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Avoiding Common Pitfalls With Annuity Purchases: Shootin’ It Straight With Stan

Stan Haithcock
October 30, 2024
Avoiding-Common-Pitfalls-With-Annuity-Purchases:-Shootin’-It-Straight-With-Stan

Welcome to Shooting It Straight With Stan. I'm your host, Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is avoiding common pitfalls with annuity purchases. This topic comes from my team and the calls that they get, and they provided examples of what they kind of didn't need to do because I've been doing this for decades, but I listened, and it was kind of the same things I continually ran across as well with annuities.

To make this very simple, if you bought annuities, I don't care what type, just for the contractual guarantees, you're going to be in good shape. You own it for what it will do, not what it might do, not the hypotheticals, the theoreticals, the projections, the back-tested numbers, the agent hopeful return scenarios that they pitch, all of the unicorns chasing the butterfly nonsense.

If you just stripped it down to, "I'm only looking for contractual guarantees," then you win. You're going to win because you're going to commoditize the product, shop all carriers, and you're going to see the highest number. Never ever buy hypotheticals and non-guaranteed. If the person keeps showing you non-guaranteed numbers, say, "No, no, no. I want to just see the guarantees, period." That's what you need to do.

The P.I.L.L

You also need to have a goal in mind. We always ask two questions. What do you want the money to contractually do and when do you want those contractual guarantees to start? Understanding that annuities only solve for four things, and the acronym is PILL: principal protection, income for life, legacy, and long-term care.

Market Returns?

One of the biggest pitfalls is people buying annuities, specifically Index Annuities, for market returns. Huge mistake. You should never ever do that. These are life insurance products. Index Annuities are issued at the state level. They're not securities. They're not regulated by FINRA or the NASD. You can't even use the word market because they're not market products. They're CD products put on the planet in 1995 to hopefully and potentially give you a little bit better return than a CD. Sometimes they do, sometimes they don't, but that's a big thing I see.

The Upfront Bonus

One of the pitfalls is people buying the dream and eventually owning the contractual reality because it's a contract between you and the life insurance company issuing the annuity. One of the other pitfalls we see a lot is, again, attached to the index side. People are being deceived by the upfront bonus. Upfront bonuses are candy for the stupid. If you think there's a CEO at a life insurance company that issues annuities, that wakes up in the morning and goes, "You know what? I want to give money away. Yeah, that's what I want to do." No, no, they're for profit.

Only politicians do that. Life insurance companies are for-profit entities. There are a hundred pennies in the dollar, so don't fall for the upfront bonus nonsense. Don't transfer your older annuity to another annuity for the upfront bonus unless it's the 1.1% that you can mathematically prove that it makes sense. Most of the time, the only beneficiary is the agent doing that for you, and they're just creating another commission. That's a big one.

Dig In

Another pitfall I see a lot is people don't dig in. They want to believe that, and if it sounds too good to be true, they want to believe it. With annuities, no exceptions, and I want you to listen to me, no exceptions; if it sounds too good to be true, it is every single time. There's never been an exception to that. You're smarter than that. Put your thinking cap on. Dig for information.

The Urgency Pitch

Dovetailing into that, another pitfall we see a lot is the urgency pitch where they'll say, "Well, you got to sign now because the upfront bonus is like..." Listen, there's never an urgency to buy a contract. The urgency is for you to read and understand the contract before you buy it. Before you sign anything. Don't fall for the urgency pitch.

If you go to The Annuity Man and schedule a call, you're going to be surprised. We're going to let you make your decision on your terms and on your timeframe. We're not going to high-pressure you at all, and we take pride in that. This is a contract. This is your money. What we want to make sure of is that you fully understand what you're deciding on. That's the reason I make thousands of videos. I've written seven books that you can get for free. There's a treasure trove of information. It's an annuity one-stop information shop. And if you decide to move forward with us, we'll take care of everything, but that's going to be on your terms. There is no urgency to buy an annuity.

Expensive Dinner Seminars

Another pitfall we see is that people will attend the expensive steak dinner seminar from the postcard you got in the mail, and it sounds too good to be true, and you fall for it. No, don't do that. Swallow the food and don't swallow the pitch.

Financial Advisors

The other thing is your financial advisor should not be your friend. If you want a friend, get a dog. Your financial advisor should be like a cancer doctor. Your annuity advisor should be like a cancer doctor. And what's a cancer doctor? They walk up to you and go, "You got cancer. We got to fix it." They don't sugarcoat it. We always see this pitfall, where they want you to come to their kid's T-ball game but stay away from that.

And if it's possible, stay away from doing business with friends and family and frat brothers and all that. I understand that might run far into what you believe in, but when you do that, you tend to not do as much due diligence. You tend to trust more, and the only thing that you should trust in the annuity world is the contract, the policy, and what it's going to contractually do. That's the trust. Our job is to filter that. Our job is to tell you the good, the bad, the limitations, and the benefits.

Those are a lot of the pitfalls that we see. They're common-sense pitfalls. If you put your thinking cap on and wouldn't fall for the sales pitch, the snooker, the good snookered stuff, and the too good to be true, and if someone says the word hybrid for no reason, there's no hybrid annuity. If it sounds too slick, then it is. You're buying a contractual guarantee. You're solving for either principal protection, income for life, legacy, or long-term care. That's it.

What do you want the money to contractually do? When do you want those contractual guarantees to start? If you want and need and yearn for market growth, do not buy an annuity of any type, period. Do not fall for market upside with no downside. Do not fall for market participation with principal protection. Do not fall for all those yummy sales pitches that look like they should go on a T-shirt. Do not fall for the upfront bonus. This one kills me. "Well, the advisor showed me his mom's account, and the advisor showed me his Uncle Buck's account." Oh my gosh, really? That's about as low rent as you can get. That's garbage. That's ridiculous.

By the way, that back-tested number they shared, "Well, Mr. Jones, Mrs. Jones, if you'd owned it 10 years ago, you'd have made 7,8,9%." That's illegal in a lot of states. They're not allowing that. I wish it was across the board. But you shouldn't fall for that anyway. Remember, annuities are contracts; they're transfer of risk contracts. Don't believe it? Buy one, and you'll get a policy in the mail. It looks eerily similar to a contract.

That's why we are so unique out here; we only focus on the contractual guarantees of the policy. Even with Index Annuities, they are the dream product that everybody seems to pitch regardless of whether you have a sore throat, a sprained ankle, or if you actually need one. We use it as a cost-effective and efficient delivery system for the Income Rider contractual guarantee for lifetime income in the future. That's how we use it. We don't look at the hypothetical and the what ifs. We use it for the will do, not the might do.

Break it down by the contractual guarantees. When you own annuities, I don't care what type; you own them for what they will do, not what they might do.

Those are some of the pitfalls. If you have a new one, run it past us, but I think I covered the gamut. I've been doing this for decades, so I've seen and heard it all. Hopefully, we are interrupting some of those really bad sales pitches so you can make a good decision on your terms and your timeframe.

That's Shooting It Straight With Stan. My name is Stan The Annuity Man. 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.

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