Ep 60: Top Social Security Myths, Part 2

On This Episode

This is part 2 of our Social Security conversation. We will be debunking the remaining 5 myths on today’s show.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Marc: Back for another edition of the podcast. This is Retirement Planning redefined with John and Nick from PFG Private Wealth, serving folks all around the area here. So reach out to them on the podcast, pfgprivatewealth.com is where you can find them online for a lot of good tools, tips, and resources. You can subscribe to the podcast, book some time with the team, all sorts of good stuff. Again, stop by the website if you’re not already working with them at pfgprivatewealth.com. And if you haven’t subscribed to the podcast, consider doing so while you’re there. We’re on Apple, Google, Spotify, and all that good stuff. So you can check that out. And this week we’re going to follow up with the second half of our social security myths. We did the first five on the prior episode. You don’t have to have listened to that one to listen to this one, but it certainly isn’t a bad idea to go back and check that one out. So that one came out a little bit earlier in April. So we’re going to drop this one here and get into the second half of this, the next five myths. Guys, you doing all right this week, John? How are you buddy?


John: I’m doing good, having a little contract work done at the house, which is, as you know Mark is –


Marc: Challenging.


John: I’m dealing with that. It’s always a challenge and fun.


Marc: That’s right.


John: Looking forward to the project being complete.


Marc: Yes, we need more contractors, we need more people who are in the trade services. That is for sure as there is a major shortage all across the country, really I think globally actually as well. But Nick, what’s going on with you bud?


Nick: Staying busy for sure.


Marc: Spring is here and the weather’s nice. That’s always good.


Nick: Yeah. Although it has been warmer here than I feel like typical this time of year.


Marc: Could be a hot summer then.


Nick: Yeah. So hopefully it cools down just a little bit for the next month so we can enjoy the end of spring.


Marc: Have an actual spring, not skip it.


Nick: Yeah, that’s all I’m asking for.


Marc: There you go. Well, let’s jump into some myths here and see if we can help some folks out with some more of these. Again, we did the first five, which are kind of the big five I think that many people hear often, but I’ve got some other unique ones as well. So these might appeal to some folks who are thinking about social security or getting close to that age and are wondering about some of these things that they’ve heard maybe online or on the news or whatever. So let’s jump in, talk about a few things guys. Myth number six, out of the total 10 we were doing, you can’t work and receive social security benefits at the same time. I think this myth revolves around the fact that if this applies to people who take it early, because there are some limitations. So Nick, why don’t you break this one down a little bit?


Nick: Yeah, just like everything else, the devil’s in the details. So essentially the way that SSA, Social Security Administration, looks at this is kind of from a tiered perspective. So they break it down in essentially three sections. So from when you’re first eligible which is 62 up through essentially before the year that you reach full retirement age, and then the year that you reach full retirement age has its own section, and then the period of time after your full retirement age. So as an example to bring that all together and make it make sense, you can have income while collecting social security before your full retirement age, but there is a limit. That limit is about $21,000, little over $21,000. And for every $2 that you make over that amount, you have a $1 reduction or penalty on your social security.


Marc: So almost like part-time, you could do part-time work if you took it early, so to speak, right?


Nick: Yeah. And a lot of times that’s kind of the ticket for some people is to work part-time, keep them busy, help them transition into retirement, and to help prevent them from having to dig into their nest egg. They might file and collect social security and those numbers kind of balance out, they have income less than the amount that would cause a penalty, and so it works out for them. In the year that you reach your full retirement age, that amount goes up to about 56,000. So essentially what they’re saying is we understand that birthdays range and that from a calendar perspective it can get a little bit tricky. So they say that you can collect your benefit and earn up to the 56,000 without any sort of penalty. Once you’ve reached your full retirement age, there’s no income limit at all. So you can do a full double dip per se in that scenario.


Marc: Yeah I mean if you make $1,000,000 a year and you’re 69 years old, that’s fine, right? Let it rip.


Nick: Yeah. What you’re giving up per se is the 8% increase per year on the social security benefit. So there is some sort of give up, but whether or not that has a big impact depends on somebody’s situation.


Marc: If you’re waiting till the 70, right?


Nick: Correct. Yeah. If you’re to wait until 70. So some scenarios that we see this work out really well are somebody hits their full retirement age, they plan on continuing to work, but maybe the mortgage isn’t paid off, so they’d like to turn on the social security with the goal of, when they retire at 70, these social security payments that are coming in, will go directly towards paying down the mortgage and they can retire without having a mortgage. Or maybe they’re behind on their retirement funds. And so they want to make sure that they can really maximize retirement savings, so they’ll collect and save it or just put the money away. So it’s like, I’m going to take this benefit, but instead of just spending it, I’m going to go ahead and save it and then I’ve had people say, this is going to be my vacation fund for our first five years of retirement. We’re going to save as much as we can, and then we’ll use that to pay for our vacations for those first five years where we’re most active in retirement, that sort of thing. So you can get strategic, but that’s kind of the breakdown of how it actually works.


Marc: Yeah and John, I think for many people that that’s where that confusion comes in, like my brother, for example, he’s already 65, but he is retiring before full retirement age, so he has to wait, so he can work part-time make up to that limit that Nick was just describing. But I think that’s where the confusion comes in. At least that’s what I’ve seen from my perspective. How about you?


John: Yeah, I’d agree with that. A lot of people confuse 65 Medicare eligible age to full retirement age and social security, so I’d agree with that. Something else that people typically miss with this or maybe just don’t fully understand is that this is based on the individual’s earned income, not household. So I’ve seen some scenarios where someone was thinking about drawing social security, they were retired, the other spouse was not, and I said, well, I can’t draw yet because our income is higher and our household income is much higher. It’s not based on household income, it’s based on the individual’s earned income.


Marc: Yeah, good point. All right, so that was myth number six. Myth number seven, I don’t think I’ve really heard this one before. Social security benefits are only for US citizens. This seems kind of like a no-brainer. That’s basically the case, wouldn’t it be?


John: Yeah this is definitely a myth, it doesn’t come down to whether you’re a citizen or not, it comes down to have you met the requirements to be eligible.


Marc: Okay, which is that 10 years, 40 quarters thing.


John: Yeah, 10 years, the 40 quarters there, and once you hit those, you are eligible for social security.


