So, is an annuity a good investment for an older person, a retiree, a senior citizen, a World War II generation? This is a big-time serious topic. And I'm going to go through it in detail so that you can make a good decision, whether it's you out there making the decision for yourself, or you're making a decision for your mom or dad or somebody like that.
Let's talk about the history of annuities. I think that's important for you to get a foundation of how this all started. Annuities started so that Roman soldiers and their families would have a lifetime income stream payment from the empire for laying their lives on the line. That's, in essence, the Single Premium Immediate Annuity, also known as the grandfather of all annuities. That's where it started, and it's been sold in this country for hundreds of years.
So, annuities have been around forever. They're the only product on the planet that will pay you for the rest of your life and guarantee a lifetime income. That doesn't mean you need an immediate annuity, but we're going to talk about all the annuity types and if it fits for you. I've come up with two very unique ways to determine if you need an annuity. And if you do, what type works best contractually for you. The first question is, what do you want the money to contractually do, and when do you want those contractual guarantees to happen?
Let's take those two questions, and I'll give you a couple of examples. What do you want the money to do contractually? Let’s say you want income. Second question. When do you want those contractual guarantees to start? Let’s say you want income to start now. Well then, we've determined that you might need a Single Premium Immediate Annuity. Let's do it again. What do you want the money to contractually do? Let’s say you want income. When do you want those contractual guarantees to start? Seven years from now. Okay. We've narrowed it down to Deferred Income Annuities, QLAC, and Income Riders. Furthermore, suppose you want to protect the principal and get some interest, and you want the contractual guarantees to start now. In that case, a Multi-Year Guaranteed Annuity is probably best for you. A Multi-Year Guaranteed Annuity is the annuity industry's version of a CD. See how simple that is.
Now, the second thing I've come up with is an acronym called PILL. P stands for principal protection. I Stand for income for life. L stands for legacy, and the other L stands for long-term care/confinement care. If you do not need to contractually solve for one or more of those items in the PILL acronym, you do not need an annuity. There's no G for growth. There's no M for the market. There's no S for stocks. It's PILL: principal protection, income for life, legacy, long-term care/confinement care. You can contractually solve for those four items using annuities.
So I get a call the other day from a son whose mother had been pitched in the indexed annuity. Now here's the scary part about all of this. The mother's in her 80s. And some agent, the advisor had pitched his mother some index annuity. The son was calling because the pitch sounded too good to be true. After all, it is. And he was saying, "Is this suitable and appropriate for my mom?" The answer is no. It's not. Okay? The elderly, senior citizen, World War II generation, in my opinion, doesn’t need to do anything complicated. They need simple, principal protection or lifetime income products. His mother did not need an indexed annuity. And I made sure that he fully understands that, and he intervened so that she did not make that mistake.
Remember that with annuities, any type of annuity, these are the transfer of risk products and risk contracts. You're either transferring the risk for them to protect that principle. You're transferring the risk to protect you from outliving the money, longevity risk. In a lot of cases, you're transferring the risk to protect you from no stock market volatility and no stock market losses. So just remember annuities equal transfer of risk. When you buy an annuity for senior citizens, the elderly need to buy it for the contractual guarantees.
Own an annuity for what it will do, not what it might do. Never, ever, ever buy an annuity for hypothetical, theoretical, projected, back-tested, hopeful agent return scenarios, unicorns chasing the butterflies.
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.