Annuity Bell Doesn’t Ring at the Top or Bottom: Shootin' It Straight With Stan
Today's topic is "Annuity Bell Doesn't Ring at the Top or Bottom." Now I know all you market gurus and people that have advisors and masters of the universe will tell you that you need to hold, you need to time it, you need to look for arbitrage, there's a timing thing, etc. You know that's not true. And especially in the annuity world, don't just say, "Oh, I hate all annuities," because that's not valid.
There are many types, but the market people and the CBCs and Fox businesses of the world always try to say, "Time it, look at it, analyze it," etc. But with annuities, this is really basic. They have the big buildings for a reason. Life insurance companies issue annuities, and life insurance companies know when we're going to die. So that's their primary pricing mechanism, life expectancy, for most of their products, the lifetime income products. But they have other products like Index Annuities, Variable Annuities, and Multi-Year Guarantee Annuities, which is the annuity industry version of a CD. And currently, at the time of this blog and probably ongoing for the near future and hopefully forever, the Multi-Year Guarantee Annuity space, which is the annuity industry version of a CD, has become very, very popular because the guarantees contractually annually are very attractive if your time horizon is more than three years.
If it's less than three years, you're better off buying CDs and treasuries. And no, I do not sell CDs and treasuries. I'm just being honest and telling you the truth. So if your timeline is three years, Multi-Year Guarantee Annuities will give you the highest contractual guarantee, but now the calls are coming in. At the time of the blog, the guaranteed interest rates are very fair and the highest we've seen for a long time. And people say, "Well, what do you think, Stan? Do you think the interest rate is going to increase?" Listen, if I knew that, I wouldn't be talking to you. I'd be in the penthouse suite instead of the Las Vegas corporate apartment. I'd have the Las Vegas penthouse suite, and I'd be just trading interest rate futures.
Can You Time It?
But the bell doesn't ring at the top or the bottom. I don't care if you're talking about markets. I don't care if you're talking about bonds, crypto, annuity rates, etc. Now one thing we need to get straight, when you talk about top or the bottom with annuity payouts and annuity guarantees, when we're talking lifetime income, your life expectancy, or if you're setting it up, joint life expectancies, plural, you and the spouse, you and the significant other, that's the key driving force of the pricing. Interest rates play a secondary role. "What'd you just say, Stan?" Oh, that's right. Interest rates play a secondary role. Here's the other thing about getting back to MYGAs, the fixed rates, the annuity industry version of a CD, which is very popular right now. If you go to our live MYGA rates, you can pull up the best-fixed rate, MYGA fixed rates, for your specific state. You can pull it by state and duration. And by the way, fixed annuities of all types, there's more than one type, are regulated at the state level. That's why you must put in your state, then pick the duration, etc., etc., and shop around and look for what you want. But the point is this, people are like, "Well, Stan, what do you think?" At the time of the blog, "Chairman Powell..." I call him Boog Powell. If you know who the Baltimore Orioles are, you'll know who that is. Boog Powell and Miss Yellen, Miss Dutch Boy haircut Yellen. No offense to that because I think I would look really good in the Dutch boy haircut. "Well, what are they going to do? Should I wait? Should I time it?" No. The annuity companies look at and watch the feed of the interest rates and what's happening out there, but does it drive the pricing train?
No, it's not linear. In other words, let's say life insurance companies are getting in enough money where they do not need to raise guarantees to attract you to give your money to them, then they will not acquiesce and follow whatever the FED does and just raise rates. Now to combat that, what do I do? Good question. As The Annuity Man, America's annuity agent, I represent pretty much every single carrier out there. And why does that matter? Number one, annuities are commodity products, meaning that you have to shop all carriers for the highest contractual guarantee. And number two, the guarantees change based on the capacity and the money coming into the carrier. If a carrier got in so much money, they don't need to raise anymore. And yes, it is true that annuity companies will not take all of your money. They have a bogie they need to hit with specific products, life expectancy, or interest rate type products. They will not take in all of your money. Once they hit it, they will lower the contractual guarantees not to attract you. It's very simple.
All About Capacity
When I represent all carriers, pretty much all carriers, you're going to see some of these companies break out and say, "Yeah, we're trying to attract premium at that point in time." But once they attract the premium, they will lower those interest rates or contractual guarantees, even with lifetime income products. The bell doesn't ring at the top or the bottom, either with contractual interest rates or lifetime income products. With lifetime income products, I want you to think of your portfolio. When you have an international, small-cap, mid-cap value, etc., within your portfolio and you have an asset allocated with the annuity companies, they have a different asset allocation model, meaning they're looking for specific age ranges. And once they fill that tranche with that specific "parameter" and your age range or ranges, if it's joint, they will lower the guarantees not to attract the money. Does that make sense? It should make sense. It's called capacity. And I've been pounding the table for the last year trying to educate the public and some of the agents out there, love those people, to understand that it's about capacity. I wish that whatever the FED does and whatever Miss Yellen does, Boog Powell and the Dutch boy haircut person, I wish that it was linear. I wish it were that simple. I wish the bell rang at the top or the bottom, and you know that too. And if you've been in the stock market, you know for a fact the bell doesn't ring at the top or the bottom. You can't time it. Nobody can time it.
