Is There an Age Restriction to Buy an Annuity?
I've concluded that, yes, I am America's annuity agent. And yes, I am licensed in all 50 states and represent pretty much every carrier out there. But you know what else I am? Do you have any idea? I'm the king of all annuities. I'm the king, and I'm wearing my robe. You might call it a blanket. Do you call it a blanket? No, it's a robe. It's a robe for the king of all annuities.
I digress. Enough of that, we're having some fun. Hey, you ask a good question. Is there an age restriction to buy an annuity? Can you be too old, or can you be too young? Or does it matter? Is it just a free-for-all? Will they sell it to anybody? And "they" meaning the annuity industry. No. There are some age restrictions out there, and I'm going to cover them to ensure you're just not buying things because I get calls every day that are crazy with people pitching to anybody who's living and breathing.
But we'll go through some product types, and we'll go through some situations on, are you too young? Are you too old? And I'm going to give you Stan The Annuity Man's take on all that, which actually is rock-solid gold and should be in the story.
What It Will Do, Not What It Might Do
The bottom line is, with everything that I do, I'm a contractual-guarantees-only person. You own an annuity for what it will do, not what it might do. Might do is the theoretical, projected, back tested, hopeful, unicorns chasing the butterflies, planets aligning themselves, wonderful return scenario proposals that never come true.
Never base your decision on that. Base your decision on contractual guarantees. What's that got to do with age, Stan The Annuity Man? It has a lot to do with age. With all annuities, whether you buy an annuity or not, you ask two questions: what do you want the money to contractually do, and when do you want those contractual guarantees to start? That's it. From those two, we can point you in the right direction of the product type or tell you, "Hey, you don't need an annuity at all."
When You're Young
I have no problem saying that. I say that a lot. But I'm going to give you some examples. I get calls all the time, especially in the Fixed-Index Annuity world, where that's like the hot go-go product right now, where every person that gets their insurance license is where they go. Not that it's a bad product, it's a CD product, but it's got a good little story to it.
But in my opinion, you shouldn't be buying that product when you're young. Most carriers, not all, because there's no uniformity in the annuity world. But most carriers won't even issue an Indexed Annuity if you are younger than 40 years old. And you shouldn't be buying any annuities, in my opinion, unless for the asterisk case, one in a million, when you're young like that.
See, when you're young, you're dynamic and intelligent, but you probably do not need an annuity of any type because you need market growth. You do not need contractual guarantees at this point. So, you're saying, "Well, this guy told me that this annuity was with market growth." No, no, never buy an annuity for market growth. If you need market growth, you should buy stocks, bonds, mutual funds, ETFs, whatever. Never, ever, ever an annuity. That's coming from The Annuity Man himself.
Now, I know there are going to be some agents and advisors who make their living and pay their Porsche payments off selling annuities under this guise of market growth, but they're wrong. I love you guys, but you're wrong. Don't do that. Annuities are transfer of risk products. So, young. I would say when you start feeling retiree-ish in your 50s, you maybe should start looking at annuities as a transfer of risk product.
What do they transfer the risk to? Easy to understand acronym, PILL. P stands for principal protection. I stands for income for life. L stands for legacy. The other L stands for long-term care/confinement care. If you don't need to solve for one of those four, you don't need an annuity. But as you get older, if you're already at the retirement age, you might want to protect your principal, or you might need more income to be part of your income floor to complement your pension or your Social Security.
That's where annuities fit. I actually think that once you pass your life expectancy, you might not need an annuity. And currently, it's in that mid-80s range, 84, 86, depending on who's doing the life expectancy, whether you're male or female. Companies will issue Single Premium Immediate Annuities to people in their 90s. And a Single Premium Immediate Annuity is a transfer of risk pension product that starts immediately.
But the question is really, "Why? What are you solving for?" Now, in many cases, and we did one the other day, got a call the other day, and it was the son. The mom was 90-something, and he said, "We would like to buy Mom an annuity." I'm like, "Huh? Why, Fred? Give me a reason." And he gave me a good reason that she needed some extra income. They were going to do a 10-year period certain, which is, it's going to pay for 10 years, and after that, it's done. They wanted it turnkey. So, if she died after year one, there would be nine more years of payments coming to the family. The evil annuity company doesn't keep a penny. It actually fit what they were trying to do. Under that scenario at age 90, it made sense.
But people in their 80s should refrain from buying long-term products like Indexed or Variable Annuities. In my opinion, they should be purchasing short-term products because their life expectancy is short. And then reverse it, young people shouldn't be buying Indexed Annuities, in my opinion, or those types of products for growth. I mean, there's an argument, I guess, for Variable Annuities to be purchased by youngsters, but I don't think they should do that. If you're going to do that, just buy mutual funds, in my opinion.
I know that's a lot, right? Nod your head. So, let's close this thing up, and I'll tell you how to get my books. We will tie this thing up about age restrictions and how old or young. I made a video called When's the Best Time to Buy an Annuity? It doesn't have as much to do with age; it just has to do with timing and what you're trying to achieve.
I will leave you one last story. Is there an age too young to buy an annuity? Most of the time, yes, but I'll give you a story where there's an asterisk, and this is the example that actually made sense. An 82-year-old grandfather calls me, saying, "Hey, I want to buy an Immediate Annuity joint life with my 10-year-old grandson." Okay, that's weird. He was trying to do a joint lifetime income payment, primarily based on the 10-year-old's life expectancy because it's the younger of the two. And that grandfather wanted that income stream to hit every single month for the rest of his 10-year-old grandson's life.
That's pretty cool. I've actually seen it done with even younger kids. I saw it done with a 2-year-old with our company. We did a joint life. And not all companies will issue that, but some companies will. So, it just depends on what you're trying to achieve. There's no carte blanche answer that's perfect. But if you're looking for market growth, don't buy an annuity. If you're looking to transfer risk, buy an annuity. And if you're past your life expectancy, you have to question why an annuity, and why don't you just put it in CDs and call it a day and go live your life? There's an argument for that.
With that being said, that's Stan The Annuity Man's take on age restrictions with annuities. It's game over, it's conversation over, game, set, match, because I think I just tied it up in a little bow Now, to tie it up a little further, but like two bows, like you got a bow here and a bow here, go to The Annuity Man to get my books, read the articles and read the blogs. We also recommend using our proprietary best-on-the-planet annuity calculators to run quotes for your specific situation. There's no excuse not to do that because we don't bug you. We just let you go in there, play around, and get the quotes you need. I'll see you on the next Stan the Annuity Man blog.
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