Marc: I wonder if some of this is for folks who retire abroad, so there’s some confusion there, because I even thought about it myself. My wife and I were joking. We were going to retire and live in Aruba part-time, and I asked myself, I wonder if you live in Aruba, can you still collect social security benefits? And I think if you have dual citizenship, I think you still have to maintain citizenship is my understanding. But it’s certainly something that you can have a conversation. That’s some of the questions that might make more sense when you’re going to the social security office versus saying, Hey, when should I turn it on? They’re probably better equipped to answer questions like that than they are answer questions about when’s the best time for you to activate it.


Nick: Yeah. One example that goes in with that too is you’ll have people that are considered permanent resident alien. So I can even give an example where in my family, my grandparents came from Cuba. My grandfather work was a professor at State University, and he spoke English and Spanish, but my grandmother had different issues and she never fully spoke English, so she never was able to do the citizen test, that sort of thing. But my grandfather was here his whole adult life and paid into social security, and so she was eligible for a benefit as a spouse and she has permanent resident alien status. So there’s different things like that that kind of come into play.


Marc: Yeah certain non-citizens then.


Nick: For sure.


Marc: Yeah. That’s cool. That’s a great example. Thanks for sharing that. All right, so myth number eight. This one is interesting, and I don’t know if this is state by state or why this myth is around, but see what you think about this one. If you have a pension, you’re not eligible for social security benefits. This just seems weird to me. I don’t think that one precludes the other.


Nick: Yeah, so I can kind of explain this as well. So what some states used to do with their pension system, and a lot of times it was, again, in certain states or even certain kind of counties or municipalities in certain states, they would allow, or their structure would be, instead of the person who was working for them paying into social security, they would pay into the pension. And so it was both they and the employer were paying into the pension system in lieu of paying into social security. And there’s a clause for this, what would happen. I know I for sure had some people in Illinois that dealt with this. And so because of that issue, there was this calculation that would offset the amount that they were eligible for social security. And so where people got in trouble would be sometimes what people would do is they would say, I’ll use a teacher for an example. So this whole program is called the windfall provision. And so what they would do was, so say a teacher, they knew that they weren’t going to be eligible for social security because of the way that their pension was structured, so they might work a summer job so that they could start to build in their 40 quarters and be eligible for social security, but they didn’t realize that there was an offset with how this worked. So the windfall provision, or it’s called windfall elimination provision, is something where if this sounds familiar, it’s something that you want to look into. And it was because the main part wasn’t paying into the social security, but unfortunately when they would get the scenario with the second job or something like that, that’s where it would almost penalize them because they would subtract the amount that’s coming from the pension out of the amount that they’d be eligible for social security.


Marc: Interesting. Okay. So the windfall provision, interesting. All right. John, any thoughts on that one?


John: No, run into the same scenario in Massachusetts where I’ve had some clients up there that have paid into the pension system up there, and basically they got reduction of social security benefits.


Marc: So it sounds like it doesn’t preclude you, it just may alter benefits.


John: There’s different situations.


Nick: Significantly. Yeah.


Marc: Okay. Good to know. Interesting. You never know sometimes, there’s always some sort of kernel to these things which kind of gets distorted and pulled out. So again, if you’ve got questions around this, and especially if you’re on a pension, you may want to certainly talk with your financial professional about that. And John and Nick are here to do so. So again, reach out to them at pfgprivatewealth.com. All right. Good stuff. Let’s do myth number nine. Social security benefits, John, are based on your income and assets. This one’s an interesting one, I think because I guess the confusion of thinking, if you have a, I don’t know, whatever your salary is, but then if you have a $5 million home, it’s somehow different than someone who has a million dollar home.


John: Yeah, that’s not the case. I mean, it is based on your earnings, which I guess some people could say, well, is that my income? And we’re going to talk about this later, it’s based on your highest 35 years of earnings.


Marc: But it’s not means tested, at least not now, not yet anyway.


John: Not means tested, but I’m glad you mentioned that. That is something that has been discussed as doing some means testing to basically help the program out where let’s say if you’re above a certain income or asset level where they start to reduce your social security benefit.


Marc: I mean, could you see Elon Musk ever needing or Oprah Winfrey ever needing social security? but technically they’re eligible, right?


Nick: With the means testing, that’s a tricky thing because the way that it goes kind of hand in hand is that people that exceed the cap, which I think right now is around 150,000, something like that in income, they no longer pay into social security. So there’s almost like a built in kind of means testing.


Marc: But doesn’t that have a donut hole, Nick, where it kicks back in again after a certain higher amount, you start paying again after $400,000 or something?


Nick: They’re discussing that, but not currently for social security. And it’s that way for Medicare, so for example, the Medicare portion of the tax is in perpetuity, and then there’s an additional amount over a certain amount of income. So what could be interesting is almost giving people an option of, and again, this is just speculation, but hey, you have the option to over this cap, you can continue to pay social security or have a means test later on when you retire. That’s something that could be interesting, almost like one or the other, or just remove the cap completely and then just have a maximum amount that could be paid out. So going back to what we had talked about in the other session, there’s definitely a way to figure this out, but somebody’s got to have the guts to do it.


Marc: Well for us, regular folk, I guess. So to John’s point, it’s not really based on those things. Not exactly anyway, it’s more based on your work history and your salary through the years, right?


John: Yeah. How many years you’ve paid into it and what those numbers were.


Marc: And so that just walks us into the number 10 here. So we’ll do that one. John, I’ll let you start with it then. So your social security benefits are based on your last jobs salary. And you kind of alluded to it, it’s really based on the highest 30 years, correct?


John: 35 years of earnings.


Marc: Sometimes I hear advisors say, hey, make sure you go to ssa.gov and take a look and make sure that your numbers are being reported correctly. Heard a lot of this during COVID, especially for folks who may have been laid off or things are kind of wonky to make sure those numbers do get reported correctly because that kind of thing can make an impact. And if you think about your highest earning years, John, many of us, that’s going to be between the ages of 40 and 60 or 45 and 65. So you want to make sure those numbers are correct.


John: Yeah, typically those are the highest earning years, and it’s always good to do a checkup every two or three years, especially after you’re hitting the 40-50 mark you really want to take a look at what did they put in there for me last year? I’d say more often than not, it’s accurate. If there are any issues, sometimes we’ll see them with someone that’s self-employed, so this comes always to the person that is self-employed and I don’t want to say determine their W2 income. It’s kind of like, how much income do you want to show for social security when you’re talking to your accountant? But that could be a negative if you’re doing some accountant stuff and showing lower income.


