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Is an Annuity Affected by the Stock Market?

Stan Haithcock
June 24, 2024
Is an Annuity Affected by the Stock Market?

Hey, I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states. This is a big question because people get confused about annuities in the stock market. I'm going to go into the details of that and dig in as only Stan The Annuity Man can.

‌The stock market and annuities. Big topic. We're going to go through every single type of annuity, Single Premium Immediate Annuities, Deferred Income Annuities, QLACs, Multi-Year Guarantee Annuities, Index Annuities, Variable Annuities, all of them, and I'm going to tell you how the stock market either does or does not affect them.

So, the two primary types of annuities affected by the stock market are Variable Annuities and Fixed Index Annuities. Let's talk about Variable Annuities first.

‌Variable Annuities

‌Variable Annuities are the purest form of a stock market-type product in the annuity world. I don't sell them; just as a disclaimer, I don't sell anything that has the possibility of going down. That doesn't mean Variable Annuities are bad. Still, Variable Annuities have what's called separate accounts inside the policy, you and I call them mutual funds, and those can be changed by you in that they have the potential to grow. Obviously, those mutual funds can be attached to the stock market.

The other product type that we need to discuss in more detail is the Fixed Index Annuity. It is not a security, while Variable Annuities are securities.

‌Fixed Index Annuities

‌Fixed Index Annuities are life insurance products issued at the state level and are CD products. They are not market products, even though they are sold and pitched and high-pressure as stock market products. They are not. They're Fixed Annuities. Your principal's fully protected, but the gains are attached to index call options, not including dividends, which can lock in. But understand this: Fixed Index Annuities, CD returns, and Variable Annuities can have market returns if you choose the right mutual funds.

‌Regarding annuities and interest rates, understand that the bogey is the United States ten-year treasury note. With annuities, that's the interest rate figure that the companies look at and that you should look at as well.

‌Annuity Types

‌There are many types of annuities that the stock market has zero effect on the contractual guarantees. Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, all three of those are lifetime income products. The stock market has nothing to do with that. Multi-year guarantee Annuities, the annuity industry version of a CD, also have nothing to do with stock market volatility. So, understand that. There are only a couple of Variable Annuities and Indexed Annuities that are somewhat affected by stock market volatility and returns, but Single Premium Immediate Annuities, Qualified Longevity Annuity Contracts, Deferred Income Annuities, and Multi-Year Guarantee Annuities have nothing to do with the stock market.

‌Client Example

‌All right, so Chester called me the other day, and as you know, if you've read any of my blogs, Chester is the fictitious person who calls, but the stories I tell are true. This is what people do when they call me. And Chester goes, "Stan The Annuity Man, I just don't want an annuity that's affected by the stock market ever. I hate the stock market's volatility. Can you do that?" The answer is yes, Chester, I can do that. There are types of annuities that are not, N-O-T, affected by the stock market. And those are the lifetime income products like Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Multi-Year Guarantee Annuities. So, if that's what you want, Chester, that's what we can give you, and we can shop all carriers for the highest contractual guarantee.

‌When it comes to annuities in the stock market, remember this, if you are trying to buy an annuity for stock market growth, do not do that. You don't need an annuity if you're looking for stock market growth. Buy the mutual funds and the ETFs and all that stuff. Annuities are transfer risk products. In my opinion, Stan The Annuity Man, the top agent out here, America's annuity agent, annuities are not for market growth.

‌Again, I'm Stan the Annuity Man. I'm America's annuity agent. I'm the top guy out here. But I do understand markets. I used to work for the major firms. I get it. I understand that everybody wants to have those 7 and 8 and 9% returns. The bottom line with annuities, in my opinion, is that you should never, ever, ever, ever buy an annuity for stock market returns. Don't buy the dream. Don't buy the unicorns chasing the butterflies. If it sounds too good to be true, it is, every single time. Buy annuities for the contractual guarantees only. Don't buy the dream.

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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