Is It Possible to Time an Annuity Purchase?
Hi there. Stan The Annuity Man, America's annuity agent, licensed in all 50 states. The question that everyone has been asking me is, is it possible to time the purchase of an annuity? Is there a sweet spot? Is there an arbitrage moment where it's the perfect time to buy an annuity of any type?
And of course, everyone that's in markets, the stock market or anything like that, you've been trained to try to time it, right? Can you do that with annuities? Can you do that with an annuity purchase? Let's dive into it.
Can You Time It?
So, is it possible to time the purchase with an annuity regardless of the annuity type? No, it's not. And that's not a sales pitch. That's not me saying, "Well, you need to buy it from me, and you need to buy it right now because..." No, it's not. Annuity companies have the big buildings for a reason. They have the big logos on the plane for a reason. They're sponsoring sports stadiums for a reason. What's the reason?
It's because they know when we're going to die. Property and casualty companies don't sponsor anything because they don't know when the hurricane or the tornado is going to hit. Life insurance companies issue annuities. Life insurance companies know when we're going to die, and they price things accordingly. So, there's no sweet spot, arbitrage moment, pound the table, you should buy it now, fire sale moment.
Even though you'll hear somebody tell you, "Well, you need to buy it right now because when rates are going down and the bonuses..." No, there's never an urgency to buy an annuity. The only urgency is understanding the annuity you're buying, however long that takes.
Multi-Year Guarantee Annuities
Let's talk about a few things from a timing standpoint. Let's look at Multi-Year Guarantee Annuities, which is the annuity industry version of a CD. Can you time that, Stan The Annuity Man, America's annuity agent? No, you cannot. Nobody knows where interest rates are going to go. And if you're out there saying, "Well, they have to go up, Stan. We all know at some point in time, they have to go up, right?" I've heard that for five years now, and I've seen rates decreasing and increasing. Will they eventually go up or down? I don't know. You don't know. Nobody knows. And the person that knows isn't telling anybody. They're just trading interest rates. Nobody knows.
Ladder the Purchase
So, the best way to combat that is to ladder the purchase. In other words, if you said, "Well, I have $300,000," then let's buy a three-year, a four-year, and a five-year MYGA. And we have money coming due at different intervals to hopefully catch rising rates.
But for people to say, "Well, rates have to go up," I've heard that for five years. People have been waiting for five years. I'm not sure. At the time of this blog, if you look at the 10-year treasury or the equivalent globally of 10-year treasury notes, the United States is still the highest. Hello!
Could they go down? Yes, they could. Could they go to zero? Yes, they could. Could they go negative? Yes, they could. Could they go way up? Yes, they could.
The bottom line is no one knows. With Fixed-Rate Annuities, the best thing you can do is to ladder that purchase over time, so you have money coming due. That's principal protection.
Let's talk about lifetime income. Stan The Annuity Man, America's annuity agent, can you time a lifetime income purchase? Let me give you an example. With Social Security, you already own an annuity because Social Security is the best inflation annuity on the planet. When you decide to turn the income stream on with Social Security at age 65 or 70, you have to factor in the fact that, at age 70, it's higher. Why? Because you're older. The older you are, the higher the payment. It's that simple. Life expectancy drives the train. That doesn't mean you wait because if you bought it at 65, you have 60 months of payments as opposed to waiting until you turn it on at age 70. That's common sense.
The same common sense applies to lifetime income annuities. And there are four types: Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and lifetime Income Riders. Those are the four strategies for lifetime income.
Understand this. Say if you're deferring the payment. Say you want the payment to start at five years or seven years. The longer you let the annuity company hold onto the payment, the higher the payment will be. The longer you let it cook, the more you'll get, in Southern terms. You can't time that.
Now or Later
Because people say all the time, "Well, should I buy the Immediate Annuity now? Or should I wait and buy the Immediate Annuity later?" I don't know. There's no good answer to that. They just have bad sales pitches. And you have to factor in the payments you've missed while waiting to buy it.
Or someone will say, "Should I buy the Income Rider now and know what my income stream will be in seven years? Or should I just invest, invest, invest, in seven years, buying an Immediate Annuity? Which one's higher?" Nobody can give you that answer. No one can run a future lifetime income quote with an Immediate Annuity because we don't know what the life expectancy tables, or interest rates will be. And remember, life expectancy drives the train. It's the primary pricing mechanism. Interest rates play a secondary role.
The Two Questions
So, getting back to the question, can I time the purchase of an annuity? The answer is no. And I just need you to believe that.
Now, with that being said and that fact in place, then how do I make a decision, Stan The Annuity Man, America's annuity agent? Here's how you do it. You run the quote, you quote all carriers, and you answer the two questions. What do you want the money to contractually do? When do you want those contractual guarantees to happen? Then, we look at the contractual guarantees. And if the contractual guarantees fit your goals, you buy it, period. There is no fear of missing out on annuities and timing them because you're beginning a lifetime income stream with lifetime annuities. Or if you're laddering the MYGAs over time, you're set up in case interest rates move in your favor.
This is hard for the investor. You're out there. You've been investing money in mutual funds, stocks, bonds, options, ETFs, etc. And in that world, in the non-annuity world, you can time things. I was there. I've been at Dean Witter, Morgan Stanley, Paine Weber, and UBS. I've been there. I understand that there are timing situations with those types of non-annuity investments.
But when it comes to annuities, when you're in the annuity world of contractual guarantees, timing does not exist. Now, you'll hear masters of the universe and journalists who don't know any better saying, "Well, if interest rates were duh-duh-duh, then it would be higher." Well, that's cavalier. If I did a hundred sit a day for the last 10 years, I'd have six-pack abs, but I don't have six-pack abs.
Okay, so what time is it? It's time to stop trying to time it with annuities. Just shop all carriers and look for the highest contractual guarantees. Go to my site at, run the quotes yourself using my proprietary calculators, schedule a call with me, get the books, and I'll see you on the next Stan The Annuity Man blog.
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.