Marc: It could bother you for your earnings later, for your social security draw later on. I think about the highest 35 years when you’re talking about that, you could hear someone saying, well, I don’t remember what I made at Wendy’s when I was 16, 40 years ago. That one probably gets dropped off. So the idea of being the highest, again, 35 years versus maybe that first job way back when.


Nick: Just to kind of add to that context, because that social security cap has continued to go up over time with inflation it’s the highest 35 years in relation to the cap. So that’s something to understand because effectively your income income today, let’s say in theory, for example, $100,000 today compared to $75,000 20 years ago, that 75 may actually be a higher percentage compared to the cap. So there’s a little bit of nuance in there, but that’s just in general, that’s how it works.


Marc: Okay. All right. Well, some good stuff. John, any other thoughts as we wrap up this podcast on Social Security myths? Anything else you’d like to chime in with?


John: No I think we’ve hit all the points. I think we’re good. I think we did a good job debunking all these myths.


Marc: Certainly some good stuff in there. I think there’s a few things that might catch people by surprise. Nick, anything else before we go?


Nick: No, just the additional emphasis that it is a complicated decision and the good part of that is that there’s usually strategy involved and that you can do things to improve the overall planning for yourself. So just like a lot of things, the gift and the curse per se, but we’d rather have people have the ability to be able to adapt their decision making process to help make this a decision that improves their overall situation than be forced to do just the same old thing.


Marc: I like on the prior episode we were talking, John said that you guys can break things down a couple of ways. You can look at social security in a vacuum, but then also look at it as it applies to everything else that you have going on from a retirement standpoint. And I think that’s going to be a real advantage when folks are trying to sit down and figure out the best ways to handle something that can be actually a lot of money. I mean, social security could be a lot of income, total dollars applied to your retirement nest egg. So you certainly want to make sure you’re getting it right, and that’s what the team can help you with. So again, if you got some questions, need some help. As always, we appreciate the time on the podcast, but don’t forget to subscribe to them. And so you can catch new episodes and check out past episodes. But also just in case you need some help, stop by the website and schedule some time. Have a conversation with John, Nick and the whole team there at PFG Private Wealth. Find them online at pfgprivatewealth.com. That’s pfgprivatewealth.com to get started today. A lot of good tools, tips, and resources. And of course you can also, again, find the podcast and subscribe there on the website as well. Find us on Apple, Google, Spotify, under Retirement Planning Redefined. Guys, thanks for hanging out. As always. I appreciate your time. I’ll sign off for us. But for John and Nick, I’m your host, Mark. We’ll catch you next time here on Retirement Planning Redefined.

Ep 59: Top Social Security Myths, Part 1

On This Episode

Have you ever wondered if the Social Security system will run out of money before you retire? Or if claiming benefits as soon as you’re eligible is the best decision for your financial future? In this episode, we’ll be debunking common myths about Social Security and answering the questions you’ve been curious about.

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More Episodes

Check out all the episodes by clicking here.



PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Marc: Welcome into another edition of the podcast, it’s Retirement Planning-Redefined with John and Nick from PFG Private Wealth. Got a little two-parter going on this podcasting episode. We’re going to spend this one and the next one talking about some social security myths, some of the top social security myths. Some of these certainly, I’ve heard and many of the guys have heard, and maybe even the listeners have heard, but there’s a few in here maybe you haven’t, and hopefully it’ll help you out a little bit if you’ve ever wondered some of the questions or things that we hear on the news all the time. Now we’re constantly making the rounds online. So again, we’re going to break this into a two-parter. So if you have not yet subscribed to the podcast, make sure you do so at pfgprivatewealth.com. That’s P-F-G privatewealth.com. Just hit the subscribe button or heart button or whatever it is on various different apps you might have already on your phone, like Apple Podcasts or Spotify or Google or whatever the case might be in that regard. So with that said, we got a lot to get through. We got five this week and five for the next episode as well, so let’s dive in. Get started. Nick, what’s going on buddy? How are you?


Nick: Good, good. Just staying busy. I had some family in town this weekend, which is nice to visit, which tends to be a trend this time of year.


Marc: Yeah. Yes, we’re taping this right after Easter, so yeah. Yep.


Nick: Yep. And then tax season is always entertaining.


Marc: Oh, busy. Mm-hmm.


Nick: So yeah, so we’re just plugging.


Marc: Good, good, good. John, how are you my friend?


John: Doing good. Doing good. Just celebrated my oldest daughter’s seventh birthday and I’m like, “Man, she is…


Marc: Where does it go?


John: When she hit school, it’s like, “Man, this is going by much faster than I anticipated.”


Marc: Yeah, it always does.


Nick: Yeah.


Marc: Mine is 25. She’ll be home this week, actually, for a couple of days from the Navy. And yeah, I’m like, “God, 25. Really? Stop.”. It only speeds up my friend, so good luck with all that.


John: I believe it.


Marc: But happy birthday to her. All right, let’s get into some social security myths. Neither one of our kids, John, will need this anytime soon, but for a lot of our listeners, social security is certainly a big topic of conversation, whether you’re, I think, you’re 50 plus. I think anything financially related from a retirement standpoint, we start paying a little bit more attention, maybe getting a little bit more nervous about some things that we see in here. So let’s jump in and talk about some of these myths. Number one, whoever wants to tackle this, I’ll let you guys go. The Social Security Administration will help you make the best decision about when you should start your benefit.


Nick: I’ll jump in on this one. Although I have heard some reports from clients, recently, where some of the information and/or slash, I wouldn’t call it advice, but information has been more comprehensive when they’ve had appointments with Social Security. It’s definitely not going to be the primary resource that one wants to use, as far as helping them to make their decision. Ultimately, this is one of those things where the social security decision should be heavily, or for most people at least, is heavily dependent upon the rest of the parts of the planning and the scenario. Is there a pension involved? When is retirement? Is one spouse still working while the other is retired? So there’s a lot of different factors that go into deciding and figuring out which options, scenario are best. And a lot of times, one of the things that’s come up quite a bit, with people, is we try to explain to them that it’s almost a two-part decision, where three to five years out, we have a good outlook and projection of when we expect to take it. But at the same time, in reality, what ends up happening is that the shorter-term, or more of a micro, decision tends to be impacted by factors that come up. So for example, a spouse gets laid off and retirement for them happens sooner than expected, or the market’s going haywire, and we want to dial back on withdrawals that were taken from investment accounts, those sorts of things. So having the ability to be able to pivot is important, but having a broad, overall plan in general when you want to take it is obviously the most important.


