But when it comes right down to it, it really does boil down to people's individual situations. Right? And what's best for them. And that is just, um, you know, that's something that you can't really obviously, you can't get to know somebody through the radio. Uh, it's not a two way thing. It's more of a one way thing. So you gotta you gotta reach out. You got to get in touch with Mike to to get that, um, consultation started, right?

Speaker3:
Yes. I mean, I don't care if you reach out on the web, if you pick up a phone and call me, if you reach out through the socials, the many channels that we're on. But, uh, you know, just for our listeners, we offer 100% complimentary consultations where we can see where you are along your roadmap to retirement. And if we see any, you know, tweaks that we can make, we'll make suggestions. And whether you take us up on those or completely up to you. You're only going to work with us if, uh, if it makes sense for you. And by the way, folks, we don't charge anything for our services. This is one of the ways that I give back, uh, because I am a firm believer that a rising tide lifts all boats.

Speaker1:
Yeah. Absolutely. Right. And the number to call, by the way, is 704 five Six. Zero. 1573. Seven. 045. Six. 015. Seven. Three. You can also go online. Once again, the website is Money Matters with Mike. Well, of course we're going to get started in our conversation about annuities coming up momentarily. We're going to talk about some fees. We've got a lot more to discuss here on the show. First, though, let's get some inspiration for our conversation, shall we? And we'll do that with our quote of the week.

Speaker4:
And now for some financial wisdom. It's time for the quote of the week.

Speaker1:
And this week's quote comes from the legendary author Jane Austen, of course, of Pride and Prejudice fame. And Jane Austen said this an annuity is a very serious business. It comes over and over every year and there is no getting rid of it. I love that. You know, it's like, uh, you know, it's going to it's going to stick with you. That's one of the good that's one of the great things about annuities. It sticks around.

Speaker3:
It's like a really hearty meal of meat and potatoes on a cold winter day. Right? Uh, just really, really satisfying. Now, listen, folks, Jane was talking about annuities. Way back in the 1800s. And yes, they have been around that long. But let me tell you something. The truth behind that quote is absolutely timeless.

Speaker2:
Hungry for something to chew on? Here's some meat on the bone.

Speaker3:
What Jane was actually getting at is this when you have an annuity that is set up properly, it shows up over and over, month after month, year after year, just like clockwork. It does not miss a beat. And in retirement, that kind of reliability, folks, is everything. So you see, when you retire, Higher your paycheck stops. But guess what? Doesn't your bills. You still have to buy groceries. You still have to keep the lights on. You're still paying for gas. You're still paying for healthcare. They don't care that you hung up your work boots, right? And that's where annuities shine when structured correctly. And I cannot stress that. More importantly, they can guarantee income that you can't outlive. And they become a financial foundation, not just a fad. Now, let me be clear. Very, very clear. Not every annuity is created equal. Just like you wouldn't trust just anybody with your life savings. You can't just grab any old annuity off the shelf. That's why I do what I do to help folks understand the difference between a good annuity and a bad annuity, between retirement building blocks and then a financial trap. But when done right, just like Jane said, there is no getting rid of it. And folks, that's a good thing. So if you are looking to build a retirement income plan that shows up rain or shine, give me a call. Let's talk about what a guaranteed income stream could mean for you and your peace of mind. Because retirement isn't about just getting by, it's about living with confidence. Stick around folks. More wisdom in retirement. Truths coming your way.

Speaker1:
Yeah, absolutely right. We've got a whole bunch of them here on the show. And of course, uh, once again, the number if you would like to get in touch with Mike, as he was saying there, give him a call. Reach out. (704) 560-1573. And, you know, it amazes me, Mike, about how, you know, we will we'll look back and I mean, you just you just highlighted it there. We're talking about Jane Austen talking about annuities back, uh, you know, in going on 200 years ago, it's kind of crazy that that they have been around that long. And then it's also kind of crazy that they. Have, you know, kind of changed quite a bit and evolved quite a bit during that time. Like the sort of basic premise is still the same, but obviously it's kind of like, um. You know, a new a new model year of car coming out, you know, every once in a while it's like. They do a little redesign. They did make it a little more aerodynamic, some more fuel efficiency. Some more safety features and all those things. And that's what's happened to annuities over time as well. And, um, you know, really do help people, uh, you know, get that guaranteed income in their retirement years. It's really, um, you know, just, just a great thing to have another tool in your tool belt.

Speaker3:
It is. And, you know, I'm glad that you pointed out the 1800s. They've actually been around since the time of Julius Caesar. Okay. So they have annuities are are one of the longest standing financial instruments that you can use. But you hit the nail on the head with your analogy of of cars. Right. Coming out with, I mean, uh, a new model. Things have changed a lot since Henry Ford came out with the model T. I know that I very much enjoy driving my GMC pickup truck because of its refinements and all of the things, right? A lot different than the model T. So retirement planning in and of itself can be an extremely daunting task, but one financial tool that can provide you significant peace of mind is an annuity.

