Table of Contents

Annuity Fancy or Annuity Contractual?: Shootin’ It Straight With Stan

Stan Haithcock
June 19, 2024
Annuity Fancy or Annuity Contractual?: Shootin’ It Straight With Stan

Welcome to Shootin' It Straight With Stan. I am your host Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is this question: annuity fancy or annuity contractual? Now, there are many types of annuities. You already own one. It's called Social Security. It's the best inflation annuity on the planet. But there are many types of annuities out here in the annuity world, the annuity hinterland. If you visit The Annuity Man, you can run quotes at your leisure 24/7/365, quoting Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts. You can see Multi-Year Guarantee Annuity feeds and run Income Rider quotes attached to Indexed Annuities.

‌What It Will Do, Not Might Do

‌But what I need you to understand in the world that I live in, which is a pure world of contractual guarantees, is that you always own an annuity for what it will do, not what it might do. Never purchase an annuity for what it might do. And if you do, understand that full downside. Understand you could get zero forever. If it's an Indexed Annuity, you could get zero. If it's a Variable Annuity, you could lose money. So, how fancy do you want to be?

‌On my site, we don't even quote hypotheticals or theoreticals or projected returns or back-tested returns, which should be, in my opinion, done away with, or what I call unicorns chasing the butterflies because it sounds so good, you tap your spouse and go, "Well, we should buy that. Look at that return. I mean, look at the upfront bonus." The upfront bonus is candy for the stupid. It's like saying, "Hey, eat this Snickers bar. It will not spike your sugar." It's just not true. And there's not a philanthropist at an annuity company waking up in the morning going, "You know what? I want to give away money via an upfront bonus." No.

‌PILL Acronym

‌What you have to understand is annuities solve for four primary things. The acronym is PILL, Principal Protection Income for Life, Legacy, and Long-Term Care, P-I-L-L. Principal Protection, Income for Life, Legacy, Long-Term Care, and Confinement Care. There is no G for growth. There is no M for market. There is no S for stocks. If you want pure market growth with unlimited upside, you should never buy an annuity. And that includes, I don't sell Variable Annuities, but that includes those because you're limited with those with your mutual fund. They call them separate accounts, but you call them mutual funds choices.

‌Fancy Equals Fees

‌With the Indexed Annuity, that's where the too-good-to-be-true sales pitch happens too often at the bad chicken dinner, expensive steak dinner seminar where you go, "Well, look at the cap and the spread, the participation rate," of which you could not explain to anyone. I always say, "If you can't explain it to a nine-year-old, never buy it." No offense to nine-year-olds. But again, now we're getting into annuity fancy. You're buying the fancy with variable or index or RILAs or many of these packaged products that are so complicated, it takes an advanced math degree to understand them fully, and even people with advanced math degrees scratch their heads and go, "What? What the heck?" And the annuity company with many of those products can change the rules on how those things are calculated yearly. And you need to check the fees. Annuity fancy, in most cases, equals fees. Annuity contractual does not equal fees. "Well, all annuities are expensive, Stan." That's not true. Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, Multi-Year Guarantee Annuities, and Index Annuities with no Income Riders have no fees. None. Don't feel sorry for the annuity company. They're making money on your money as they dole it back for lifetime income in those cases. But the point of the matter is that fancy equals fees.

‌Specimen Policy

‌And if you can't explain it to your spouse or whoever, you shouldn't buy it. If you don't fully understand it, you shouldn't buy it, which leads me to another point. You can always ask for an annuity specimen policy. And hopefully, you're going to use The Annuity Man. We have the best team in the world. But if you use us and say, "I need to see a specimen policy," we'll get you a specimen policy. If someone won't give you a specimen policy, you need to walk away. If you can't read that specimen policy and fully understand what you're buying, then don't buy it.

‌Annuities Are Contracts

‌Annuities are contracts. Read the contract. And if the contract says, "We, the annuity company, get to change the rules," and it has mathematical formulas with numbers and letters in it, and you're like, "Wait a minute, I didn't go to that math class. What?", then don't buy it. If you're going to be fancy, be fancy where you can get unlimited growth, and that's the stock market. Be fancy with non-annuity products, but don't be fancy with annuities. Annuities are contracts. They're contractual guarantees. You should own them for what they will do, not what they might do.

And we're going into annuity silly season once again, where you'll get stuff in the mail to go to the seminar, and you'll hear about products that sound too good to be true because they are every single time. You're going to hear about one product as the person's talking to 100 people, and they're going to try to sell that one product to 100, like a doctor trying to sell one medicine type to 100 people. It makes no sense. You might not need an annuity. Suppose you don't need to solve for principal protection contractually or income for life contractually, legacy contractually or long-term care, or confinement care contractually. In that case, you do not need an annuity type period, even though you already own Social Security, which is the best annuity for inflation on the planet.

‌As you're researching annuities, I want you to think annuity fancy or annuity contractual. Which one do you want? I've been on both sides of the ledger. I used to work with Dean Witter, Morgan Stanley, Payne Webber, and UBS, which was market-driven stuff with no annuities. If you're going to be fancy, be fancy over there because you have real possibilities of real returns. With annuities, they're contracts. Never forget that. You cannot have your cake and eat it too, or in the southern world that I live in, you cannot have your cobbler and eat it too. I like cobbler better than cake unless it's a good carrot cake with sour cream icing, but we're digressing right there.

‌My name is Stan The Annuity Man. Annuity fancy or annuity contractual? You know where I'm landing: annuity contractual. 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.

Learn More