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Don’t Buy Annuity Hypothetical Annuity Returns: Shootin' It Straight With Stan

Stan Haithcock
February 28, 2024
Don’t Buy Annuity Hypothetical Annuity Returns: Shootin' It Straight With Stan

Welcome to Shootin' It Straight With Stan. I am your host, Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is a good one that will inform the masses and upset some people trying to sell annuities, and it's titled 'Do Not Buy Annuity Hypothetical Returns.'

‌Please do not buy hypotheticals. Do not buy dream sales pitches. Do not buy unicorns chasing the butterflies. Do not buy back-tested return numbers. Do not buy the annuity dream because you're going to own the contractual realities.

‌Now, the majority of annuities out there, and yes, there are more than just one annuity type. "I hate all annuities. I hate them all, Stan." I love the people that comment, "I don't care what you say, Stan. I hate all annuities." Okay, great.

‌Call Social Security, which is the best inflation annuity on the planet. Call the local office or go down there and say, "Because I don't want to be a hypocrite anymore, I got to cancel these payments from Social Security, the best inflation annuity on the planet, because I hate all annuities." Same thing if you have an employer that's providing a pension payment to you. Same thing, that's an annuity, a lifetime income annuity. You need to call your employer and say, "Stop it because I told Stan The Annuity Man, I hated all annuities." Okay?

‌Annuity Types

‌So, the majority of annuities are lifetime income annuities, Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts; there are no hypotheticals, there are no theoreticals, there are no back-tested projected agent hype.

‌That's the reason when you go to the bad chicken dinner, now expensive steak dinner seminars, you never hear about those because they can't be sizzled. I used to have a T-shirt that I wore around that said, "Buy the annuity steak, not the sizzle." Don't buy the sizzle.

‌Swallow the Food

‌Yet, every single food seminar out there you get invitations to, and I just did a video called 'Swallow the Food, Not the Annuity Pitch.' I encourage you to go to every single retirement annuity. They never say the word annuity; they say, "Come learn about retirement. Come learn about the potential dangers of losing your money."

‌It's veiled annuity speak because when you get in there, it's annuity, annuity, annuity, annuity. But yet, they won't say annuity to get you to come swallow the food. But go to every single one.

‌My mom, who lives in St. Augustine, Florida, is a world-class plate licker, is what I call it. She's a world-class plate licker, meaning that if there's free food, she's going there. If there's free food at Costco, if it's poop on a cracker, she's going to eat poop on a cracker. You know why? Because it's free.

‌If she goes to the grocery store, and in Florida, it's Publix. She goes to Publix, and they're giving away the world's worst-smelling cheese with a soggy cracker; she will stand in line for it. I want you to be the same way. Bless my mom's heart; she'll call them up, "This is great, I love this."

‌Two things about my mom going to these food seminars. She'll get the invitation as we all do; she'll call them and go, "What's for dessert?" Because she's from the South, right? If there's carrot cake with sour cream icing, which, by the way, I love, she's like, "Okay, can I start with that one? Is there any way I could eat first before he talks?"

‌Because, of course, they want you to listen to the pitch, and then you eat. But then, the great part is, at the end, they call to set the appointment. She goes, "I'm so sorry. I should have told you that my son is Stan The Annuity Man." They're like, "What?" It's like that Scooby-Doo. I mean, that's not good for an agent because they know it's game over. So, go to all of these seminars, eat the food, eat the food, eat the food. If you have hearing aids, take them out. Eat the food, eat the food, eat the food, okay? But what you'll see at these are hypotheticals, theoreticals, and back tested numbers.

‌The Pie in the Sky

‌"Mr. Jones, if you'd have owned this 10 years ago, I want you to look at these 10-year guaranteed back-tested," whatever that means, "Numbers." You're talking about a conundrum. "Guaranteed back-testing." That means nothing's guaranteed; that means pie in the sky.

‌In fact, I would love for the annuity industry to stop with these back-tested projected numbers because annuities are contracts; the policies you get in the mail are contracts. You should be buying it for what they will do, not what they might do.

