5 Dumbest Annuity Questions According to The Annuity Man Part 1
Hi there. Stan, The Annuity Man, America's annuity agent licensed in all 50 states. This is a great topic, the 10 dumbest questions ever asked to Stan The Annuity Man. I'm going to tell you right now; it took a while to cull it down to 10. There are some gems that are out there, and I blame the annuity industry. It's not you, it's not your fault. It's not the consumer's fault. It's the annuity industry's fault because they haven't done a good job educating the public on how annuities and the different types of annuities work. Who's taken over that realm? Who is leading the charge? Ta-da, it's me. I'm leading the charge of annuity education, edutainment, entertainment, or whatever you want to call it. But in that war for facts come some of the dumbest questions on the planet and let me put a caveat there. They're dumb to me because I know all things annuity. I'm that guy. I'm Stan The Annuity Man. I'm America's annuity agent. I know everything about annuities.
When I tell you the questions, they might not sound dumb to you, which is okay, but let's have some fun with it. You know that I don't put people down. Look at me. I mean, you can't put other people down when you look like me. Okay, so are you ready? I'm ready. Hit it.
All right. Number 10: why are annuities so expensive? That's the question. Why are they so expensive? It's expensive. All of them are expensive. Really? No, that's not true. Let's go through the types, and let's talk about expenses. So, let's look at the facts. Single Premium Immediate Annuities, no annual fees. Deferred Income Annuities, no annual fees. Qualified Longevity Annuity Contracts, no annual fees. Fixed Index Annuities without Income Riders, no annual fees. See the trend?
When people say that they're doing a 30,000-foot view and they're making a comment on something they have no clue about. So, are all annuities expensive? No. Why are all annuities so expensive? They're not expensive. They're not expensive from the standpoint of looking at how they are structured. Now, there are a couple of types like Variable Annuities, not all, some Variable Annuities have high annual fees. But you can buy a no-load Variable Annuity with no annual fees. So, just when you hear that or if that's something you hear, well, annuities are all expensive. That's not true. If you say, "Well, that's not what I'm talking about, Stan. I'm not talking about the annual fees. I'm talking about expensive to own because I'm missing out on opportunities." FOMO, FOMO, FOMO, fear of missing out. Come on, player. You know better than that. Annuities aren't investments; they're contracts. You buy them for the contractual guarantee. So that's number 10, and I just shot that down like a bird.
The number nine dumbest question of all time is, well, I'm never going to buy an annuity Stan. Why would I do that when the annuity company will keep all the money? Why does the annuity company keep all the money when I die? Dumb question. Because what that question revolves around is people think that there's only one type of annuity, which is an Immediate Annuity, which is a lifetime income annuity. Yes, you can structure that lifetime income stream annuity with Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts, which are annuitization products. You can structure them life only, which means when your Learjet hits the mountain, money goes poof. But guess what? There are over 40 different ways to structure and customize a Single Premium Immediate Annuity, for example. You can structure it, and most people do so that the annuity company's on the hook to pay for the rest of your life as long as you are breathing. If it's joint life, as long as one of you is breathing, but you can structure it so that 100% of any unused money in the contract will go to the listed beneficiaries of the policy, and the evil annuity company will never keep a penny under any circumstance, even though they're on the hook to pay. So, that question, the ninth-dumbest question of all time in the annuity world to Stan The Annuity Man, which is why does the annuity company keep the money when I die? They don't have to if you want to structure it, so they don't have to. But if you hate your beneficiaries, and you never want to talk to them again, and you want the highest payout, then get life only. That makes sense.
For the majority of the people out there who work very, very hard for their money, they want a lifetime income stream. They want to get paid as long as they are breathing. But they also want to make sure that the evil annuity company, I say that in jest, never keeps a penny under any circumstance, even though they, the annuity company, are on the hook to pay.
The eighth-dumbest question I've heard ever is why is the lifetime income amount so low? I was expecting a higher payment. Why is this so low? Good question. Good dumb question. But let's answer that. The reason that it's so low is that you're young in the annuity company's eyes. A guy called the other day, guy's like, "Well, I want to buy a lifetime income stream. I'm 55 years old," or whatever. He was in his fifties, and I shot him the quote. He emails back, "That's too low. Why is it so low?" I'm like, "Because you're young player. You're young."
