Boost Guaranteed Lifetime Income up to 100K

Michael Lewis, author of “Moneyball,” pointed out at a recent industry conference that “experts make mistakes, and analyzing data can help prevent gut calls that become bad decisions.” The Oakland A’s dissected statistics and analyzed data to identify undervalued players. The process became known as the “Moneyball” method and is now used in all major sports. This same process of identifying and exploiting inefficiencies can be applied to any problem, such as increasing retirement income. The rewards for continuing to defer an income rider payout option is counter-intuitive to the average investor who is used to being rewarded for allowing the magic of compound interest to work over time. It doesn’t help when most of the brochures focus on the compounding of the income account value.

Imagine if you could engineer a $30,000 to $150,000 increase in your total guaranteed lifetime income benefit payments (GLIB rider) and prove it mathematically. The following example will show you how to increase potential lifetime guaranteed income by calculating the Optimum Starting Point to turn on optional income rider payments.

Many advisors know how to sell income benefits riders, but few have taken the time to determine how to maximize the payout based on their client’s individual objectives. This article is going to teach you how to identify the power curve, where you would receive the maximum payout based on your objective. You will also learn how to quickly identify inefficiencies to your maximum benefit.

We will start from the premise that you already own an annuity with an income rider, and you want to generate the largest possible return for the additional charges incurred. I am also going to assume account value is not a primary concern. We will determine the Optimum Starting Point of the income rider to increase the likelihood that your client receives the largest total payout and rate of return by calculating the best time to activate the rider for your specific contract and desired end point.

On the surface, Guaranteed Lifetime Income Riders are designed to provide security from running out of money, in exchange for an additional expense called a rider charge. There is, however, no such thing as a free lunch, and you need to very carefully identify the quid-pro-quo. These riders are designed to create an actuarial profit for the carriers that make them available on their various annuity contracts. It is best if you think of an income rider as an option, but not an obligation to start a minimum withdrawal amount at some point in the future. The brochure may discuss various guaranteed interest “roll-up” rates for the income account, which is called a secondary account feature. This secondary account is only used for calculating income payments and is not to be confused with the accumulation value and can not be removed as a lump sum–so you and your clients need to understand the math. 

Once you own an annuity with an Income Rider, you basically have three options relative to the rider itself:

1: Turn the payments on immediately.
2: Turn the payments on later (defer).  
3: Never turn the payments on (ignore or cancel).

Many agents automatically advise clients to defer as long as possible before turning on an income rider, because the income account is growing at a certain rate of return (such as 6, 7 or 8 percent). This is an overgeneralization that could cost you tens of thousands of dollars, as in our examples below.

The brochure language is designed to get you excited about certain aspects of an annuity that may or may not create value for you. As an example, a certain annuity or rider may double the income account value after a 10 year period, but the actual value/return enjoyed by you is not determined solely by the size of the income account.

Taken individually, income account bonuses, guaranteed roll-up rates up rates, and income account size is meaningless. The carrier could provide 10 percent roll-up and then recapture that “marketing calculation” with a reduced 4.0% payout factor. The only way to cut through the fog is to focus on the factors that are important to calculate the internal rate of return probabilistically.

If we want to view this as a formula, we know the current account value and your age. We can calculate the income payouts from the statement or contract for various income start ages. We can also use probabilities and your health history to select a likely ending point for the income. As long as we use the same calculation summary age for the various income rider start ages, we can determine if there is value to be gained by using a different starting age. We would you determine what survival probability with which you feel most comfortable.

The factors that determine the ultimate value received by you are:

1: Current Account Value
2: Age of Client when they Start Income
3: Amount of Income Payment
4: Rider Charges
5: How Long the You Live and Receives Income
6: Ending Account Value (we are using zero growth for this article because we are only evaluating the income rider portion)

Reasons to Turn It On Now
Since one of the “known knowns” is mortality, I always start with the hypothesis that the earlier you turn on the income rider, the better the odds that you are going to live long enough to receive an amount greater than their principal:

  • If it is a variable annuity and the account is substantially underwater. I have seen IRR’s as high as 9% through age 85 because the account value was substantially underwater.
  • If you are older than 70, have a cap and are paying a fee.
  • The roll-up period is over.
  • You need the income now.

Reason to Turn It On Later (Defer) 
The next step is to determine if there are any significant changes in the rollup values. This is done in order to evaluate whether the payout of deferring is real or imagined when juxtaposed against probable life expectancy and calculation age. A common error is that many of us grew up with a “saver’s mentality,” and feel that the longer they let the income rider compound, the better. The trade-off is that, for every year you increase the size of the payment because of roll-up and payout factors, you are also one year closer to death. By calculating the IRR at your agreed upon life expectancy age, you can quickly determine the Optimal Starting Point for your needs.