Marc: Yeah, and to your point, they just don’t know your personal, complete situation, so they can give you some ideas on, I’m sure, the best overall… Well, I mean not the best overall, but just looking at some of the claiming options that you have available to you, but how that’s going to play with everything else, they’re going to not have any clue to that, because they don’t know your financial situation. Now that’s the first one. Myth number two, John, you want to tackle this one? You won’t get any social security if you’re a stay at home mom. That’s not exactly right either.


John: Yeah. I’ll jump on this one, and then also I want to go back to myth number one. One thing I have also noticed, that people need to be wary of, is calling Social Security and getting wrong information. I’ve actually had multiple calls with clients and the representative didn’t necessarily know exactly, maybe what was being asked and they basically gave the client bad information, where we had to call up together and ask. And it really affected the client’s strategy that they were going to use, because at first they were kind of like, “Well, this is what Social Security told me.”. And we did our due diligence, realized like, “Hey. No, that’s not accurate.”. So we called up once, continued to got bad information, then we had to call back again. There’s actually specialists that we were able to talk to, that basically gave us the right information, which in her case ended up being quite a bit of money that she ended up gaining, by able to do some widow benefits where…


Marc: Oh yeah. That’s good to know.


John: Otherwise, she wouldn’t have known. So yeah, I just wanted to add that in, because I’ve seen it happen a couple of times.


Marc: No, absolutely. Yeah.


John: And as far as not being eligible as a stay-at-home spouse, basically that is a myth. There are spousal benefits and if you qualify for those, you’re eligible to get half of the other spouse’s full retirement benefit. There’s different strategies that one can implement in that situation, but you are eligible for some spousal benefits, even if you were not working and have earned credits into Social Security.


Marc: Yeah, and so I think some of the confusion, and a lot of times how these myths is usually it’s kind of close, but maybe a little off. So if you’re talking about your own individual benefit, you have to work, what is it, 40 quarters I think, through your lifetime, which is 10 years total, in order to qualify. But, to your point, if you’re married, and I think there’s a caveat there too, is it not that you have to be married at least 10 years. Is that what it is to get the spousal?


Nick: Correct. Married 10 years is the case.


Marc: Yeah, so there’s a couple little caveats, but I think that’s how myths get started and get skewed out of proportion. So yeah, if you’re married and you’ve been a stay-at-home mom raising the kids the whole time, you are still eligible for your spouses. So it’s certainly good information to know there as well. All right. Myth number three, you won’t pay taxes on social security, since you already paid taxes on that money when you paid it into the system. Once upon a time, that was true, but it’s no longer true, right?


Nick: Oh yeah. If you want to get somebody fired up, this is the way to do it. Yeah. So what we try to explain to people, is that for most people, most households, kind of middle class and up, about 85% of their social security income is going to be includable in their taxable income. So there’s a chart and it is dependent upon the other income sources that are coming into the household. But, like I said, for the most part, most people are going to have their income, up to 85% of their social security income, includable in the amount of taxable income that they have. So it is important for people to understand that there’s a difference between that, “Hey, it’s taxed at X amount rate.”, or something like that, because there is confusion in there. So that 85% of the number just is tax at whatever effective tax rate they’re in. So for most people, they’re going to fall into the 10 to 12, 13% effective rate. So it’s not a huge overall impact, but because it is considered a payroll tax that funds it, there is a little bit of firing up that happens when, from an emotional standpoint, where the thought process is, “Well, hey, I paid taxes into it.”


Marc: Yeah.


Nick: Yeah.


Marc: I mean it is… I was going to say, just didn’t mean to cut you off, but I think where people also don’t realize this is a good place where strategy comes into play, because how you’re pulling your income, it’s your income levels that’s going to determine how much that this could get hit. So again, social security should be part of an overall strategy and not just, “Oh, I’m pulling money out of X, Y, and Z account and then also I have this social security thing.”. You want them all working together, right?


Nick: Yeah, and the reality is, and people don’t necessarily want to always hear it this way, but the reality is, is that social security payments through your payroll, while you’re working are essentially, I try to tell people, essentially you’re paying into a pension, is kind of what you’re doing.


Marc: Sure.


Nick: So you’re kind of paying it into a pension, so it is done via payroll tax, but in reality that’s kind of what’s happening.


Marc: Yeah. John, anything you want to add on that one?


John: Well, I guess the one thing would be, as you mentioned, strategy. If you find yourself in a position where your social security is going to be taxed, maybe you have to take extra income in a given year, Roth IRA would be a great spot for it, because that does not count towards your modified, adjusted gross income in this case for the calculation.


Marc: So, maybe looking at ways to lower your taxable income limit, so just to help with that strategy?


John: Yeah, yeah. And that’s why it’s important. And if you tune into this podcast, often you hear Nick and I always say, you want to put yourself in a position to adapt to any situation and have balance, so that’s where that’s important, where it’s like, “Hey, I have to take some money out this year. Health, whatever, house.”. As we were chatting offline of house issues and contractors. Roth could be a good spot to take from, where it doesn’t affect your income.


Marc: Okay.


John: To get off-topic, same thing goes with Medicare. As you have too much income, your Medicare premiums might go up, so planning is very important.


Marc: Exactly. Strategy is completely important in how it might affect that particular myth. All right. Let’s do the last two. Here are some of the big ones, and these are the ones that get people most concerned or whatever. Myth number four, there won’t be any social security left by the time you get to retirement. I just don’t feel like this is probably going to… I can’t see any politician standing up there and doing it. It’s too much of a hot potato. They’re going to continue to kick the can down the road, and I think there’s going to be something, in some form or fashion. Could changes be coming? Sure, but the whole concept of it’s just going to go away, just seems like a lot of fluff to me.


John: Yeah, I would agree with that. Changes are already happening. We already see the cap limit for income going towards social security. That’s been increasing. So there are some updates that we see happening, and this is really an actuarial problem, so it’s a matter of just being like, “Okay, this is what we need to do to fix it and it will be fixed.”. What most people… What’s interesting, is I just got a question last week on this from a client, because they read an article about the trust fund will be exhausted between 2032 or 2034, if no changes happen. So their concern was, “Hey, is the money going to be there?”. And the answer is, your benefits will still be coming in, because it’s funded through your payroll, so there’ll be people paying that system, while people are drawing out.