When you buy lifetime income, I don't care what product it is. Income Riders, Deferred Income Annuities, Qualified Longevity Annuity Contracts, Single Premium Immediate Annuities. When you buy lifetime income, you transfer that risk to the annuity company to pay you for the rest of your life as long as you are breathing. When you do that, it's about your life expectancy. It's not about interest rates, it's about your life expectancy every single time.
I'll give you an example. This is a quiz, so get out your pencil. The payment for Social Security, is it higher at age 65 or is it higher at age 70? Good answer. Age 70. Why? Because you're older, which means your life expectancy projections are less, which means there'll be fewer payments, which means the payments will be higher. Next question, keep your pencil out, pen, whatever it is. You might have one of those feather pens and put it in the ink. Put it in the ink. Okay, your second question. When you start the income at age 75 with an annuity, lifetime income annuity, will that be a higher payout than compared to an annuity, same annuity, you start at age 70? Good answer. The 75 is going to be higher because why? It's about your life expectancy. The older you are, the higher the payment. So, when you say, "Why is that payment so low? That's just too low." It's about your life expectancy, okay? Whether you like that or not, that's your call. But that's the fact behind lifetime income.
Dumb question number seven. This is one of my all-time favorites. Why are the commissions so high with annuities? I love when advisors, pundits, or stupid people who write about retirement say, "Annuity commissions are way, way, way, way too high." That's crap. That's garbage. Now, there are a couple of types that have high commissions, and let's cover commissions in general. Commissions that are paid to an agent like me, Stan The Annuity Man, America's annuity agent, they're built into the policy. You never see it. It's like an administrative cost. It's just part of the policy. Put in a hundred grand, you're going to see a hundred grand. Do I get paid? Yes, it's a one-time payment.
But understand this. With commissions, the more simplistic the product, the lower the commissions. The more complex the product, the higher the commissions. The longer the surrender charge time period on, say, a deferred type product Index or Variable Annuity, the higher the commission. You can't just be like, why are commissions so high? Well, on, say, a Multi-Year Guarantee Annuity, some of the commissions are half of 1%. Do you consider half of 1% a high commission that's built-in? I hope not. That's crap. But there are some that do have high commissions.
In the annuity industry, in the annuity world, in the annuity category, you can't make blanket statements like, "I hate all annuities. All annuity commissions are high." That's dumb. I was on a forum the other night, and they introduced me. As they were shooting down the annuity industry, they introduced me, and they had all these bullet points, of course; then, I corrected them and did it professionally, which made everybody feel warm and fuzzy. But one of the bullet points was "commissions are hot; commissions are around 6% or more." I went, "What are you even talking about? Holy crap, that is crap." Because of 6% commissions, that person, who knew nothing but was a very smart person, was talking about some Index Annuities and some Variable Annuities. But they were not discussing Multi-Year Guarantee Annuities, Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts. So, factually, he just shot it right down, and I shot it down for him factually and nicely. So, why are all annuity commissions high? They're not, and that's a dumb question.
The sixth-dumbest question of all time in the annuity world, and I'm keeping score because I'm the official scorekeeper because I'm Stan The Annuity Man, America's annuity agent. This is the sixth-dumbest question. Why are annuities so complex? They're not. One of the things that I tell people all the time is if you cannot explain the annuity that you're considering buying to a nine-year-old, no offense to nine-year-olds, then do not buy it.
Take the Warren Buffett approach. Warren Buffett doesn't buy anything he doesn't fully understand. Yes, there are complex products like Index Annuities, and some Variable Annuities can also be complex. But when you're talking about Multi-Year Guarantee Annuities, Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and if you're buying just the Income Rider guarantee, that's as simple as it gets. I can go to any second-grade classroom in the country, explain it to them, and they'll be like, "Mr. Annuity Man, I get it 100%."
So, why are all annuities so complex? They're not. That's a dumb question. Here's the problem, though. I just ran out of time. I know you're saying, Stan, what are the other five? Come on. Just five more! We're going to do that on the next Stan The Annuity Man blog. I'm so amped up. See you next time.
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