Are Annuities Safe?

Stan The Annuity Man here, America's annuity agent, licensed in every single state. We're here to talk about annuities. Are they safe? I get the calls all the time. "I don't know if annuities are safe or not. Should I put money there?" Let's talk about that. In the world that we live in, if you're wearing a tinfoil hat out there, which means you're a conspiracy theorist, it doesn't make you a bad person.

You might be right with stuff, but are annuities safe, and what backs them up? What can you depend on, and how do you go about looking at all that and all that stuff? Well, guess what? You've come to the right source: the top agent in the country. I know this stuff. I've forgotten more than most agents will ever know. Think about that for a second, but I do know what I'm talking about when it comes to this, and we will help you decide which annuity companies are safe. There are some that I don't recommend right now. I look at their balance sheets because I have been at the big firms. I've got the background to look at balance sheets and understand when the bond buyers are not doing the right things, etc., but annuity companies are pretty highly regulated and handcuffed to do the right thing.

‌Fixed Annuities

‌First, when you buy a Fixed Annuity, those Fixed Annuities would be Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Multi-Year Guarantee Annuities. All those are fixed and regulated at the state level.

‌The Backing

‌Most people, when they think of the backing of their money, they're thinking of FDIC, Federal Deposit Insurance Corporation, that backs up their CDs. Great story; my mom's not a client. I don't want my mom as a client. I love my mom, but she's not my client; she's my mom. So, I help her buy CDs, and she loves FDIC. "I just feel so secure with the FDIC coverage, me and your father..." He's passed, "Your father and I just really felt comfortable with the FDIC." She doesn't really talk like that, but that's my version of it. She's right; F stands for federal. That's the best coverage on the planet. Now, the tinfoil hat people are out there are going, "Wait a minute, but then there's the debt, and there's this conspiracy in the Fed and the..." I understand, I get it, but FDIC is the best coverage for what's out there.

‌Now, brokerage firms, because I used to work there at Morgan Stanley, Dean Witter, Paine Webber, and UBS a long time ago in a previous life, you're backed up by SIPC coverage, which is also fantastic. I don't think annuity coverage is as good as those two. Fixed Annuities are backed at the state level by the state guaranty fund. The state has a state guaranty fund, which backs policies up to a certain level and limits based on ownership. And you can visit them at http://www.nolhga.com, and what that is the national organization of all these state guaranty funds, and you can look up your specific state. That's a safety blanket you can have with annuities, but understand that the annuity industry does not allow agents to use state guaranty funds as part of their sales presentation.

‌To me, that's all you really need to know. I actually applaud the annuity industry for that because you should be basing your decision to buy the annuity on the Claims-Paying Ability of that carrier, not the state guaranty fund, which, fortunately, or unfortunately, but in my opinion, has not been tested, truly tested yet. One of these days, we will test it, but state guaranty funds should not be part of your decision. You can do that.

‌Client Example

‌I got a call the other day and the state guaranty fund limit was $200,000 or $250,000 for his specific state. And he called me, he said, "I want to put $700,000 into three Multi-Year Guarantee Annuities, Fixed-Rate Annuities." He goes, "And I understand that you don't think the state guaranty fund should be part of the decision," but he goes, "Just because it will make me feel better, let's split it up between three carriers underneath that amount."

Hey, I'm fine with that. What I'm not going to do is over-promote that state guaranty fund. Still, if you feel comfortable, if you want to wear a belt and suspenders, as they say in the South, the guy that walks into the church and he has the belt and the suspenders, you're like, "Man, you are prepared, that's what I'm talking about right there," so state guaranty funds are like belt and suspenders. Do you need it? Meh. Do you want to use it? Yeah, maybe, it's there, but you need to look at the Claims-Paying Ability of that carrier.

‌Rating Services

‌Let's talk about the safety of annuities, which is important because you're putting your retirement money there, whether you're buying an annuity for lifetime income or principal protection, whatever the goal is. And by the way, go to my site; we have the best proprietary annuity calculators that shop all carriers for the highest contracts for a guarantee for your situation. Now, there are four primary rating services that cover annuities: AM Best, Standard & Poor's, Moody's, and Fitch, and then there's also Martin Weiss, who I like; he's very good. He also has a rating service, but I also use something called Comdex.

‌Now, with AM Best, Moody's, Standard & Poor's, and Fitch, they always use the lettering grades like A+, A-, AA, and AAA. It's like you have a drinking problem, but I like Comdex because it takes all four of those rating services: AM Best, Standard & Poor's, Moody's, and Fitch, and gives a one to 100 score.

‌Is it perfect? No, but it's good to use. The other thing is if you work with me, and I hope you do, I'm going to shoot it straight. I'm not going to be your friend; I'm going to be the best advisor you ever had. You don't need friends; you need good, honest advice. So, if you use me and you say, "Hey, I see all these ratings and Comdex rankings Stan The Annuity Man, can you get me the financials of that carrier? Can you pull that for me?" Absolutely, I can get you all the information that you need. Suppose you really want to dig in deep and me and you put on those little visors that the little financial people used to wear a long time ago. In that case, we'll put those visors on and look deep into these carriers to ensure that they have the Claims-Paying Ability to back up those guarantees that you are trying to transfer the risk because annuities are transfer of risk products.

‌But if you're going to transfer that risk, that risk transfer has to be to somebody who can back up those claims. That just makes common sense, but I don't think people put enough weight on that from the standpoint of whether annuities are safe. That said, go to my site for all things annuity, podcasts, blogs, and articles. I write blogs and release videos every week. If you don't mind, hit the subscribe button on our YouTube Channel because I'm trying to educate the public. Yes, I do sell annuities, and I'm the top agent out here, but you have to understand what you're buying and buy them on your terms and your timeframe after you receive all the information, which includes my books, that you can download for free. Thank you for joining me today, and I will see you on the next Stan The Annuity Man blog.

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.