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

Welcome to Shootin' 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, which comes from the calls my team receives. They shared examples of things people could have avoided. While I've been doing this for decades, I listened and realized that these are common mistakes I’ve also encountered with annuities.

The Importance of Contractual Guarantees

To simplify, if you buy an annuity for the contractual guarantees, you’ll be in good shape. Own it for what it will do, not what it might do. Don’t focus on hypotheticals, theoreticals, projections, back-tested numbers, or the agent’s hopeful return scenarios. These often lead to “unicorns chasing butterflies” nonsense.

If you stick to contractual guarantees, you’ll win. You can commoditize the product, shop all carriers, and choose the best option. So, never buy based on hypotheticals or non-guaranteed numbers. If an agent keeps showing you non-guaranteed numbers, simply ask, "I want to see the guarantees."

Have a Goal in Mind

You also need to have a clear goal in mind. We always ask two key questions: What do you want the money to contractually do, and when do you want those contractual guarantees to start? Remember, annuities solve four things: Principal Protection, Income for Life, Legacy, and Long-Term Care (PILL).

One big pitfall is buying Indexed Annuities for market returns—huge mistake. These are life insurance products, not market products. Indexed Annuities are issued at the state level, not regulated by FINRA, and are essentially CD products introduced in 1995. Sometimes, they may offer better returns than CDs but buying them for market returns is a mistake.

The Danger of Upfront Bonuses

Another pitfall is being misled by upfront bonuses. I call these "candy for the stupid." If you think there’s a CEO at a life insurance company who wakes up and says, “I want to give away money,” think again. Life insurance companies are for-profit entities. Upfront bonuses are typically for the benefit of the agent, not the client. Don’t transfer your older annuity to another just for the bonus unless you can mathematically prove it makes sense. Most of the time, it’s the agent who benefits, not you.

Avoiding the "Too Good to Be True" Sales Pitch

A big pitfall is people not digging deep enough. If it sounds too good to be true, it is every time. There has never been an exception. Don’t fall for the urgency pitch like, "You have to sign now because of the upfront bonus!" There is no urgency to buy an annuity. The only urgency is to understand the contract thoroughly before signing anything.

At The Annuity Man, we let you decide on your terms and timeframe. There’s no high pressure. We want you to fully understand what you're buying before making any decision.

Stay Away From Expensive Seminars

Another pitfall is attending those expensive steak dinner seminars you get from postcards in the mail. They may sound too good to be true, and that's because they are. Don’t fall for it! And, by the way, your financial advisor should not be your friend. If they’re trying to be chummy with you, like inviting you to their kid's T-ball game, that's a red flag. Your advisor should treat you like a doctor or a specialist: they give it to you straight without sugarcoating.

Avoid Doing Business With Friends or Family

Another pitfall is doing business with friends or family. While it might seem harmless, it can lead to less due diligence and more trust in the wrong areas. The only thing you should trust in the annuity world is the contract—what the policy will contractually do. We focus on giving you the truth, the benefits, the limitations, and all the details you need.

The "Hybrid" Annuity Myth

Finally, if you hear someone mention a hybrid annuity, it’s likely a sales pitch with no real meaning. If it sounds too slick or too good to be true, it probably is. Annuities are contracts, not market participation with no downside. Don’t fall for that "market upside" nonsense or the “upfront bonus” pitches.

Make a Good, Informed Decision

So, break it down by the contractual guarantees. You should own annuities for what they will do, not what they might do. If you're looking for market growth, do not buy an annuity. You need Principal Protection, Income for Life, Legacy, and Long-Term Care. If an agent shows you hypothetical returns, run the other way. If they pitch an upfront bonus, walk away.

Annuities are not about dreams—they’re about contractual guarantees. When you make your decision, it should be based on what the contract will actually deliver.

Final Thoughts

There’s no one-size-fits-all solution, but there are a lot of bad sales pitches out there. If you’ve got a new annuity, run it past us. We’ve seen it all over the decades. Let’s make sure you make the best decision for your financial future on your terms and your timeframe.

That’s Shootin’ It Straight With Stan. My name is Stan The Annuity Man. See you next time!