Marc: Right. And we do have a problem there. That is a concern, right? If you look at those numbers, there’s way less people paying in now than people pulling out, which is why some other changes may need to come into play. But yeah, I think that’s where the confusion comes in too.


John: Yeah, exactly. And I believe a couple.. And you can look this up, if nothing changes, there will be roughly a 20 to 24% reduction in benefits, if they don’t change anything. But we feel confident that they’ll make some adjustments to the program-


Marc: Last minute, yeah.


John: … to get everyone whole. But again, it comes back to planning correctly. So, are you positioned yourself to adapt to this, if this were to happen? If social security benefits were to get cut, how does that affect your plan and what are you going to do?


Marc: Yeah. You hear all sorts of strategies out there, Nick, right? I’ve heard the one that if they just eliminate the early, at 62, and even moved it to 64 or just said, “No, we’re just dropping the early and you’re 66 or 67, depending on your full retirement age.”, it could fund it for another hundred years. Then they’re talking about means testing. So there’s a lot of things on the table, they just haven’t pulled the trigger on any way to actually replenish it yet.


Nick: Yeah, it’s pretty frustrating, because like John said, there is kind of a science to calculating this when you’re talking about this many people, from an actuarial standpoint. Literally from, like you had mentioned, increasing the initial, early retirement age from 62 or even starting to phase it in, like they have in the past as far as what they consider full retirement age, starting to move that towards an average of 65 would make a huge difference. Adjusting the cap, as far as the maximum amount of income that you pay into social security on, if they adjusted that up. So it’s frustrating, because like so many other things, and without going on a rant, it tends to be quite political. And unfortunately what tends to happen is instead of it being the small adjustments, that can make a huge difference, what tends to be in the news is more of like, yes or no. Will it be there or will it not? Versus like, “Hey, we can start to just adjust these numbers and make these… People are living longer, so we can figure this out.”.


Marc: Well, the doom and gloom makes a better headline too.


Nick: Yeah, for sure.


Marc: I mean, look at what’s been happening in France for the last month. They’re totally upset over pushing their pension there, which is basically the same thing that we have, back two years. There’s options there, it’s just a matter of what’s going to be acceptable. And I think for many of us, if you’re probably 50 or over, the chances of it affecting you greatly are probably diminished. I can certainly see though, changes to the ages or things like that affecting people. They say, “Okay, born from this date down, for sure you’re going to see some changes.”. So possibility, but just the quote on quote, “Well, it’s empty. It’s gone. No one gets a check ever.”, I think is just kind of silly.


Nick: Yeah.


Marc: All right. Final one guys and this kind of rolls into that prior one, as well. Number five is go ahead and claim it as soon as possible, turn it on as soon as you possibly can. And I think, again, whoever wants to answer this first, but if you need the money, that’s one thing, right? Turning it on, because the strategy makes sense, because you need the money, but turning it on, because you think it’s going to run out is maybe not the best way to look at that.


Nick: Yeah, we tend to agree. Taking it when you’re first eligible is very rarely a best bet. You give up significant benefits by taking it when you’re first eligible at age 62. And it kind of dovetails a little bit into what we had talked about, just on the previous question, where people that were at the point in time where their full retirement age was 65, so 62 is only three years before that period of time, the reduction, which is about a half a percent per month before your full retirement age, it didn’t have as big of an impact. But now with full retirement age, for many people, being 66 and a half to 67, now we’re talking a wider gap of years, four and a half to five years. So that the compounding effect of that early benefit is significant. So it has a really big impact for people that take it really early, when they don’t necessarily have to. And I get more regretful responses from people that took it early, not understanding the full situation, than I do from people that waited and had more of a strategy for when to take it.


Marc: Yeah. Any thoughts on that take it as soon as possible, John?


John: Yeah. I think it comes back to, like we said, what is the person’s situation? I really see situations where if someone doesn’t need it, taking it early makes sense. The only time is if there’s significant health issue or something like that. But then you also have to think about survivor planning. So there’s a lot of variables that you got to think about and does it make sense?


Nick: And just to dovetail off of that, John mentioned the survivor planning, where sometimes, as an example, one person in a couple taking it earlier and using that to leverage the other person waiting much longer, that combination can work out sometimes, work out-


Marc: Yeah, a couple’s strategy.


Nick: … really, really well. Yeah, yeah, so factoring in both strategies, letting one ramp up and using the other one to make it easier on the overall nest egg, sometimes that can make sense, but this is always something that we use. We have different calculators to strategize for social security and that sort of thing, and so we try to be as strategic as possible.


Marc: And John, I think you’re referring to the break point, so you’re talking about when you’re turning it on, you can run some calculations and see what that break even point would be if you turn it on early versus waiting. Obviously health plays a factor, but you guys can kind of stress test those numbers as well to see the best chance or the best option.


John: Yeah, so we have different programs, which is great, where one, we just look at social security in a vacuum and basically it’s, “Hey, let’s look at taking now versus 67.”, if that’s the person’s retirement age, and we can go look at their break even, which typically is mid-seventies in that scenario. Then we have our comprehensive planning tool, which takes into account other factors of, “Well, if you take it early, your investments can build up a little bit longer. What if you take it early and save it, so you can really put in different factors on it.”. But one thing people really think about if they take it early, and we’ve seen this lately, is the cost of living adjustments. So those in the last few years have been pretty significant. So when you take it early, you’re still going to get those cost of living adjustments, but they would’ve been much greater had you waited, because the balance is bigger that you’ll be getting monthly.


Marc: Gotcha. Okay. So again, there’s a lot to the social security strategies, the conversation. These were some of the bigger ones. We’re going to do a second part, with five more myths in a couple of weeks here. So make sure you tune in and check that out. But as always, if you’ve got questions, if you need some help, especially when it comes to claiming strategies and maybe running a maximization strategy to see what the best option’s going to be, don’t just run out and do something. And also don’t treat it as a separate entity from everything else that you’ve set aside for retirement. It really is about them all working together in a cohesive plan. And that’s what John and Nick and the team can help you out with. So if you need some help and you’re not already working with them, jump onto the calendar at pfgprivatewealth.com for a consultation and a conversation. That’s P-F-G private wealth.com. Get yourself some time onto the calendar, subscribe to the podcast. You can do so while you’re there as well, so there’s a little dropdown tab for podcast. We’re on Apple, Google, Spotify, all that good stuff. So again, P-F-G private wealth.com is where you can find them online. And we always appreciate your time here on Retirement Planning-Redefined. For John and Nick, I’m your host, Mark, and we’ll see you next time for more social security myths.

