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Annuity Rates: Don’t Buy Fear or Greed

Stan Haithcock
April 3, 2023
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Staying Level Headed With Annuities

Today we're going to talk about how people sell annuities for fear and greed. Most of the time, this revolves around Fixed Index Annuities. I have nothing against Fixed Index Annuities, but this is the fear and greed sell that you hear most often. Let's go through the other annuity types. Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts are very simplistic, transfer risk pension products, lifetime income products with no moving parts and no annual fees, and no market detachments. They're just very, very basic. You could explain it to a nine-year-old, which is good. The other very simplistic product is Multi-Year Guarantee Annuities, the annuity industry's version of a CD. Again, there are no moving parts, no market attachments, no annual fees, just a guaranteed interest rate for a specific period of time. Fear and greed surround the Fixed Index Annuity space. And for the record, I like Fixed Index Annuities.

We use Index Annuities as a simplistic delivery system for the Income Rider guarantees for future pension needs. They were put on the planet in 1995 as a CD alternative. That's going to get you a better return than a typical CD at a normal interest rate time. But they're not market products, and they're not a security. They're issued at the state level. You're just not going to get market returns, even though that's what you're being sold and pitched. In their proposals, they're showing the back-tested numbers.

Fear Aspect

Let's talk about the fear aspect of it, which is an easy sell for people. Most baby boomers or people are going toward that retirement age at this time of this blog. 10,000 Baby boomers reach the age of 65 every single day. A lot of them are looking for guaranteed income or guaranteed principal protection. They've seen markets go up and down. They've been through the .com bubble, and they've been through the 2008 situation. People are a little weary at the time of this blog, especially when you get to the finish line for retirement. You don't want to lose money because you don't have time to make it back up. Many people fear the markets and swoops in the indexed annuity sales pitch, which is market upside with no downside. Principal protection with market participation. Sounds good, right, Marge? No. That's a sales pitch. These are not market products. Yes, the principal protection is there, but market participation is not. I don't care what someone shows you, a back-tested number or proposal. It's garbage. Okay? It's garbage. Just remember, with Indexed Annuities, the call option, we're getting into the weeds a little bit here. But in essence, the returns are based on a call option, and the annuity company can change those rules at their discretion. If you buy a 10-year surrender charge annuity with a one-year call option for the returns, you're buying a 10-year surrender charge with a one-year guarantee. You have to be very, very careful. But the fear pitch is markets are going to crash, and markets are going to go down. You've got to protect your payment, and you can have your cake and eat it too.


I got a call the other day, and the gentleman said, "you know what? I wish I would've heard you talk about Index Annuities and read your book." By the way, I've written a book on Indexed Annuities. We are currently out of inventory at the time of this blog, but we will have PDFs available for download very soon. You can sign up here to be notified when they will be available. I'll send it to you for free! He said I was pitched seven to 9% returns on this Indexed Annuity on the back-tested numbers, but I've gotten around one to 3%. Yeah, that's reality. It is what it is. That doesn't mean it's a bad product. That means it was sold improperly. In fact, some companies sell just Indexed Annuities. I don't even know how that's possible. It's like a doctor just prescribing one medication to everybody. And they have, it's like market crash systems or market.

These people are just preying on fear and scaring people into buying Indexed Annuities. You should never do that. You should buy an Indexed Annuity for the contractual guaranteed principal protection, or if you need future income, the attached Income Rider for future income needs or pension needs, and then you need to shop all carriers for the highest contractual guarantee. So, the fear part of it scares people. I mean, people that have seen markets go down, it scares people. People are at the end of their careers and don't want to lose any money; they're scared not to lose any money. But there are alternatives other than an Indexed Annuity, and you can't buy that crap sales pitch. All right?

Greed Aspect

Now, the greed part is also as bad. In my opinion, the greed part is a bit more fraudulent than the fear part. The greed part is you can get market returns with principal protection. You can't be that stupid. If you're that stupid, I'm glad you're reading this blog because I'm getting ready to educate you. If you could get market participation or market returns with full principal protection, then that's all the FED would buy. That's all other countries would buy. All the money in the world would go to Indexed Annuities. Remember, if it sounds too good to be true, it is every single time without exception, especially in the annuity world. If you're at the bad chicken dinner seminar or the really expensive steak dinner seminar and you got the filet mignon, and the guys up there saying, market upside with no downside, and look at the 10-year returns. You've got 15 and 13, and 12. That's garbage. And by the way, these back-tested numbers, and in many states, it's illegal even to show those. It should be illegal in every state, period. There's no such thing as a too-good-to-be-true product. So, if they're selling the greed part of your brain and you nudge your spouse, you go, well, that sounds good. We can get market upside and no downside. Let's do that. In addition to that, the biggest greed component of that pitch, in addition to market upside with no downside, which you should be smart enough not to fall for that. But the one that you might fall for is, "Mr. and Mrs. Jones, if you sign up today with this specific Index Annuity, which I, Mr. Bad Chicken Dinner Seminar, says is the best one, we're going to give you an upfront bonus of 10 or 15 or 25%." And you nudge your spouse again and go, they're going to give us free money. You can't be that stupid. Bonuses are candy for the stupid. And the agent and advisor are hoping that you are out there going, well, that's free money. It's not free money. There are 100 pennies in the dollar, and somewhere within that policy, they're adjusting the guarantees to make up for that upfront bonus. There are no philanthropists and annuity companies that wake up in the morning and go, you know what? I think I will give free money away to everybody in the country. No, the only people that do that are our politicians in DC. They print the money, and then they give it away, or they give it away to other countries. But not the annuity. The annuity business is capitalistic. They're in it for the profit. They're not giving free money away. Buying an annuity for the upfront bonus is like buying a car for the stereo system. It makes no sense. But that's the greed side. So once again, greed, upfront bonus market upside with no downside. Sounds great—principal protection with market participation.


The last thing they'll throw in there on the greed side is that if you buy this Income Rider, you get free long-term care. Once again, incorrect and fraudulent. Long-term care is a health insurance product, and annuities and Fixed Index Annuities are life insurance products. There is guaranteed issue confinement care type coverage enhanced benefit coverage. But in the South, what we call that is when you get sicker, you get your money back quicker. It's a guaranteed issue, but it's not long-term care. All that greed stuff sounds too good to be true because it is. The fear stuff, you just can't fall for that. You can't get scared into that. The solution for protecting your principal isn't 100% in an Indexed Annuity period.

What I want to make sure of is you're not buying on fear and greed. Buy on rational thinking, and buy on contractual guarantees. Buy on what you want the money to do. Remember, ask yourself two questions. What do you want the money to contractually do? And when do you want those contractual guarantees to happen? And from that, we will pinpoint you to the annuity type of product that will provide the highest contractual guarantees. And you might not even need an annuity. How about that?

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.

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