‌Do not buy hypothetical returns, but I will guarantee you this, and this is a guarantee; this is a will-do. The majority of Fixed Index Annuities and Variable Annuities, I don't sell Variable Annuities because I don't sell anything that has the potential to go down in value.

‌We use Index Annuities primarily as an efficient delivery system for Income Riders, and hopefully, in the future, there will be some Index Annuities that we will look at for accumulation value. But, at the current time of this blog, we're using them primarily as a source for delivering that Income Rider guarantee.

‌Market Growth

‌But don't buy those, "Hey, it could do this." "It might do this." "It can do this." "It should do this." If you want market returns, real market returns, never ever, ever, ever, ever, ever, no exceptions, buy an annuity of any type, period. Don't buy a packaged product.

‌Don't buy anything that limits the upside; don't buy anything that the company can change the rules on how they can limit the upside. If you want market returns, and this is coming from someone, moi, French for me, I started at Dean Witter, then I went to PaineWebber. Wait. Here's how it went. Dean Witter was then purchased by Morgan Stanley, then I went to Paine Webber and then it was purchased by UBS. I've been at those big firms where there's real market growth, real opportunity, real unlimited upside, I get that.

‌So, when I came out here to dominate and become Stan The Annuity Man, America's annuity agent, I was perplexed by some of the sales pitches I heard. Which is, "You should buy an annuity for market growth." Really? The only caveat, an asterisk I can even come up with, is a no-load Variable Annuity that has 500 really good mutual fund choices.

‌There used to be one out there, but they were purchased, and now it's not as good. But there used to be one that I'm like, "Yeah, buy that. Manage it yourself, buy that." It was 100% liquid; it was a great product. It was such a great product that a company bought and ruined it.

‌The P.I.L.L Acronym

‌I'm not going to mention names, but it is what it is. But, for market growth, don't buy an annuity. Annuities solve for four things: the acronym is PILL, principal protection, income for life, legacy, and long-term care/confinement care. Principle protection, income for life, legacy, long-term care/confinement care.

‌If you don't need to contractually solve for one or more of those items in the PILL, one or more, you do not need an annuity. There's no G for growth in PILL or M for market in PILL. It's not G-PILL or M-PILL, it's PILL.

‌But it always kills me when people say, "Well, this guy showed me if we'd have gotten 12 and 13, 14% in the last 10 years." I'm like, "Well, give me a break. You're talking about hindsight being 20/20; you're talking about cherry-picking; that's nonsense."

‌Every single time, I tell people this, "Well, I believe this guy, I think we're going to get it." I'm like, "Call me in two years; tell me what happened." I have yet to have one person call me and say, "We nailed it, Stan. We got 12 and 13, 14%."

‌Fixed Index Annuities

‌No, no. It's like, "We got two, we got three, we got four." There's nothing wrong with that. If you know going in, that's what's going to happen. Fixed Index Annuities, and listen, I've got nothing against them; I just have something against how the majority of agents sell them. Fixed Index Annuities were put on the planet in 1995 to compete with CDs.

‌They were hoping to get a little bit more return than a CD. In many cases, they do, but historically, you might be as well off just buying a Multi-Year Guarantee Annuity, a MYGA, which is the annuity industry version of a CD.

‌Variable Annuities

‌Now, Variable Annuities were put on the planet in the 1950s, 1954/1955 by TIAA, which used to be called TIAA CREF, for tax-deferred market growth using mutual funds of which the industry somehow calls separate accounts. But they're mutual funds to you and me.

‌That's fine and dandy, but the problem with a lot of those is they have limited mutual fund choices, or their mutual fund choices are crapola. You really can't get real market returns and the average annual fee, last time I checked, of commercial Variable Annuities? Around 3% annually, for the life of the policy.

‌So, that means every single year, you're starting at minus three. That's tough. That's tough to get a really good return; that means you have to get 10 to get 7, and you have to get 13 to get 10. You know how that works? That math minus three? That's hard to do, even if you're Gordon Gekko.