Ep 27: Understanding Annuities – The Basics

On This Episode

There are a lot of strong opinions on annuities. Some people heavily advocate for them, while others claim they are a bad investment. Today John and Nick will break down the basics for us by discussing what an annuity is and some important terms to know.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Speaker 1: Hey everybody. Welcome into the podcast. Thanks for tuning into Retirement Planning Redefined with John and Nick from PFG Private Wealth. We appreciate your time as we’re going to get into understanding annuities, we’re going to do a series on annuities, several podcasts coming up but we’re going to start out with the basics, annuity basics. So, stick around for that, we’re going to get into that in just a second. But first, let me say hi to the guys. What’s going on, Nick? How are you?


Nick: Staying pretty good, just waiting for the weather to cool down a little bit here in Florida. We are ready for, I guess what we would consider our winter or fall one.


Speaker 1: Do you get fall? Isn’t it just summer, winter?


Nick: I feel like when I first moved here, there was some fall back in ’03, ’04, ’05. But the last few years, it feels like it’s just kind of jumped from one to the other. But whatever it is, where it’s not 90 plus and sticky out, I’m ready for it.


Speaker 1: Right. Yeah. John, how you doing my friend?


John: I’m good, I’m good. I’m with you. I was thinking we’re just chatting about the weather and it’s still 87 here and it feels like 92 and I’m ready for a low 80s and no more humidity.


Speaker 1: There you go. Yeah, the humidity can be the bear, that’s for sure. Well, good. I’m glad you guys are doing well since our last time chatting here on the podcast. So, we’ve got a lot to cover, we’re going to try to keep this into our timeframe. We’re trying to keep this into a digestible amount of time for folks here. So, let’s jump in and start talking about annuities, understanding them and again, as I mentioned, we’ll start with the basics.


Speaker 1: It’s just really important to understand them because they can offer some things to people, it can be a vehicle that some may find useful. There’s risk reduction, retirement income, tax deferral, death benefits, so let’s just get into some of this stuff. What is an annuity to kind of start off with guys?


John: When you break it down, it’s a contract with an insurance company. So, that’s kind of the premise of it all and what that contract, typically, you’re getting some type of guarantee and we’ll dive into that a little later but it could be some type of a principal protection guarantee, income guarantee, death benefit guarantee. So, that’s what you’re looking for. And it’s really important again, kind of going back to understanding it because it is a contract with an insurance company, so you need to understand all the details of it, just because it could come back to bite you. And we’ve seen that happen quite a few times as we’re doing some reviews with clients. They just don’t truly understand how it works because these are pretty complex vehicles and there’s a lot of moving parts.


John: So, it’s just important to understand how, going back to the overall plan, how does the tool work with everything else? And then one thing that we, again, being a contract, the guarantees are based on the paying ability of the company that you’re with. So, one of the things that we always kind of look at is what’s the rating of the company you’re going with because if you want to set the contract for some type of guarantee, you want to make sure that they’re going to be around to actually give you that guarantee.


Speaker 1: Right, yeah. Yeah. So, Bob’s insurance is not necessarily the best idea, right?


Nick: Yeah. And I will say one other thing that we like to preface this sort of conversation with and part of the reason that it is so confusing for people is that there are many different subsets or different types of annuities. And so, oftentimes people have heard the term annuity but they don’t realize all of the different types and that their experience may pertain to one of 10 different types. So, as we get into the differences and kind of the nuances, we’ll kind of joke sometimes in our classes that we almost wish that they were called different things. It’s like saying, “Hey, should I buy a vehicle? Well, do you want a car? Do you want a truck? What are you trying to do? Is gas mileage important to you? Is off-roading important? What is it?” And that same sort of mentality is important when you are talking about it.


Speaker 1: Well, you could think about that analogy Nick with and just leave it at cars because many people would just say, “I need to get a new car.” Even when they’re looking at like an SUV or something like that, they don’t really refer to it that way. So yeah, that’s a great way of thinking about that. And we will cover, we we’ll get into, like I said, we’re starting with the basics today but we’ll get into some of the different types, their names, what they are, so on and so forth. So, John gave us kind of what the gist of it is. There’s a couple of phases to think about, what are the phases?


Nick: As we get into it and when we’re talking about deferred annuities, there’s essentially what’s called an accumulation phase and a withdrawal phase. So for the accumulation phase, what that is referring to is, between the time that you initiate or deposit money into the annuity and between that starting point and then the period in time in which you start withdrawing money, it’s called the accumulation phase. And that’s important to know because there’s different rules, which we’ll sort of get into but that accumulation phase is important to understand because by itself, an annuity does provide tax-deferred accumulation or tax-deferred growth during that phase.


Nick: So, if somebody says an example of that is the easiest way to compare it is, client has $100,000 in a money market account at the bank and they get to collect, when they get interest on that account, they get a 1099 at the end of the year, they pay taxes on the interest in the year that the interest is incurred. In the annuity, in its own chassis, it’s going to provide tax-deferred growth, which means that that growth just compounds without having to pay any taxes on it until the point that you start taking it out. That’s a pretty big deal and could be a really useful tool for higher income earners that are looking to put money in places that are more tax beneficial especially if we do enter into a higher tax bracket, phase, which we may in the next four to eight years.


Nick: And then for the withdrawal phase, it is that money starts to come out. So, the first thing that people need to understand is that when you take that money out, if it’s non-qualified or non-IRA money, there is going to be some form of taxation. It’s going to be ordinary income, which means whatever tax bracket they’re in, those withdrawals, as long as they’re part of the gains that have happened in the contract, those earnings are going to come out first and they’re going to be taxed at ordinary income.