Speaker1:
Yeah. Absolutely. Right. And, you know, annuities are, um, you know, designed really to help people grow their money while they're still working, but then also then provide a steady income stream in retirement. And that's particularly useful during those years because obviously the paycheck from your workplace stops and, you know, you got to replace that somehow. So let's replace that maybe with an annuity if that's something that's right for you. And what we're going to do here, Mike, over the next few minutes is really help people understand what annuities are, how they work, how they can provide that guaranteed stream of income for life, and why the annuities today are, as we say, different than those of yesteryear, of previous generations. They're not your grandfather's annuities, in other words. So the very first sort of basic question for anybody who, you know, okay, now they've been listening for a few minutes to us talk here. They've heard the word annuity a few times on the very sort of basic level. What is an annuity.

Speaker3:
So an annuity is simply a financial contract between you and an insurance company. People get insurance for everything, right? You buy health insurance life insurance, home insurance, auto insurance, boat insurance. This is a way to insure your money. Okay. You're going to pay a certain amount of money either as a lump sum or in installments. And then in return, the insurance company agrees to pay you back a fixed sum of money periodically, either for a specific period or for the rest of your life, and that income stream can supplement other retirement income sources like Social Security, a pension if you're fortunate enough to have one, any IRAs that you have. And it just helps ensure that you do not outlive your savings.

Speaker1:
Yeah, it can be so, so crucial. And then, you know, I mean, so under under the hood then how do annuities work? I mean, you know, you mentioned that there are contracts with insurance companies. And that's really it's a highly regulated thing. It's not just like the Wild West out there. You know, there are a lot of rules and regulations that the insurance companies have to follow. And those are, of course, all for the the benefit and the safety of people's money and their investments.

Speaker3:
Yeah. So every single state has its own department of insurance while banks are insured by the Federal Deposit Insurance Commission, FDIC. Every single state has the state Insurance Commission. Department of insurance. Right. So the insurance company owns the annuity, and they are responsible for providing the payouts. The annuitant or the person who takes out the contract, pays in the premium and is responsible for paying any taxes due from those regular payments, just like they would, you know, taking money out of a 401 or an IRA. The beneficiary is the person who receives the payouts if the annuitant dies. All right. So in other words, my me and my wife, we're married. If I pay the annuity, I die. My wife gets the lump sum benefit. So the financial strength of the insurance company that you choose to work with is crucial, so that you can be sure the annuity payments will be made as agreed.

Speaker1:
Yeah, 100%. And then so we know we talk about annuities as a personal pension. Right. We use that sort of analogy all the time when we talk about them on the show. And that really means sort of the translation of that is that annuities provide guaranteed income for the rest of your life. So how do they then go about doing that for folks so they know they have that guaranteed income?

Speaker3:
Yeah. So I mean, if you've got a lump sum in the bank, you know, I talk to people all the time that have 100 grand, 200 grand, 500 grand, just sitting in a bank. And it's like, why are you doing that? It's the money is sitting there idle. It's not earning very much interest at all. And so the way that annuities provide that guaranteed income stream for life is through a process called annuitization. When you annuitize, you're converting that lump sum of money that you've invested into a series of regular payments that gain interest, okay, and more interest than banks will provide, and that the income that you derive from that can last your entire lifetime. Or if you only need it for a specific number of years, say 10 or 20 years, then you can do what is known as a period certain. And what that does for you is ensures a steady and reliable income source, which can be particularly beneficial during retirement, because if you just leave that money in your bank and you're able to access it. The accessibility sometimes becomes extremely addictive, almost like crack cocaine, right? You hit it once and then it's like, oh, I like grabbing that ten grand, um, taking that vacation. And so then you take another one, uh, another lump sum, and now you've just remodeled your kitchen, um, which that can in and of itself wipe out your retirement savings. So, you know, the process of annuitisation and making sure that you have a guaranteed monthly income stream for the rest of your life, you're protecting your future self from you. All right. And just adding to your future self's financial viability in the long term.

Speaker1:
Yeah, and stability along the way too, you know, because it's, you know, that reliable source of income means so, so much. And, you know, as we said earlier, Mike, you know, today's annuities at the at the very basic sort of level, you know, you put money in, you get money out in regular payments like that is sort of the base definition, as we've been saying, of an annuity. But they have really changed over time. They've they've evolved, let's say. So how are annuities today different than they were maybe back in Jane Austen's day or Julius Caesar's day?