To determine the IRR (Internal Rate of Return) at a chosen calculation age, we will need the current account value (not income account), your current age, and the guaranteed income payout for the ages we want to test. So using a sample set of data:

Current Age: 65 (Male) 
Current Account Value: $200,000
Accumulation Growth Assumption: 0%
Rider Charge: 1%
Calculation Age: 85

We determined the payout factors and income below–for each starting age of 65 through 80–in order to determine the sweet spot. The object is to provide the largest possible return through age 85 based on our calculations. The table below was created using payouts calculated at and using for IRR calculations. Payout factors will vary widely based on carrier, your age, desired calculation age, and charges.

Total Payouts and IRR through Age 85
Start Age Payout Amount Payout Years Total Value (85) IRR
65 $10,584 20 $211,680 0.61%
66 $11,502 19 $218,538 0.90%
67 $12,495 18 $224,910 1.14%
68 $13,568 17 $230,656 1.32%
69 $14,727 16 $235,632 1.46%
70 $15,981 15 $239,715 1.54%
71 $17,355 14 $242,970 1.59%
72 $18,797 13 $244,361 1.57%
73 $20,376 12 $244,512 1.51%
74 $22,081 11 $242,891 1.40%
75 $23,922 10 $239,220 1.25%
76 $24,328 9 $218,952 0.61%
77 $24,733 8 $197,864 -0.07%
78 $25,139 7 $175,973 -0.80%
79 $25,544 6 $168,857 -1.0%
80 $25,950 5 $167,422 -1.0%

“Income rider deferral is your friend until the end when it bends.”

As long as there are no other factors in the decision, turning on income at age 71 would create the highest IRR in this particular case.  If there were a need for income prior to this date, you could simply take withdrawals. The total payout increase between starting ages of 65 and 71 is $31,290.

Now we will look at the same calculations using age 95 as the calculation age.

Current Age: 65 (Male)

Current Account Value: $200,000
Accumulation Growth Assumption: 0%
Rider Charge: 1%
Calculation Age: 95

Total Payouts and IRR through Age 95
Start Age Payout Amount Payout Years Total Value (95) IRR
65 $10,584 30 $317,520 3.65%
66 $11,502 29 $333,558 3.80%
67 $12,495 28 $349,860 4.01%
68 $13,568 27 $366,226 4.18%
69 $14,727 26 $382,902 4.33%
70 $15,981 25 $399,525 4.45%
71 $17,355 24 $416,520 4.56%
72 $18,797 23 $432,331 4.64%
73 $20,376 22 $448,272 4.70%
74 $22,081 21 $463,701 4.74%
75 $23,922 20 $478.440 4.77%
76 $24,328 19 $462,232 4.42%
77 $24,733 18 $445,194 4.09%
78 $25,139 17 $427,363 3.76%
79 $25,544 16 $408,704 3.44%
80 $25,950 15 $389,250 3.12%

In the example, using age 95 as our target age, turning on income at age 75 would create the highest IRR.  If there were a need for income prior to this date, you could simply take withdrawals. The total payout increase between starting at 70 vs 75 is an additional $78,915. The increase in payouts is hypothetical because mortality is never guaranteed, and you can never calculate the final IRR going forward (such as with a fixed interest rate)–only looking back from the final point. The purpose of the process is to determine Optimum Starting Point based on your perceived ending point.

Turn It Off
In many cases, you won’t want to turn the rider on at all. The following situations may benefit more from systematic withdrawal strategy:

  • You are beyond age 75. It is statistically difficult to benefit from an income rider that has not been activated unless you have a reason to believe that you are going to live substantially beyond normal life expectancy or have a very low accumulation value compared to the income payouts.
  • You have Substandard health concerns.
  • Your income needs are met through other sources (such as pensions).
  • Your objective is leaving maximum for heirs.
  • You are wealthy and want to maximize growth.

Income riders are a great invention, but there are significant pitfalls if you don’t understand how to maximize the payouts. There are definite trade-offs that you need to be able to calculate if you wish to be operating in a true fiduciary capacity.

 While many of the annuities with income riders also have a growth component, we left those out of this exercise because we are focusing on evaluating the income rider Internal Rate of Return, independent of the cash values.



Double Variable to Fixed Annuity Conversions


With variable annuity net assets exceeding $2 trillion at the end of the fourth quarter, there is a very good chance that by simply improving a single factor in your replacement methodology, you could easily generate several hundred thousand dollars of additional annuity premium and AUM. What would happen if you could improve every aspect of evaluating and comparing variable annuity contracts?

Using the process we are going to be teaching in this post, you will be able to quickly take control of any discussion that involves variable annuities. Once you learn how to connect the dots, you will begin operating at a whole new level, professionally and financially.

