Are Annuities Safe for Retirement?
The best question I've heard in a millennium is, "Are annuities safe for retirement?" And you might be one of those 10,000 baby boomers retiring daily. That's an actual stat, and that's crazy. Now, the reason that's important when you talk about annuities is most people have had it with the stock market. If that's not you, then great, trade your brains away. Do it, Gordon Gekko. You can do it. But most people, when they retire, say, "Wait a minute. I want to go live my life. I want to do my thing. I've earned it. I've busted my rear end. I need guarantees. I want to transfer some risk. I'm tired of shouldering all the risk." Are you tired of shouldering risk? You might be.
Annuities are transfer of risk products. So, we're going to go through if it makes sense, if an annuity makes sense, for your retirement planning. Should you put all your money into annuities? Heck, no. You shouldn't. That's coming from Stan The Annuity Man, the number one agent in the world. You have to be careful with the proportion and the allocation. And at the end of this, you might say, "You know what? I listened to Stan. He's going to send me the books, but I really think that I might not even need an annuity." And that's okay.
The Annuity Deception
If you're alive, breathing, have a television, read the paper, and go online, you've seen the ad, "I hate all annuities. I'd jump off a cliff because I bought an annuity." Some people out there are not in the annuity business, they're in the financial business, and they're trying to convince you that all annuities stink. They're horrible. They're heinous. That's a cuss word. It might be a financial cuss word because the annuity industry needs to do a better job framing the products. But when someone says, and you read something somewhere that says, "I hate all annuities," or "I feel bad because I bought an annuity." That could be the most ignorant, dumb, uneducated, and misinformed statement of all time, and there's an agenda behind it. You've got to be smart enough to know that.
I always tell people this, and they'll call me and say, "Well, I'll just hate annuities. I'd never buy damn annuity." Okay, that's fine. Do you hate your pension? Well, no. Do you hate your Social Security payments that always come in and increase with inflation? Well, no. Well, that's an annuity player, okay. That's an annuity. So, we have to filter all of the garbage out there. It's incredible that we can listen to the fake news or whatever political side you lean on and say, "That's crap." But you hear the, "I hate all annuities." And you go, "Well, that's true." It's not. I just wanted to start with that. So, let's dig deeper.
Are Annuities Safe?
Are annuities safe for retirement? Safe in the annuity world means the Claims Paying Ability of the carrier issuing the policy to you. There are four rating services that follow annuity companies. AM Best, it's one. Standard & Poor's, Moody's, and Fitch all have an A, A+, AA, and AAA ratings. It sounds like an alcohol meeting, but it's not. But we follow those four. Now, the unique part about that is they've taken all four of those services, and they've assigned a number from 1 to 100, 100 being perfect, so that you can say, "I don't know what AA means or A means or A+ means or A- means." Me neither, but they have a score. Let's say you pick XYZ company; their score is 91 out of 100. That's pretty good. Or if some person at the bad chicken dinner seminar is trying to sell you an annuity, you pull up the COMDEX rankings, and this company, this person's trying to sell you is a 42 or something like that, or not even on the COMDEX rankings. Then you should dig deeper and make sure that their financials are okay. But from the standpoint, "Are they safe?" It all comes down to the Claims Paying Ability of the carrier because in essence, you're transferring the risk to the annuity company to provide a lifetime income stream. One more thing about the safety part. When you buy a CD and get FDIC insurance, that's fantastic. Let me digress for all of you with the tinfoil hats that say, "Hey, Stan, the government can't pay..." Stop. The best coverage is FDIC. Now, annuities don't have that. Annuities and Fixed Annuities, which I specialize in, are regulated at the state level, and each state has a state guaranty fund.
Mentioning that in the sales process as part of the sales pitch is not allowed. The annuity industry frowns upon that. They want the agents and advisors to ensure that they're focusing on the Claims Paying Ability of the carrier. Still, each state has a limitation in that they will back up your annuity purchase to a certain amount. Some are $250,000 per policy per owner. Some are $100,000 per policy per owner. So, it depends on what state you're located in. You can contact us, and we can give you that state guaranty fund, or you can go to nolhga.com and look it up yourself. But state guaranty funds do protect Fixed Annuities up to a certain point, but it is not like FDIC insurance.
So, we talked about the safety of annuities. I encourage you to watch my video, What Type of Annuity is Best For Me? Because in combination, if you're looking at the safety of it and then trying to figure out the type that's best for you, then that combination, you'll make a well-informed decision on your terms and on your timeframe. By the way, there's never an urgency to buy an annuity. One person might be trying to sell it to you, but who cares? It's not their money; it's your money. Take your time and understand what you're buying. Don't buy it if you can't explain it to a nine-year-old.
Now, you should subscribe to my YouTube channel. I am putting out a video every other day for infinity until I die or until my wife says, "No more. We're done. Stop." I do nothing in moderation, and that's a problem. I'm here to educate everybody with some entertainment. I call it edutainment. I'm also going to answer all the questions out there in Internet land. And if you have a question that you want me to answer, email me at [email protected]. And guess what? It might magically appear on a YouTube video. And if you ever have any questions, be sure to book a call with us, and we can have a one-on-one conversation about annuities and retirement.
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.