Speaker3:
Yeah. I mean, it used to be you would pay the money to an insurance company, and then they would charge you a fee to give you your money back. And then if you died, not if when you died, okay. They kept your money. And that doesn't sound like a very attractive option for most people. And I think that in and of itself is what gave annuities a bad name. And and so today's annuities, you're absolutely right. They have evolved to become much more flexible to address the needs, the changing needs of retirees. All right. Today's annuities actually offer a variety of options, such as immediate annuities, deferred annuities, fixed annuities variable or what we call variable annuities. And then indexed annuities, which provide different levels of both risk and reward. So these modern annuities, they come with writers. They come some of them with bonuses and features that can add benefits like a death benefit, like a guaranteed lifetime minimum withdrawal amount, uh, with cost of living adjustments. Some of them even have long term care writers built in. For those of you who don't have any type of, uh, protections in place. And these types of enhancements make today's annuities much more tailored to the individual needs as compared to the old school, straightforward and limited options that were, you know, available to previous generations.

Speaker1:
Yeah, yeah. You've got a lot more options, as you say. And people love having options here. Um, and, and so I guess sort of bottom line, what are some things that people need to consider there. We've got a checklist here, I guess, of people, uh, of things that people need to really keep in mind when maybe considering, uh, an annuity and helping them make that decision. What are what are those things that people really need to to just bear in mind as they approach that decision?

Speaker3:
Yeah, I think first and foremost, you know, you need to decide what you're doing and why. You're why you're even considering an annuity. Are you doing it to leave money for a future generation? Are you doing it because you need income in retirement? And if that's the case, right. Then you need to evaluate your need for that income, which will help you determine what you need your annuity to do for you. That's first and foremost. Then you need to decide on what type of annuity that would best fit your situation. Are you investing for income or are you simply investing for protection because you don't like the idea of losing money in retirement? And please, please, please understand that not all annuities are the same, right? The third thing you definitely want to consider are the fees and the charges that are contained within the annuity that you choose. Be aware of the fees and the charges that are associated with different types of annuities, including administrative fees, and then obviously potential surrender charges because different companies have different fee and charge schedules. Be aware of tax implications. All right. Because how that is going to impact the overall tax situation in retirement. Are you investing with pre-tax money or after tax money because the tax qualification will stay the same. And then you obviously want to work with a financially strong insurer to ensure that the annuity will continue to pay you your income as long as you live. And then ultimately, consulting with a financial professional is going to help ensure that the annuity fits your retirement plan as well as your personal circumstances.

Speaker1:
And I just happen to know a guy, uh, his name is Mike Zeno, and you can give him a call (700) 456-0157 3704560 1573. You can also go online. Money matters with mike.com is the website for the show. The consultation, by the way folks, as we've been saying, is absolutely free of any cost and any obligation. All right. So, uh, you know, we've talked about annuities and the protection that they can help provide for your retirement years. I think a lot of people, Mike, are thinking a lot about protection from market volatility, especially today, uh, because of just kind of the roller coaster ride we've been on so far in 2025 with the stock market. And so, you know, if people are watching the, uh, the markets, if they if they turn on the TV and see that stock market report every day, or if they just look at their phone and, and open up the stock app, um, they, they, you know, the blood pressure can kind of go, come and go with the markets as well. It's almost like the blood pressure. Anytime the market goes down, the blood pressure goes up, right? I mean, it's just it's kind of that inverse effect correlation. Right? Exactly. So, um, if you are approaching retirement or in retirement, what do you need to be thinking about market volatility and protecting yourself from it, especially in in times like we're in right now.

Speaker3:
Yeah. Well, I mean in recent years and you don't really have to look back that far right. When the stock market has experienced both impressive gains and then some really notable fluctuations, which leaves many retirees wondering how exactly to navigate their financial future in those uncertain times. And fortunately, there are strategies that you can employ to help safeguard your retirement income and then maintain your overall desired lifestyle, even during market downturns.

Speaker1:
Yeah, well, let's talk about a couple of those here. And number one really is it's all about balance, right. You've got to make sure that you are properly balanced in your investments and in your savings for retirement.

Speaker3:
Yeah. So I mean, one effective strategy is to maintain that balanced approach to your retirement investments, which involves having enough regular retirement income from protected sources like Social Security, like pensions or income annuities that are going to cover most of your essential living expenses. And by doing so, you can minimize the impact of stock market downturns on your day to day life. And then you which it affords you the luxury of avoiding the temptation to sell your investments because you need money during a market crash.

Speaker1:
Right. I mean, it takes that emotional, uh, you know, reaction off the table. Really? It does. Because, you know, and that's obviously not the thing that you want to do. You want to leave your emotions out of that picture. Um, and then also, you know, the closer you get to, to your retirement years and then into retirement, you want to make sure that you secure your gains. You want to, you know, if you've won the game, you don't want to keep playing. You want to declare victory. And, you know, make sure you've you protect that that big lead that you've built up. Your in your in your score. Right.