Nick: So, understanding how that works is kind of an initial importance. There is a term and a methodology of taking out money inside of an annuity via what’s called annuitization. Again, this is one of those things where you wish that they would just come up with words that aren’t confusing, annuity, annuitization, et cetera. So, annuity is basically like a noun, it’s a type of account. Annuitization is an action essentially. Annuitization is when the company liquidates your lump sum of money and starts paying you in it whether it’s a monthly or an annual payment. And one of the benefits of annuitization is that they can actually spread out your gains over a longer period of time and it can be a more tax-efficient way and can guarantee you payments over a certain period of time.


Nick: And so, in one of the other future series, we’re going to get into that process a little bit more. But the easiest way for people to think about it is kind of like a pension payment, a fixed amount of money that’s going to be paid out over a certain period of time. And then, there are guaranteed withdrawals and we’ll talk about that a little bit where you can kind of structure how you want to take out withdrawals. So, it is confusing, there’s a lot of moving parts and it’s a good example of why we’re going to have in-depth series on this.


Speaker 1: Yeah. That’s a good example of why to work with an advisor as well to help you go through some of these things. And John, there’s definitely caveats that go with it. There’s things you’ll want to know, some big bullet points if you will. Give us a few of those in the basics of an annuity.


John: Yeah. Important again, any contract you go into important to understand what the rules are and these are things you want to consider. So, similar to an IRA where there’s that 10% penalty if you withdraw before 15 and a half, annuity has the same scenario. So actually, this just came up with some advisors I was working with and we were doing some planning and the client needed money in a four-year period and really needed to, they wanted to make sure there was some guarantees to it. So, it was discussed of kind of an annuity to provide some type of principal guarantee. But by the time they would need the money, they would have only been 58. So, it was decided, “Hey, this isn’t a good vehicle for you because you can’t touch it ’til 59 and a half due to do that 10% penalty.”


John: So again, important when you’re going into anything, just understand the rules because had they put that money into it and then in four years when they needed it, they wouldn’t be able to access it penalty-free. So, just important to understand that one. Another one that we see a lot of people mistake or not understand how it works is the surrender period. Some of these contracts basically, when you give the money to the insurance company, there’s a period of time where you actually can’t get access to all your money full and clear. And this is separate from the 59 and a half but the surrender periods can be as short as three years. So, let’s say you give your money to XYZ insurance company, they give you these guarantees and they tell you, “Okay, for a three-year period though, you can’t get full access to your money. We’re basically keeping it.”


John: So, it can be three years and we’ve seen as high as 16. And that’s one of the things you really want to understand what you’re getting into because unfortunately, we’ve seen some people where they’ve gotten to the 16-year period, is that they had no idea they we’re getting into it and they have limited access to their funds. And we’ll go through … There is a piece of money you can get at but you just want to make sure how long has this contract going to be before you can get out of it. And with that is what we call the surrender charge. So, let’s say your surrender period is seven years and in year five, you want to pull out money. Well, there’s actually a descending surrender charge. So in year five, if you decide, “Hey, I can’t do this anymore. I need to get access to my money,” the insurance company might charge 4% of your principal for you to actually get out of the contract.


John: So, an example of that would be seven-year contract. First year surrender charge could be 8%, second year would be 7% and so on. So, that’s where you really want to understand exactly, “What’s my surrender period? And if for whatever reason, I need to pull out of this contract early before the surrender period’s up, how much am I going to get charged to do so?” Again, it’s all about reading the fine details in the contract.


Nick: And within that, many contracts have a 10% free withdrawal amount that will avoid you having to pay a penalty even that surrender charged during that surrender period but that can be confusing as well. And sometimes, that’s used to oversell or kind of force people into not necessarily force, but convince people to put more money than they feel comfortable with into something like that. But many of them do allow for a 10% withdrawal each year.


John: Yeah. So an example of that, so I’m glad you brought that up, Nick is, let’s say you had $100,000 in an annuity and you’re in year three. And you don’t necessarily need to cancel the whole contract but you do need access to some funds, you could pull out. Typically we see a max, they allow up to 10%. We’ve seen some as low as 5%. But in a 10% scenario, you could pull out 10 grand in that year free and clear of any charges. So, that’s important to understand exactly what’s your free withdrawal amount. And then, one thing to understand is once the surrender period is up, so if you’re in a seven-year contract, once that seven years is over, you can move your money wherever you want or you can keep it in the current contract. So, once a surrender period’s up, it’s 100% liquid at that point in time.


Nick: And just one other thing on that surrender period, if somebody out there is evaluating them, a good question to ask is whether or not the surrender period is what’s called rolling or not on rolling. So, what that means is that if it is a non-rolling surrender period and it’s a seven-year contract like John explained or kind of detailed, the seven-year period starts when you first deposit the money and it never extends. So, you can make an additional deposit down the road, say in year five and that new deposit does not have its own seven-year surrender period, it only has two years left just like the rest of the money.


Nick: So, that can be a really useful tool for somebody that’s trying to sock away some money, make ongoing contributions to it but still maintain access to their money. Whereas a rolling surrender charge period, each deposit has its own seven-year surrender period which can get really squirly and hard to keep track of. So, that’s an important thing to look out for.


Speaker 1: And so, you mentioned some of those bullet points there, John, to think about, you mentioned guarantees and the insurance company and so on and so forth. Are there protections in there? A lot of times people wonder what kind of creditor protections are there?


Nick: So, creditor protection tends to vary from state to state, which is actually a good kind of segue. So, one thing that people may notice, especially we’re in Florida and we have a lot of people that live in different states, et cetera, or at least part of the time. Insurance companies are regulated state by state. So, even though XYZ insurance company may have contracts in 50 different states, the rules and benefits that they provide in each state can be different. So in Florida, and this is always something where you want to, before you make any major decisions, you want to check in with an attorney, especially in estate planning or asset protection attorney, somebody that really works in that space.


Nick: But in the state of Florida, annuities fall into one of the categories that have a level of asset protection via loss, kind of joke that it’s the OJ Simpson rule, why he became a resident here many years back after he was found liable in court for the murders back in the ’90s were because the State of Florida provides asset protection on annuities for their residents. So, that is an area where we’ll have people that are high income earners, maybe physicians, specialists in medicine, things like that, where they’re very worried about asset protection, they may use annuities as a place to put money for growth but also provide them with a level of protection.


Speaker 1: Okay. And does that apply to a probate things of that nature in some protections, wills, so on and so forth? Is that caveat also?


