[Music] okay now let’s talk about some of the consumers objections to annuities how about just I don’t like annuities yeah well you know it’s binkie i say this annuities are not bad but there are bad annuities the problem with annuities is that in the past there were some bad annuities out there well people focus on that in the media but annuities do things that no other product can do there’s no other product in the world who can take longevity risk off the table and besides that I tell people when they say they don’t like annuities they say really so let me understand this you paid into Social Security for 35 years but you’re going to call the Social Security Ministry say stop those checks we don’t want any Social Security checks remember Social Security is a lifetime income annuity you like Social Security oh you work for the company for 42 years you’re going to call up HR saying stop those checks we don’t want another nasty pension check in this house we don’t like annuities a pension is a lifetime income annuity so if you like your pension you’re like your Social Security I promise you you’re going to like your lifetime income annuity too now there have been bad annuities out there but you’re not going to read bad things about income lifetime income annuities I haven’t seen any bad things about it and math and science says you’ve got to have it as a foundation in your retirement plan okay here’s another objection why would I buy in an income annuity now when interest rates are at a 50-year low well because interest rates are likely to stay at low rates for another 30 or 40 years – if you’ve ever seen my economic commentary with all the massive debt that’s out there and debt is highly deflationary and then the deleveraging that these governments are going to have to do they’re going to have to raise taxes cut spending that’s deflationary and then the demographics of the world that people are getting older and old people don’t spend money and so with the depth of deleveraging the demographics it’s highly likely interest rates are going to stay very very low for a very long period of time I always tell people I can’t predict the future better than anybody else so look at the bond market the u.s. 30-year government bond is paying two point five percent on the day that we’re recording this two point five percent what is that predicting interest rates are going to do for the next 30 years stay very very low for a very very long time okay but even if you don’t believe me on that I’ll bet you do believe me on this that people are living longer and medical technology is improving and that people are going to live to be a hundred hundred ten 120 and if you believe people are going to live longer you know what’s going to happen to the payout rates in these annuities they’re going to go down because every payment from income annuities composed of three parts principle that’s not going to change interest I don’t think that’s going to change much and if it does interest rates matter less and less the old you get but the third is these longevity credit see is more Tyler your longevity credits well as people live longer these companies are going to have to reduce that why do you think one hundred percent of my new purchases are going for income annuities because I’m trying to lock in the highest longevity credits I’m ever going to see for the rest of my life so you do not not sell annuity because of interest rates you should buy the annuity because you’re going to get the most longevity credits here we’re going to see for the rest of life it’s not an interest rate play it’s a longevity credit play right I totally agree with that I’m not sure that income will ever be cheaper you know plus you can even see like from the long-term care world that insurance companies might start to be uncomfortable making that promise absolutely if they climb behind promises low interest rate environment insurance companies are going to have to find places where they can make profits and they’re going to have to they’re going to have to be trimming some of these products and that’s why I’m buying them as fast as I can okay here’s another common objection I don’t want to give up control yeah what I tell people is you’re not giving up control you’re gaining control over risk you’re gaining control over longevity risk it’s a guaranteed paycheck for the rest of your life you’re gaining control over market risk there is no market risk there’s no withdrawal rate risk there’s no order return or sequence or return risk you’re gaining control over deflation risk because if you’re getting a paycheck and things actually go down in a deflationary world it’s one of the best things to own a deflationary world so when math and science says you should cover your basic living expenses with guaranteed lifetime income that’s exactly what you should do you’re not giving up control you’re gaining control the people who think they’re in control those are the ones that run out of money you know why because they’re out of control with the risks and at no point David have I said put all of your money in annuity I said put a portion put at least enough to cover those basic living expenses okay and another common one is it’s not liquid that’s a problem well but but here’s the deal liquidity is not a one-time event liquidity is a lifetime event when you increase your income your lifetime income you are increasing your lifetime liquidity now again I never said put all of your money there so I said use a portion of it you’ve got other money that’s liquid I don’t want a minute – liquidity it’s important to save some money for emergencies but I will tell you this most people overestimate their need for liquidity and they underestimate the cost what am I talking about well if you’ve got money sitting in a money market fund at you know 0.5% and you could get a six percent payout on that money that’s costing a five and a half percent and on you know few hundred thousand dollars it could be twenty thirty forty thousand a year you’re paying to have that money liquid and for the people who say oh I need five hundred thousand liquid really what I always ask people is a other than your house what’s the biggest check you’ve ever written in your life well the furnace went out one time had already check for $5,000 okay so in your whole life the biggest check you’ve ever written is $5,000 but you want 500,000 liquid really I mean I’m not I’m not saying that they shouldn’t but if but maybe 50,000 maybe a hundred thousand maybe two hundred thousand but do they really need five hundred thousand so they underestimate the cost they overestimate their need and the quiddity lifetime event okay so sir does those make sense I also think with liquidity you know that if you’re using your portfolio to take withdrawals so there’s some Kurtis clucks about all the time it’s it’s sort of a myth that you have liquidity because you’re counting on those assets to generate the withdrawals and you really have to hang on to those assets you really don’t have any liquidity double-count assets all the time they say well I got this money and these tax-free bonds it’s liquid but it’s sending me thirty thousand a year well then it’s not liquid because if you took the money out then you’d get your thirty thousand a year so they double count the assets all the time I’ve seen that – okay well that’s great I think that’s very helpful and and we do have to address the common concerns and the objections that people have to be absolutely this approach one other objection I hear is people say well I’m just getting my own money back and if I die the insurance company keeps my money well that’s not true you can you can pick how you want the money when you die it could go to your family it could go to your kids it could go to your grandchild I mean those checks could go for a hundred years number one you get to pick that up front and as far as me only getting my own money back if that’s ever an objection what you want to do is you want to run like a life with 30 years certain take the longest if you can do life with forty or certain whatever the longest certain period because then you’ll see that they put in a hundred thousand it guarantees to pay them back 300 or 400 thousand so but you know it they’re asking you to show them along you’re certain period and and then that can handle that objection but the insurance company really doesn’t care which one you pick if you pick life only life with cash refund like for 20 years certain length or 30 or certain they’re all actually calculated I don’t care which one a person picks the insurance company doesn’t care it’s what fits them best that’s great thank you this video was made possible by the New York Life Center for retirement income