‌Show Me the Guarantee

‌The key here, if I've driven a point home, is if someone pitches you an annuity and they're leaning in hard on the hypothetical, they're leaning in hard on the non-guaranteed side, I want you to do what they, what was that movie with Tom Cruise? It was about baseball or something? "Show me the money"?

‌Instead of yelling, "Show me the money, show me the money, show me the money." No. No, no. "Show me the guarantee, show me the guarantee, show me the guarantee, show me the guarantee, show me the guarantee." Just keep repeating it until they point it out. "Here's the guarantee. Here's the non-hypothetical, here's the guaranteed return."

That's where you make your decision. After reading this blog, if you make your decision on a hypothetical, theoretical, or back-tested return scenario that some person or agent advisor shows you, then you deserve what you're going to get, which is disappointment in most cases. Don't buy the dream. You're going to own the annuity contractual reality.

I mean, the crazy part about this topic and the fact that I have to address this topic continually, is that if the annuity industry followed my lead and just promoted the guarantees that annuities provide and that people need and that the 13,000 baby boomers that hit sixty-five every single day want, the annuity industry would triple in size, at a minimum.

‌It would double if they did it wrong but triple if they followed me. That's the reason I need to be where annuities are. Because what does everybody want in chapter two of their life? They want lifestyle. They want to live life like they've earned. They've worked hard, you've worked hard.

‌You want to live life, see the kids and the grandkids, travel, relax, get caught up on all the sleep, and do some hobbies and all that stuff, right? You want guarantees. You want an income floor in addition to the best annuity on the planet, Social Security, that you already own. Or a pension, bonds, or real estate that's taken off income.

‌You want income to hit, or you want principal protection. You don't want to lose any money; you want guarantees. You don't want hypotheticals; you've done that. You've played the markets; you've taken those risks. You've seen market ups and downs, you've seen global events, you've seen political nonsense, and you are going to continue to see political nonsense.

‌You want to see guarantees, and because you want to see guarantees. Don't buy hypotheticals. Ask for the guarantees. If you go to my site at Stan The Annuity Man® | Brutally Honest Facts About Annuities, all that we show are the contractual guarantees of the policy. You're not going to see a hypothetical or theoretical.

You won't get, "Look at this, look at what it would mean. In combination with the upfront bonus, sir, you would've gotten this 10 years ago." That's garbage; you don't make decisions like that. We've all seen those studies of the mutual funds that were the winners last year, are crap this year.

I mean, we've seen that. You can't base your decision on that. If you're getting pitched an annuity of any type and they're showing non-contractual guaranteed returns to you, stop the conversation. Stop them mid-sentence to say, "That's fine and dandy, that's great. Show me the guarantee, and not only that, show me the guarantees and shop all carriers."

‌You turn the products into commodities once you strip down annuities as a category by just looking at the contractual guarantees. This means you can then shop all carriers for the highest contractual guarantee for your specific situation. You strip away that big sales pitch hypothetical nonsense.

‌I don't like the word hypothetical; I like the word guaranteed. You need to like the word guaranteed. You need to shun, I love that word, you need to shun anything hypothetical. You need to shun anything shown to you that's not guaranteed. You need to walk away from the unicorns-chasing-the-butterfly sales pitch.

‌Go to The Annuity Man. No one's going to call you, no one's going to bug you. You can shop at your leisure; you can run quotes on our calculators at your leisure. You can read the articles and watch thousands of categorized videos. You can listen to my Fun With Annuities podcast; you can get educated on annuities and not just be pitched on some pie in the sky, or as they say in the South, cobbler in the sky, peach, cobbler in the sky nonsense hypothetical.

‌Remember that you can't lock in a hypothetical, but you can lock in a contractual guarantee. My name is Stan The Annuity man, I am America's annuity agent. This is Shootin' It Straight With Stan, and that was shot pretty darn straight. See you next week.

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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