Nick: So, probate typically is the process of essentially the court system, implementing the direction of a will or your estate and there’s a fee for probate. So, because an annuity is considered an insurance contract, you can actually list the beneficiary in the insurance contract, which will allow that process after a death of the funds to transfer directly to your beneficiaries and avoid them having to go through probate to get those assets, which can be a savings of somewhere from three to 5% of the assets in there. And not only that, it keeps it private instead of a public process, which probate is, but it just is a much cleaner way to be able to leave assets by listing the beneficiaries in the insurance contract, which is the annuity in this case.


Speaker 1: Okay. So, let’s talk about some more basics here. We often hear the term riders, make sure you get something with a rider and this has that so on and so forth, different options. John, what’s a rider?


John: So, a rider’s basically an additional piece to the contract that you can add, some type of guarantee or some type of benefit. And let me preface it by saying, most riders will have some type of cost associated to it. So, an example of a rider would be like a death benefit. You could put a death benefit rider on the contract where your initial principal payment, that’s your guaranteed death benefit. So, if you were in a, we’re talking about variable annuities, but if you’re in a variable annuity and the market dropped, you put in 100,000 and the market dropped to 80 due to market fluctuation, your death benefit stays at 100 or there could be a rider where the death benefit could potentially increase each year by a guaranteed rate.


John: Some other riders could be like a principal guarantee where you can’t lose any of your initial purchase payment amount. And then, the most popular one that we see is a guaranteed income rider, where it will guarantee income throughout the life of the contract similar to, when Nick was talking about what the pension and we’ll dive into this a little bit deeper on how this works in some of our future sessions, but when people are asking questions like, “Hey, what is this rider?” It’s typically some type of benefit or guarantee within the contract. And there is more often than not some type of fee associated with it and it’s important to understand how that fee works and then how the rider works on your contract if you like that type of benefit.


Speaker 1: It kind of goes into the factor of, is it worth it or not for that purchase that you’re making for what it is you’re trying to accomplish, right? What you want that vehicle to do for you.


John: Yeah and with the annuities, it really all comes down to the guarantees and if that’s what you’re looking for. Are you going to be guaranteed against some type of loss, guaranteed some type of income and is the cost of that guarantee worth it in the annuity contract? And for some people it’s great, it really gives them peace of mind and for other people, they don’t want to pay that extra fee or any type of cost on their money. Anything I missed there, Nick?


Nick: No, I would just say the way that you want to view any sort of, really any sort of investment vehicle itself, but especially annuities are through the realm of yourself, your specific situation, your plan. Because there are so many different variations of annuities and there are lots of bad ones and there are a bunch of good ones. Oftentimes, where we see the biggest mistakes made are when people implement a strategy that was good for their friend, their neighbor, their brother, their sister, but not good for them. And so because of that, and because of that decision it’s like, okay, these are bad,” where instead it should have been, well hey, you used the wrong strategy, you used the wrong type, this wasn’t something that made sense for you because X, Y and Z.


Nick: So, when you kind of evaluate these sort of things and as you kind of listen through the upcoming sessions and we talk about the positives, the negatives, some of the features and the benefits, et cetera, you really want to look at it through the realm of yourself and your specific situation because your brother, your sister, your neighbor, your friend, they may have different tolerances for risks, for expenses, their income levels may be different, they may have a pension where you don’t. So, every situation is different and I think that gets amplified by a significant amount when it comes to annuities and it’s part of the reason why they’re so often misunderstood.


Speaker 1: Well, and like any financial vehicle you already said that you want to make sure what’s the right fit for you. There’s so many vehicles out there, so many different financial products, there’s pros and cons to everything. And so, it’s finding the right balance, the right fit for you. Well, we’re going to wrap this up here in just a second. So, you mentioned, actually John mentioned variables, there’s basically three types. So, what are the three types we will be covering on the future conversations?


John: Yeah. So, we’re going to jump into fixed annuities and breaking down those and the pros and cons of variable annuities and then also fixed index annuities. We’re really going to try to do a good job of giving people details so they have the education and the knowledge to have good conversations, whether with their advisor or for themselves to really figure out if it’s the best decision for them.


Speaker 1: Makes sense. And so, we’ll finish it off by saying, make sure you subscribe to the podcast if you haven’t done so yet, they’ll also send this out for those folks if you’re getting that already. You can do a couple of things. You can either just go to the website, pfgprivatewealth.com, that is pfgprivatewealth.com or you can type in retirement planning redefined on whatever app you’re using like Apple or Google or Spotify. You can find it on all the most popular apps as well, just type in retirement planning redefined in the search box and you should have that pop up and you can subscribe to it that way.


Speaker 1: If you’ve got questions or before you take action, you should always call a qualified professional like John or Nick at PFG Private Wealth. They are financial advisors here in the Tampa Bay area. So, give them a call at (813) 286-7776, it’s (813) 286-7776. And we’ll also address guys that we’ll find a little bit here, it’s just a bias. You kind of alluded to it. People, they hear things and it’s like, “Oh, I don’t even want to talk about them because I know they’re all bad.” So, we’ll also discuss a bit of the biases for them and against them.


John: Yeah. So, with the biases, we find a lot of people based on stuff they read and articles and things they’ve listened to, they really come in with a bias, whether for them or against them. And one of the things that we like to just say is say, “You have an open mind and just learn about it and figure out if it works for your plan because if you’re reading an article and it’s telling you that annuities are bad, all the stuff,” and I’ll say like, “Fisher Investments, they’re really dog annuities,” but when you look at it, what they do is asset management. So, their primary focus is getting money, going into stocks, bonds, mutual funds, things like that. So, they’re not really offering annuity so they’re basically, they’re going to be against them.


John: And vice versa, we’ve seen some advisors that aren’t actually licensed but they have an insurance license and all they can offer is an annuity. And guess what’s the greatest thing out there? It’s an annuity for you because they can’t do anything else. So, whatever you’re reading, you got to kind of look at it from a perspective of, “Is this person open-minded to it?” And that’s where Nick said it’s really important to look at the tool, the annuity, the pros and cons to it and does that fit with your plan and what your goals are?


Speaker 1: Well, that’s a great way to end the podcast this week. Thanks so much for your time here with John and Nick as we were talking about understanding annuities on the podcast. This has been Retirement Planning Redefined. We appreciate your time. Make sure you hit that subscribe button on whatever app you use or reach out to John and Nick at pfgprivatewealth.com and we’ll see you next time.