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Annuities Explained by Age 18-34, 35-54, 55-64, 65+

annuities-explained-by-age-18-34-35-54-55-64-65

Today we are talking about the ages that you need to purchase an annuity. What’s the right age? When is "too young"? When is "too old"? Well, I’gm going to go through age ranges. If the age ranges don’t fit my parameters of being a fiduciary.

All right, so let’s look at the first age group, ages 18 to 34. First of all, 18 to 34-year-olds should never, ever, ever, ever, ever buy an annuity of any type. I don’t care if the agent or advisor needs to make a car, home, or child support payment. It doesn’t warrant an 18 to 34-year-old buying an annuity. Period. You have so much life expectancy ahead of you that you need growth. You can afford markets going up and down, and up and down, and up and down, and hiccup, and hiccup. You can afford to do that. You can afford that to happen. You do not need to lock up your money for income for life. You do not need an index annuity at 18 to 34 years old.

If you’re 18 to 34 years old and someone pitches you an annuity, punch them in the face. Do time in... No, don’t do that. If you’re an agent and advisor out there and pitching it to young people, you should be ashamed of yourself. That is ridiculous. Here’s the reason why 18 to 34-year-olds. Let’s just listen. Lean in. You need market growth. You need money to have market growth potential and unlimited upside. And there’s not an annuity on the planet that provides unlimited upside.

Yes, even you variable annuity people, you know there are limited choices with annuities. You are going to have limited choices or limitations on the upside. If you’re 18 to 34, you do not need those limitations. Hey, one more thing, I was moving on to the next age group I was going to rant on. For the 18 to 34, one of the biggest reasons you do not want to buy an annuity-like a Deferred Annuity, like an index annuity, is because the IRS has a little rule, and it’s called the 59 1/2 Rule. That means if you’re 18 to 34, in that age range, or too young to buy an annuity. You buy this index annuity that the person said, "Dude, you’re going to the market upside with no downside," which is a lie, and you take money out of that before your age 59 1/2, there is a 10% IRS penalty because you're taking it out before age 59 1/2. Have I made myself clear?

Let’s talk about ages 35 to 49 right before you get to 50. Even for these people, I’m going to tell you that you should not buy an annuity. Period. You still have a long life expectancy. You can still weather the storm of market growth and market volatility. If you’re in your 30s and 40s, absolutely early 40s, just do not buy an annuity. Going back to that 50 1/2 Rule, if you buy a Deferred Annuity like a Multi-Year Guarantee Annuity or a Fixed Index Annuity, if you take money out before you’re 59 1/2, there’s a 10% IRS penalty on that money you’re taking out.

There are a lot of agents and advisors who don’t even know that rule, and they should know that rule if they’re selling anything. So 35 to 49-ish, that range, it’s a push. You, really, really should not buy an annuity of any type. The only way you’ll probably fall into an annuity is if you inherit an annuity. I’ve done a lot of videos on inheriting an annuity, the rules of inheriting an annuity, and I would advise you if you’re in that situation where somebody, mom, dad, aunt, whatever, left you the annuity, you’re the beneficiary of that, you need to set a time to talk with me.

You’ve got to be careful who you’re asking out there because there will be people trying to flip you, sell you stuff, and do all kinds of things. When you inherit an annuity in that age range, whether it’s 18 to 49, you need to talk to me. The other kind of asterisk thing that I’ll put out there for these youngsters in annuities, there are such things as structured settlements that happen when people are in accidents. A judge hits the gavel and says, "You know what, there’s a lawsuit involved." It’s in the legal process, and they get an annuity for that young person because they were in an accident.

That’s not what I’m talking about. Even though people say, "Well, I have a niece that got an annuity because she was in an accident." That’s called a structured settlement. That’s fine. That’s part of the legal process of caring for an injured person. But that person didn’t decide to buy the annuity. They didn’t even decide to get in the accident. It is what it is. The other tiny little asterisk I’m going to put out there is that I have five clients that fit into this; that’s why it’s important to talk to me; these are super, uber-wealthy entrepreneurs.

Uber wealthy entrepreneurs. A lot of them are in their early 40s, maybe early 50s. When they first called, I remember saying, "You’re too young.” They’re saying, "Well, I read this article that you wrote a long time ago, Stan the Annuity Man, about there are some states that can protect your assets from bad lawsuits or things like that, hit and run type of lawsuits where people are trying to get after your money. Annuities will protect that." In specific situations, those might fit. But for the 99% of all of you that fit under that age range, it doesn’t fit.

If you’re the person out there making $10, 15, 20 million, or whatever, and you make more money doing your business, and you just want to protect what you have and protect it from creditors, annuities could fit. Overall, looking at those two age ranges, 49 and below, I don’t see annuities being appropriate and suitable because you need market growth.

The next age range is 50 to 64. You’re 50 years old or up to 64 years old. At this point, for anyone over 50, it’s okay to start looking into annuities. Get educated. Once you’re in your 50s, you need to start getting educated about annuities because if you’re not going toward retirement soon, you’re thinking about, you’re just trying to plan for it, so 50 to 64, you need to start thinking "Do I want to transfer risk? What does my lifetime income look like? What does my income floor look like? Do I want to protect some principle right here as I get closer to the finish line?"

Everyone’s finish line of work is different. I got a call the other day, and the gentleman was 50. I said, "Your kind of young for an annuity of any type." He says, "Yeah, but I’m retiring at age 54 or 55." First of all, kudos to you. Second of all, then let’s start looking at it. I did explain the 59 1/2 Rule, meaning that we have to be careful not to take money out of a Deferred Annuity, like a MYGA or an indexed annuity, and incur that IRS penalty.

But you can get around that, and that’s why you got to talk to me. If you were doing an annuitization-type product, you could get around that penalty. Once again, I’m going to ask a bunch of questions, what do you want the money to contractually do? When do you want those contractual guarantees to start? I will tell you the PILL acronym, Principle Protection Income for Life, Legacy, and Long-term Care. We’re going to look at your situation and maybe start looking at annuities from a laddering approach, laddering the purchases in because you’re in your 50s, et cetera. The bottom line, once you hit 50, we probably need to start looking at it.

All right, the last category is 65 and older. 10,000 Baby Boomers are hitting the age of 65 every single day. That doesn’t mean you need to buy an annuity, but that means that everyone’s going to try to sell you one. I’m going to tell you that right now. You’ve got to be very careful. I got a call the other day. The gentleman was actually in his late 70s, and someone was trying to sell him a ten year surrender index annuity. That’s not an appropriate and suitable recommendation in most cases. When I looked at it, it was not.

You need to have the maturity shorter if possible when you get older. It makes total sense. So, be very careful out there. If you’re 65 and older, yes you probably need to look at annuity types for at least lifetime income to combine with Social Security, or from a Principal Protection standpoint because you don’t want to lose money. You’re in chapter two of your life, and you want live, and you focus on lifestyle.

In conclusion about the ages, I’ll just synopsize this very quickly. Under 50, probably not. Probably not. If you want to talk to me about it, give me your specific situation, and have me say, "No" personally to you, I’ll do that. If it's something outside the box, then we can talk about it. When you’re above 50 and beyond 50, you might want to start looking at it, and might want to start getting educated on the annuity types available, what they do, and the contractual guarantees for your specific situation.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.


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