Annuities for a 9-Year-Old: Shootin' It Straight With Stan
Welcome to Shootin' It Straight With Stan. I am your host, the lovable Stan The Annuity Man, America's Annuity Agent, licensed in all 50 states. Today's topic is a very good one, and it's called Annuities for a Nine-Year-Old. Now, I made my PR team leave this topic and title in place because I know grandfathers and people out there going, "Well, I got a nine-year-old. I'm going to check that out, that Stan The Annuity Man, and see if there's something for my nine-year-old son, Jay Rod. Excuse me, that's my grandson, not my son. My son's called J; my grandson's named Jay Rod."
Anyway, it's not about that. It can be about that, and we can talk about buying annuities for youngsters as a legacy in a future podcast, but that's not what we're talking about here. What we're talking about here is the annuity industry is suffocating people with complex products, and they aren't explaining the complex products. They're just giving the 30,000-foot view at a really good food seminar where they serve nice food, and you can eat for free. And then all of a sudden, they're going to be on top of you setting an appointment, talking about the greatest thing ever. And as I've always said, if it sounds too good to be true, it is every single time without exception with annuities.
More Than One Annuity Type
But there are two or three different types of annuities out there that are so complex, so convoluted, and have so many rules and mathematical formulas that you have to go to MIT or Caltech to understand them, with a lot of them. And there's no way some of the agents on those postcards that I'm getting in the mail that come and talk about the economy, interest rates, and inflation, and then all of a sudden, they're going to slam an annuity and jam an annuity down your throat, that's complex. That needs to stop. It would stop immediately if all annuity product types, and yes, there's more than just one annuity out there. So, if you say, "I hate all annuities. I hate all trucks, I hate all record stores, I hate all restaurants, and I hate all socks and shoes and all coats." I mean, it's that stupid. "I hate all annuities," Give me a break. And if you're going to put your foot in the ground on that and say, "Let me tell you something, Stan, I'll defend that till I die, and I'll punch you in your hat and your throat, and write on the Annuity Man logo if you don't stop it." Then my answer to you is, call the Social Security Department and cancel Social Security because that's the best inflation annuity on the planet, period.
This would all be solved if the annuity industry, and all product types, would have the same level of commission. If all product types had a low commission built in, it would almost force most agents and advisors to recommend what's right for the client, what is in their best interest, and what is suitable and appropriate. "Instead of one-size-fits-all, I'm going to learn one product, and if I sell enough on it of it, I'm going to go to Bora Bora for free with my wife, girlfriend, and/or boyfriend," whatever applies, or all of them, "I'm going to go, if I sell enough of this. One-size-fits-all, square peg in a round hole; that's how I'm going to sell." And that's a lot of what's going on out there.
Can You Explain Your Annuity?
And if that's been pitched to you, you know what I'm talking about. It's like chumming the water. It's like throwing bloody fish in the water, and suddenly, the sharks show up. And what drives me crazy, and I don't want this to be you ever, but if it's happened, book a call me, we'll look at what you bought. But a lot of people say, "Stan, I bought this. I really don't know what I own." What? Come again? "Stan, yeah, I bought this. I was kind of pressured. It sounded good on the surface; upfront bonuses and these great returns if you'd owned it 10 years ago or whatever, and I bought it." "Can you explain it to me?" "Not really, that's all I know about it." Really? That's why I say if you can't explain it to a nine-year-old, don't buy it; no offense to 9-year-olds.
For every single annuity type that you're considering, you should be able to walk into a second-grade class, and the teacher says, "Boys and girls, and whoever identifies as that, we have a special guest today. It's Mr. Johnson. He wants to run something by you before he buys something from an investment standpoint. It's an annuity, and he wants to explain it to see if you understand it. And then after that, he's going to buy everyone cookies." And Mr. Johnson gets up there and explains it. And if you or Mr. Johnson can't explain it to that second-grade class, and they nod and get it, you shouldn't buy it. It's really that simple.