Nobody Can Time It
The best people in the world can't time it. Buffet can't time it. Jim Kramer can't time it. Dave Ramsey can't time it. Nobody can time it. No offense to Dave Ramsey. By the way, nothing against Dave Rams, but he needs to stop talking about annuities because he really doesn't know what he's talking about. And if he needs me and my show to help him, that's fine. But I will tell you this, what he does to get people out of debt, is phenomenal. I want to hug him the next time I see him. I'll have to lean down because I'm 6' 6". I'll hug him and say, "Thank you for getting all these people out of debt," because that's what he really brings to the table. Why am I digressing? Well, I wanted to let you know that the people he sends the leads out to that are trying to sell people an Index and Variable Annuities are kind of scary. I don't know what he calls those people, his advisors or his stamp-approved advisors. That's interesting. I understand he means well, but boy, he does a good job getting people out of debt. Good for him, and I'm glad he's out there doing that. But I wanted to address this because a lot of people call me all the time, and they're trying to time it, and they're trying to figure it out. They're going to wait till the next FED meeting. And yes, if we're two days away from a FED meeting and you call me, I'll say, "Let's wait two days." But if we're two months away from the FED meeting, I'm like, "No, we're not going to wait two days." I don't know what's going to happen. The annuity companies don't immediately act either way up or down when the FED makes a decision. But I need you to think logically for a second. Stop. I'm going to let you get your thoughts together so you can think logically. Are you ready? Okay. Think logically for a second.
The US Debt
The country, our beloved country, has printed a lot of money. And at this point in time, conspiracy theorists are going to yell at me. They're going to say, "That's not the right number," and then the people that don't know will go, "Really? Is it that high?" I don't care how you're counting, $31 or $32 trillion of debt. I'm sure there's other municipal debt, etc. I'm talking about federal debt, $32 trillion at the time of this blog, and it keeps going up. I'd like to have one of those clocks where it's like the debt clock you see in New York. But the point is that, at some point, the United States and the FED can't keep raising their interest rates. It's like if me and you had a mortgage and say, "You know what, I'm going to raise that interest rate. I'm just going to raise it. Raise the payments, raise the payments on service, and that debt." It's the same correlation.
So as soon as the glimmer of light comes through and shines on Boog Powell's face and the Dutch boy haircut's face, they're going to say, "We need to lower rates." The other thing, too, is you and I both know, if we're honest with ourselves here, we've been doing this a long time; those numbers are manipulated. The government manipulates them, and if they want to lower interest rates, they'll manipulate the numbers and lower the interest rates. Here's what I want you to do. When you're looking at annuity guarantees, remember you own an annuity for what it will do, not what it might do, and the will do is the contractual guarantees. The might do, is the hypothetical theoretical and all that crap, unicorns chasing the butterflies, at the bad chicken dinner seminar or the expensive steak dinner seminar at the restaurant you'd never go to unless they were presenting whatever they're presenting, and you go eat the food. If it sounds too good to be true, it is every single time, and the bell doesn't ring at the top or the bottom.
I want you to think about these guarantees, contractual guarantees. Whether it's for income or legacy or principal protection, whatever your goal is, is that fair? Do you think that's fair? Knowing that the bell doesn't ring at the top or the bottom, knowing that you can't time it, knowing that you're not a Svengali, knowing that you're not even going to try, knowing that you're smart enough not to try, are those guarantees, after you work with us and shop all carriers, are they fair? Do they help you reach your goals? That's a yes or no answer. And if the answer is yes, just take the OCD cap off, please. And I'm an OCD person. By the way, it's obsessive-compulsive when you loop things in your head. And it's the reason I don't have a tattoo. If I got a tattoo, I'd look at the tattoo every day in the mirror for two or three hours and go, "They kind of messed up on that line right there. And that eyeball or the skull or whatever I got is wrong," and it would drive me crazy. But the same thing applies to this. You cannot obsess about the top or the bottom. You cannot think that there's a bell that's going to ring. And if a bell does ring, then something's in your head. You probably need to see somebody about that because the bell shouldn't ring. My name is Stan, the Annuity Man. And what did you get out of this? A lot. One thing is the bell doesn't ring at the top or the bottom. That's Shooting It Straight With Stan. I will see you next time.
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.