How a 62 Year Old Substitute Math Teacher Used a Hybrid Annuity to Set Up His Own Personal Pension

Get the “Personal Pension” Toolkit and the Definitive guide To Hybrid Annuities.

John was a substitute math teacher who loved jelly donuts. (long story). His wife’s name is Dagny.

He wasn’t always a math teacher. He worked at a large electronics company for a long time, but back 7 years ago when he was 55, they went through downsizing and he was laid off.

When he was 62, he realized there was a problem when he finally retired. It’s the same problem that most Americans face.

They won’t have enough guaranteed retirement income to meet their income requirements for the rest of their life.

What John needed was to design an income plan that would show him that he would get the income he and his wife need, without having to worry about losing half of their money in the market.

When John started to think about it, he and his wife Dagny would have an income gap. That means there wouldn’t be enough income coming in to meet their expenses.

He also realized that Dagny would lose a lot of income if he dies early, because she would lose one of the Social Securities and half of John’s pension because it only has a 50% survivorship.

Then John was shocked to learn that on average the surviving spouses income drops by 42% if the main breadwinner dies early.

Losing all that income would put Dagny in a very bad situation.

So John started to do some research and that’s how he found me…online.

The first thing John said when we talked on the phone was “I already have a financial adviser, Carl”

I said, “Of course you do. So the first thing you and I need to talk about is Accumulation vs Distribution.”

In the first half of life you are focused on working, saving, contributing to a plan and accumulating money for the future.

In the second half of life you go into the distribution phase where you are pulling money out, not contributing, and you focus more on reducing risk.

There are a lot of good people who are financial advisers and brokers and they are fine for what they do. But…that’s not what I do.

  • They focus on accumulation and growth.
  • I focus and distribution and safety.

They use products like mutual funds, stocks and bond funds. Which are fine for growth if you are OK with the risk that comes with it.

But if you want safety and steady income, you use things like a hybrid annuity that have safety and guarantees.

If you try and use mutual funds for income planning it’s all based on assumptions. Instead you want to look for products with guarantees that will make sure you have income for as long as you live.

On the accumulation side there are maybes, risk and volatility.

If you are planning your income for the rest of your life, wouldn’t you want Anti-maybe, Anti-risk and Anti-volatility?

So then John asked what his options were. I mentioned that it’s important to use the right tool for the right job.

If you have short term money that’s safe and liquid, you use the bank.

If you want unlimited growth potential and you are Ok with the risk then you use mutual funds, stock and bond fund.

If you want safety and guarantees on your income then you want to look at fixed annuities or a hybrid annuity.

As people get older they tend to move money from the RISK bucket to the SECURITY bucket.

So with a hybrid annuity you can’t lose principal, you get income for life without annuitization, and if there is a balance left when you die it goes to the kids.

There are surrender charges if you leave within 10 years, you are limited to withdrawing 10% of your account per year and the income benefits have a fee which is usually under 1%.

So then John needed to figure out what his monthly expenses were going to be so I gave him an easy to follow one page budget guide that only takes 5-10 minutes.

Once we had that done. Then we did an income assessment where we map out all of their income on one page.

For many people it’s the first time they have seen it laid out so clear and simple.

The software we use also allows us to troubleshoot different scenarios. What if John dies at 75…what happens to Dagny’s income?

After doing the income assessment, John found out that he was going to be $20,000 short when he retires in 5 years.

Also, Dagny’s income was going to drop substantially if John dies early. So we found a hybrid annuity that if they moved in $300,000 and waited 5 years, the annuity would pay them $21,000 per year for as long as either on of them is alive.

This solved their income gap and also put Dagny in a much better situation.

That the process John went through. It’s not that difficult, it just takes a little time.

Now that he has his own personal pension, he can retire knowing that he and Dagny have the income they need, and it will last as long as they live.

We made it really easy for you to find out a little more about this process.

I put together a “Personal Pension” Toolkit with all the tools we talked about with John and Dagny.

For you copy just click here and it will be sent right to your email.


DISCLAIMER:Carl Ostenson is a licensed insurance professional.The characters used in the John and Dagny example are fictional. This video is for educational purposes only. This is not a solicitation to buy or sell anything. This video is not to be considered investment advice. All illustrations are examples only. Your results may vary. Carl Ostenson is not securities licensed. He is not a tax advisor. He is also not a lawyer. Please consult with the appropriate advisors before buying or selling anything. All insurance claims are based on the ability to pay of the underlying insurance company.

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