Speaker3:
Yeah. No doubt. Especially for older retirees, retirees that are in their 70s or older or who are particularly conservative with their investments. Yeah. Like you just said, declare victory. Like, take some chips off the table. Secure your gains If you've enjoyed significant cumulative returns over the years, you might consider shifting a portion of your stock market investments into more stable options like cash, like money markets, or like income annuities, because any of those strategies can help protect your retirement income from future market downturns. And ultimately, the best investment strategy for your retirement is one that generates sufficient cash flow in order to help you support your desired lifestyle, while at the same time providing you peace of mind. So regularly reviewing and adjusting your investment and retirement income strategies can help ensure that you are on track to achieve your goals, even in the face of stock market fluctuations and volatility.

Speaker1:
And you know what, folks? The initial consultation does not cost you a dime, and the peace of mind that comes with all of that is absolutely priceless. So go to Money Matters with Mike. Com or give them a call (700) 456-0157 three. Of course another thing Mike, in these last few minutes here I want to talk about is something that that people get concerned about. Um, when they, when they know that, that their, their um, and this will make sense momentarily. But the thing when they know that they're there, they get really concerned about them. But a lot of people don't know that they're there to begin with. And that's fees. Gosh, fees. Fees can just be hidden in the fine print. And people not even know that they are existing at all. But, um, they're so important because they can just eat away at your potential for gains inside your portfolio.

Speaker3:
Yeah, fees is a four letter word, folks, literally and figuratively when it comes to your retirement savings. Right? And so understanding and identifying the fees that are in your investment portfolio Folio is critically important, especially for those retirees and those in the retirement red zone who are nearing retirement because, as you just said, they can significantly impact the growth of your savings and your income that you're going to rely on during your golden years. So imagine if you have $100,000 invested in an IRA and that IRA earns, you know, just be conservative 6% over 25 years. Okay. Well, without any fees, your account is going to grow to approximately $430,000. However, if you just pay half of 1% in fees each and every single year, your final balance is going to drop to $379 with over $50,000 going into investment costs. And imagine this if your fees are 2% annually, your account could only be worth $260,000, and you would have paid $170,000 over those 25 years, just in fees alone.

Speaker1:
More than your initial investment. Uh, in that in that IRA. It's kind of crazy. Well, and then, you know, when we talk about the different types of fees, we've got investment management fees, operating fees, sales charges, expense ratios, we've got things that kind of run the gamut there. And, um, if time allowed, we'd go into more details about all of those. But just be known, folks, there's a wide array of fees that you could be paying. But just to quickly hear Mike in the last kind of, uh, I guess minute and a half that we've got left on the show, talk to folks about a couple of ways to identify those fees in their retirement plan.

Speaker3:
Yeah, I think the first and most important one is to review your statements, folks, start by carefully reviewing each of your annual investment statements. And while the statements might, they might not explicitly list the fees in terms of dollar amounts, they can provide clues. Look for those sections that detail your investment performance and then any adjustments made to your account balance. And then I think ultimately, you know, consulting with a financial professional. Why? Because they can provide a comprehensive analysis of your investments and help you understand the exact fees that you are paying, and then might be able to recommend lower cost alternatives that will align with your financial goals, with your risk tolerance, as well as your time horizon. Because most of those fees, they're not immediately visible. All right, brokers and fund companies, they will adjust the daily share price. They might reduce the number of shares that you own to account for those expenses. And that can make it especially tricky and difficult to see the true cost of your investments. But the impact is real and can significantly erode those returns over time.

Speaker1:
Mike Zeno can take a look under the hood and tell you what fees you're paying. Folks, money matters with Mike. Com once again as the website the number (700) 456-0157 three. Well Mike that's going to do it for this edition of the show. Sir, I really appreciate your time and all that you bring to the table. And we'll do it again next week.

Speaker3:
Matt, thanks for everything you bring as well. But most importantly, thank you to each one of our listeners, whether you're listening in the Carolinas or anywhere across the globe, without you, we do not have a show. So, folks, if you've learned anything today, do us all a favor. Do your friends, your family, your coworkers a favor? Share the information across your socials? Because the more people we help means more people are making and keeping more of their hard earned cash. Whatever you're doing this weekend, I hope you enjoy it to its fullest extent and as always, make it a great day.

Speaker2:
Thanks for listening to Money Matters with Mike. You deserve to work with a licensed financial and insurance professional who can offer strategies for protecting and growing your hard earned money. To schedule your free, no obligation consultation, visit Money Matters with mike.com or pick up the phone and call 704560 1573. That's (704) 560-1573. Not affiliated with the United States government. Mike Zeno does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. Amira life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information.

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