A little background

Three years ago, an advisor asked me to review several sizable variable annuities belonging to one of his prospects. After reviewing the statements and policies, We calculated that his contract had in excess of 4% combined fees along with enough confusing jargon to choke a horse. After many hours of calculations, we estimated that this particular client will be paying over $629,000 of fees during his remaining life expectancy. The agent that I was working with presented the findings using spreadsheets over multiple client meetings. In between meetings, he (the client) would take what we said and go back to his current advisor for rebuttals. After several weeks of this game, confused, the prospect decided to stay with his variable annuity. Six months later he finally figured out his VA was not in his best interest and moved 1.4 million into an FIA… with the original advisor who sold him the VA with 4% of fees!

“That which hurts instructs” – Ben Franklin


1: We didn’t have a process to show him his previous results

2: We didn’t have a way to show him the impact of his previous fees

3: We didn’t have a way to project his past returns into the future

4: We didn’t have a way to evaluate his income rider performance

5: We didn’t have a way to run a numerical side-by-side showing his options

Frustrated, I resolved to never be involved in another “bloodbath” as a result of not being able to quickly assess a situation based on the facts.

Step 1: Current Returns. You need to be able to join the conversation that is already occurring in your client’s mind. This means you need to determine the real rate of return they have earned since issue. If there have been no withdrawals since the issue date, you can quickly get a snapshot of the internal rate of return using an HP 12-c financial calculator available at OfficeMax for less than $100. Even though I have a software that does this in several seconds, it is valuable to be able to do this calculation by hand at any time.

Steps with HP 12-C:

To calculate the compound annual growth rate when the beginning and ending values are known, follow these steps:

1. Press 0, then PMT.

2. Key in the beginning value, press CHS, and then PV.

3. Key in the ending value, and press FV.

4. Key in the number of periods between the beginning and ending values, and then press n.

5. Press i to calculate the compound annual growth rate.

Step 2: Calculate Fees and Charges. Show the real fees and calculate the impact in a manner that creates instant clarity. The fee and rider charge percentages can be determined with a statement and prospectus. You can then calculate how much is being paid each year in fees. AnnuityCheck™ recently launched Annuity Snapshot, giving you instant access to the fee data on any variable annuity contract in less than 30-seconds. We can determine the gross rate of return, fee percentage, fee dollar amount. 

Step 3: Show fees as a percentage of growth. Showing the fees as a percentage of growth provides a sobering analysis of where most of the growth is being funneled. nd provide the

Step 4: Determine the net IRR. Provide the net return after all expenses and withdrawals. Also, lost opportunity costs as a result of the fees can be calculated.

Step 5: Future Pace. Illustrate the value of their current annuity if the current and past performance continue going forward.  AnnuityCheck allows you, with a single click, to send the snapshot results forward into the illustration tool. This enables you to show the client how well his investment will perform going forward based on results calculated through his current statement date.

Step 6: Compare. Now you can run various scenarios using FIA, other VA or AUM strategies and click our compare button to show the results side-by-side.

you will instantly deliver you and or your prospects three concept pages, using their numbers, that fully illuminate the lethal effect that excess fees have on an individual’s retirement income.

With over 209,953 lines of code and over 440,000 data points, in a few minutes, you can be running client scenario’s on what I consider to be the “Holy Grail” of Variable Annuity fee reversal based marketing and see how to easily convert variable annuity owners into new clients in scale, consistently and reliably.

While many calculations can be completed manually, time is money and time spent running advanced numbers could be better spent communicating with your clients.


Our new Annuity Snapshot makes it easier than ever to generate real-time results using easily available statement information, creating a whole that’s greater than the sum of the parts.


Expose Underperforming Annuities in 30 Seconds

Let’s face it, if you sell annuities or financial products, you are in the replacement business. Your prospects walk into your office with their dollars already invested in a manner that they believed was in their best interest at the time they made the transaction. Before a prospect opens up to a new strategy, you must first convince them that you understand their situation.  To paraphrase Stephen Covey; “seek first to understand, then be understood.”
This Thursday at 10 am PST; we will be teaching the newest methods for breaking down your client’s annuity performance in a way that instantly inspires confidence and results. You can show; annual growth rate, the total fee percentage, dollar amount of fees, fees as a percent of growth, and net growth with five pieces of information available on the front page of any annuity statement.
In this training, you will learn how to quickly expose and destroy all but the very best contracts after several minutes of “reality therapy.” You will take complete control of any meeting regarding annuities and quickly show them information their current advisor didn’t even know existed.
Also, you will learn how 1% turns into 29%, how to provide 20-40% more income without “account-draining” income riders and increase account legacy values by an average of $100,000 per client.
See you on the training.  Register Here: Registration.
P.S. These strategies work with Fixed Annuities, Variable Annuities, and Investment Accounts.

