Common-Sense Steps When Considering Annuities

Today’s topic is Common Sense Steps When Considering Annuities. These are your common sense steps, not the steps of an agent trying to sell you something, not an advisor trying to pitch you, and not the advisor who somehow convinced your employer to let them into the break room to push their annuity of choice.

The real question is, does an annuity fit for you, and should you own an additional annuity? Because all of you already own one.

What? There is no way. Yes, there is. It is called Social Security. It is the best inflation annuity on the planet.

If you have a workplace pension, as my parents did in the North Carolina school system, it is also an annuity.

So, my mom has two annuities, right? Actually, she has more than that now, but she had two before we determined she needed something for her older age lifestyle. I have done videos on that, including how to not allow your parents to become your roommate. That is a whole different story.

Today, we are focusing on common-sense steps when considering annuities, and it really comes down to an acronym I created called PILL.

The PILL Framework

P stands for Principal Protection

I stands for Income for Life

L stands for Legacy

L stands for Long Term Care

If you do not need to contractually solve for one of those items in the PILL, then you do not need an annuity. Or you do not need an additional annuity on top of Social Security.

If you need market growth, do not buy an annuity. Let me say that again. If you need market growth, do not buy an annuity. Buy stocks and bonds and all that stuff.

I know what I am talking about. I used to work for Morgan Stanley, Dean Witter, Paine Webber, and UBS. I understand growth. When I became the mythical but real creature known as Stan The Annuity Man and moved into the annuity world, it was because I saw 13,000 to 14,000 people turning 65 every day. I wanted to get in front of that demographic tidal wave and help.

What shocked me was how many agents were talking about market growth with annuities. You have a life insurance license, which is required to sell Fixed Annuities. How are you talking about the stock market? I am not sure it is even legal, and it makes no sense. The market world is one world. The annuity world is a contractual world.

Most People Look to Annuities for Income

Going back to the PILL, Principal Protection, Income for Life, Legacy, and Long Term Care are the contractual reasons annuities exist. There is no one-size-fits-all annuity that does everything, but there are specific annuity types that contractually solve each part of the PILL.

Principal Protection is straightforward. If you are a CD buyer or someone who likes AAA municipal bonds, Multi-Year Guarantee Annuities act like CDs. They are the annuity industry’s version of a CD. You can visit The Annuity Man to see the best rates.

But most people are looking for lifetime income. They are trying to fill in their income floor, which is the amount of money you need every month to pay the bills and live the lifestyle you have earned. That is where annuities come into play.

Inflation and the Income Floor

Inflation is the gorilla in the room. Everyone talks about it. To me, inflation is personal. Since my daughters, who are now in their late twenties, are long gone from the house, we are not buying milk or any of the other stuff families buy. So, inflation does not hit me the same way it hits others.

The common-sense approach to addressing inflation with annuities is to fill the income gap in your income floor. You can go to The Annuity Man and run what is called a reverse-engineered quote. That means, in plain English, you tell the system how much extra income you need. For example, $750 per month. You can run that number and see exactly how much money it would take to create that lifetime income for yourself or for joint life. And you can structure it so the annuity company never keeps a penny, even though they are on the hook to pay as long as you are breathing.

The Bottom Line

Start with the PILL acronym. Principal Protection, Income for Life, Legacy, and Long Term Care. If you do not need to contractually solve for one of those, you do not need an annuity. There is no G for growth. There is no S for stock market. If you say you are all about growth, all about the markets, fine. Do not buy an annuity. You already own Social Security.

If you are looking to fill your income floor, are entering chapter two of your life, or are already in it, and you need income without following the markets, then annuities can make sense. Or if you just want to protect the principal and get a good contractual yield, you might consider Multi-Year Guarantee Annuities.

Go to my site, The Annuity Man. Best site on the planet if you want to engage with us. You can schedule a call. We never proactively call you unless you choose a specific appointment time.

Thanks for joining me today. See you next time.