Having Annuity Companies Buy Bonds for You: Shootin' It Straight with Stan

“Fun With Annuities” The Annuity Man Podcast

In this episode, The Annuity Man discussed:

• How annuity companies buy bonds for you
• Accessing industrial-grade bonds
• Interest rates play a secondary role
• Potential or contractual increases

Key Takeaways:

• You can’t open an account with an annuity company and have them buy bonds for you, but when you sign a contract for an annuity they’ll buy bonds on your behalf to support the lifetime income they’ll be dishing out for you.
• Annuity companies have access to industrial-grade bonds that regular individuals don’t. That means they get the best of the best when it comes to investments.
• When you are talking about a lifetime income stream the primary pricing mechanism is your life expectancy at the time you start the payments. Interest rates play a secondary role.
• Anytime anyone says that the income stream is increasing with inflation, that means that the annuity company is lowering that initial payment to make up for that potential or contractual increase.

"When you’re buying lifetime income, you’re literally saying to the annuity company ‘I’m gonna piggy back on your institutional access to bonds and you’re gonna buy the bonds for me and you’re gonna do a better job buying the bonds than I could as an individual and because of that… the lifetime stream’s gonna be better." — Stan the Annuity Man.

 

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