About AnnuityCheck: Technology has revolutionized many aspects of business, perhaps none more so than the financial industry which has gained incredible efficiencies. The new software reduces workloads, increases productivity, and improves accuracy and access to millions of data points.

AnnuityCheck brings those advantages to the cloud, enabling Advisors to benefit from transformative technology and innovation.

AnnuityCheck recently launched Annuity Snapshot, giving our customers access to best-in-class class data on any annuity contract in less than 30-seconds. AnnuityCheck customers taking advantage of this new process will be able to automatically calculate the gross rate of return, fee percentage, fee dollar amount, show fees as a percentage of growth, and provide the net return after all expenses and withdrawals. Also, lost opportunity costs as a result of the fees can be calculated. This lets Agents and Advisors focus on more strategic goals such as helping clients analyze results and make more informed financial decisions.

Our integration also enables our customers to eliminate many tedious, manual processes. Without this kind of capability, many Advisors are forced to enter performance related data into Excel, manually manipulate it, and spend hours trying to get the final results. Our software eliminates this process and the inherent opportunities for errors that manual manipulation brings.

AnnuityCheck strives to provide finance professionals with comprehensive tools to provide crucial calculation processes for prospects and clients in real time. Our new Annuity Snapshot makes it easier than ever to generate real-time results using easily available statement information, creating a whole that’s greater than the sum of the parts.

3 Types of Annuities that you should replace now
3 cringe-worthy results that justify annuity replacement
3% Internal Rate of Return Since Issue
Fees less than 25% of Growth Since Issue
Income rider return greater than 3% ROR at Life Expectancy
Annuities with with lower than a 3% Internal Rate of Return since issue
Annuities where the fees as a percentage of growth exceed 40%
Annuities where the GLIB rider

Increase Client Income 20-40% Without Riders

Income Under Management™ is a brand new solution that works better than conventional income planning methods.  It is can help you get clients to take action in a matter of minutes rather than days or weeks.
Click to watch a video that reveals the power of IUM and how it can easily help you…
– Boost your closing ratio by up to 300%
– Double or even triple your credibility in the first 10 minutes of meeting a prospect
– Out-perform “traditional” income planning advisors and as a result, gain more clients
– Make more money for both you and your clients
Plus, you’ll see exactly how IUM outperforms the: 4 percent rule, 2.6 percent rule, and expensive, account-draining income riders based on real retirement income amounts.
Regardless of if you sell annuities, do AUM or any combination, the game is about to change in a big way. The days of selling products or investments without detailed disclosure of fees and compensation is quickly coming to a close. This Wednesday we are going to spend 35 minutes showing how you can turn the forthcoming regulatory changes into a true actuarial edge for both you and your clients.
Using AnnuityCheck™ combined with your favorite carriers such as:
Athene, Allianz, AIG, American Equity or any hypothetical asset, we are going to give you the ability to precisely calculate income strategies that will put you in an entirely new class in your local market.
AnnuityCheck™ has developed the most powerful income illustration system in the world and we are doing a full test drive this Wednesday at 9:00 am PST to let you see why top producers are using our technology to take their production to new levels without using costly income riders and providing 20-40% payout increases to clients and prospects.
We will be sharing these “Must Have” illustration capabilities:
1: Growth Only (No Withdrawals)
2: Specified Withdrawal Amount
3: Maximum Income
4: Maximum Income w/ SPIA
5: Maximum Income w/ JT SPIA
6: Minimum Deposit Annuity (solve for needed income)
You can quickly switch carriers, products, strategies and Illustration types. On top of generating substantial payout increases, you will save  you and your staff 5-10 hours weekly in preparing and designing cases.
Do the New DOL Regulations and Future Commission Disclosures Have You Gasping for Breath?
If YOU still require products with income riders and 8% upfront compensation just to make 6-figures, you might be in BIG, BIG Trouble.
But that’s good news…
It’s good news, if you’re willing to reach out for the lifeline we’re about to toss you.
1: Use DOL Guidance to Double Your Annuity Production In 2016
2: Create Level Commission Illustrations Based on Product and Withdrawals
3: How to Calculate Exactly Which Products Will Make You the Most (The answers may surprise you)
4: How to Use the Gold Standard of Finance (Internal Rate of Return) to Prove Your Strategies to Clients
Whenever the industry shakes things up, it’s a chance for shrewd, savvy advisors to swoop in and make a killing, while the Chicken Littles run around shouting, “The sky is falling the sky is falling!”
But you must pay very close attention.
You can give you and your clients a six-figure raise and create an unbeatable advantage in the annuity income market. You are going to gain a new momentum. Nothing beats momentum. You go from victory to victory while your competition struggles with out-dated income riders.
The rules have changed. It’s time to master the new ones. Our software company has grown 847% since January 1st. Find out what your competition is up to, before your clients do.
Your new actuarial advantage and training begins this Wednesday at 9:00 AM PST.