You should be able to say to them, "I'm buying a lifetime income stream, meaning that this annuity company is going to pay me for life, like a salary for life," you're talking to the 9-year-old. "And it's going to pay me as long as I'm alive, as long as I'm breathing." The little kid raises a hand, "Even if you're in the hospital?" "Yes, even if I'm in the hospital." The kid in the back goes, "How about if you're on a respirator?" That kid. "Yes, even then. As long as I'm breathing, it's going to pay. We call it a pension." "So, this is going to pay as long as you're breathing?" "Yes." And then the smart little girl in the front goes, "But how do they determine what they're going to pay you, sir?" "Good question, and you're going to be a leader someday," as Mr. Johnson says to her... and you say, "Well, the older I am, the more they're going to pay me because they don't think I'm going to live that long." In unison, the second-grade class will be like, "Got it. Where's our cookies?" Seriously. That's lifetime income to second graders. That's lifetime income to a 9-year-old or a group of 9-year-olds.
And then you go to them and say, "Well, I'm considering this fixed-rate annuity. It's called a Multi-Year Guarantee Annuity, but here's how it works, kids. I give the money to the annuity company, and because they're holding onto that money, they're going to reward me and give me back a little bit more money." "So, if I give them..." you can say $100,000, kids be like, "Huh?" "But they're going to pay me a percentage." And then the teacher goes, "This is a good time for us to all learn, girls and boys." She goes on the board and says, "Remember when we were talking about percentages the other day in our math class, that we're only allowed to do once per year? Remember that?" And so, she goes through that and shows them. And every kid in there, all second graders, would be like, "Yeah, I understand that; you're getting a percentage on that money, like Mrs. Persenome," that's her name. I don't know where that came from. "The teacher, Ms. Persenome, taught us that, and they're going to pay that." And then the little girl in the front goes, "But how long are they going to do that for, sir? I mean, they can't do that forever." "That's a very good point. You're hired, and you're going to be an intern even though you're a second grader." And you go, "That's a good point, but they're only going to do that for a specific period of time. You can lock it in for a year, two, five, or seven years." She goes, "Oh, okay, I understand that."
And then, of course, her friend named Phoebe says, "But what if rates go up after you bought it?" And then Mr. Johnson says, "Well, you're right. That could happen, but I've locked in for that specific period of time." At that point in time, the whole second-grade class goes, "Yay, we got it. We don't want cookies this time; we want ice cream."
Understand What Your Are Buying
You have to be able to understand what you're buying, and you have to be able to go into a second-grade class and explain it to them. Period. End of story. Now think about some of the pitches you've heard, which are upfront bonuses, market upside with no downside, and all that stuff; try explaining that. Try explaining that formula. Try explaining upfront bonuses to a group of second graders. They'd be the most skeptical kids. You'd say, "Okay, I'm going to buy this, but for buying it, they're just going to give me 20% of what I put in." Eloise and Phoebe, at the same time, will raise their hands and say, "That doesn't make any sense. How can they do that as a company? How is that real?" And then the kid in the back, kind of the jerk that raised his hand the last time, he'd be like, "Well, they just can; that's just what they're doing." "No, wrong answer, the kid in the back because Phoebe and Eloise know what they're talking about." How do they do that? Well, they do that because there are a hundred pennies in the dollar. They have got to take something else away to make up for it, and it's not real money you can walk away with. So, the next time you hear a sales pitch say, can I go into a second-grade class and explain it to them? Or better yet, don't let your spouse watch this; can I explain it to my spouse, family, or friends? If you cannot do that, if you're at the 30,000-foot level trying to talk about all these shiny things that have been presented to you, you can't really explain the shiny things. If you can't explain how those shiny things work and how they actually make sense within the policy, then do not buy it. It's really that simple.
So, annuities for a 9-year-old? Nah, not really. There are some specific situations in which you can do a joint lifetime income stream. I call this the legacy income monster, where the grandfather buys a joint lifetime income policy with his 5-year-old great-grandson; we've done those, but I'm talking about something else. When I'm talking about annuities for a 9-year-old, is that you better be able to explain it to a 9-year-old, and you're going to have Eloise and Phoebe in the front, those two girls that are 9-years-old, that are sharp, and they're not going to buy BS. They're not going to buy it. They want to know how it works, why it works, when it works, should it work, can it work, and if it is a lie or the truth. And that's exactly how you should be as well.
Now, wasn't that fun? And that was all off the cuff. I can't remember the teacher's name that I came up with, but it was pretty good. But Phoebe and Eloise, you know, those two girls were in class with you when you were in school. You know exactly who they were. I mean, they were in my class, and I was in the back. I was that kid. No, I wasn't. Yeah, I was, actually. Listen, that was fun. That was Shootin' It Straight With Stan. I am Stan, The Annuity Man. I'll see you next time.
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