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Should I Have an Annuity in My Portfolio?

Stan Haithcock
June 15, 2023
Should I Have an Annuity in My Portfolio?

So, should you have an annuity in your portfolio? That's the question, right? Hey, I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states. I know you wanted to know that. But should you have an annuity in your portfolio? That's an excellent question. The answer is, I don't know. And maybe not, but maybe so. How about that? We're going to dig into it. I will give you a couple of easy-to-remember questions and acronyms to determine if you need one and, if so, what type. So, hang in there with me.

2 Questions to Ask

Should you have an annuity in your portfolio? Promise me one thing, promise me, do not ask another agent for that. Do not ask anybody that because the answer will be a carte blanche, yes. I'm just going to tell you annuities don't fit everybody. They're transfer of risk contracts. The way that I tell everyone to consider if they need an annuity, there are only two questions to ask and answer. Let me give you those questions. Number one, what do you want the money to contractually do? Not hypothetical, theoretical, back tested, projected, hopeful agent return scenarios. What do you want the money to contractually do?

And then the second question is, when do you want those contractual guarantees to start? That's pretty much it, right? So, answer those questions, book a call with me and say, "This is what I'm trying to do." And then, we'll put together the program for you and the strategy.

P.I.L.L Acronym

The other easy-to-remember acronym I've come up with is PILL, P-I-L-L. P stands for Principal protection, I stands for Income for life, L stands for Legacy, and the other L stands for Long-term care. So principal protection, income for Life, legacy, and long-term care. If you do not need to solve one or more of those, you do not need an annuity. And notice that there's no G for growth or M for market growth. I do not believe that annuities should be purchased for market growth, even though many are sold for that purpose. Indexed Annuities are, unfortunately, sold as market products. They're Fixed Annuities, CD products, and life insurance products. They're not securities. Variable Annuities have the biggest argument for growth, but even those have limitations on your investment choices. Mutual funds, we call them, they call them separate accounts.

In my world, true growth has no limitations. And having worked for some of the larger firms on the street, I understand that. Annuities are transfer risk contracts. So, the question is, do you need to transfer risk? And if so, what do you need to transfer risk for? Is it principal protection? Is it income for life? Is it legacy, leaving money to your heirs? Or is it long-term care? Or is it none of the above? Because if it's none of the above, you do not need an annuity.


Okay, so we're going to the whiteboard. Here we go. So, let's go to the PILL acronym I just did: principal protection, income for life, legacy, and long-term care. Principal protection would be a Multi-Year Guarantee Annuity or an Indexed Annuity. And I know that you've gone to the Bad Chicken Dinner seminar, and they told you the market upside with no downside. Just trust me. Indexed Annuities, it's a CD product, and it just truly is.

Income for life, immediate income would be an Immediate Annuity. And then you have Deferred Income Annuities, QLACs, and Income Riders. So, an Immediate Annuity is what it is, and it's for immediate income. Deferred Income Annuities, QLACs, and Income Riders are for future income. And you know to the penny what that income will be. From a planner's standpoint, it works out perfectly.

Legacy could be a MYGA or an Index Annuity that you leave to your heirs and whatever percentage growth. Or you can buy what's called a Death Benefit Rider that grows at a specific percentage that you could leave to your heirs. Is it like life insurance? No, because life insurance is the best legacy product on the planet. It's the best return on investment you'll never see because you're dead. And the death benefit from life insurance goes probate-free, just a lump sum. It's beautiful. Tax-free to your heirs. My daughters hate me now but will love me when I die. That should be a song. That should be like a country song.

But seriously, there's lots of life insurance on Stan The Annuity Man because I think it's a great product, and no, I don't sell it, so calm down. It's a great product. But if you're drinking a bottle of Jack Daniels a day or a bottle of tequila a day and smoking cigars and cigarettes and just burning the candle at both ends, you won't qualify for life insurance. But you could get a Death Benefit Rider attached to an annuity to leave a legacy to your heirs.

And then the last thing is long-term care. So, this L is long-term care. And there are such things as long-term care annuities that are simplified issues, meaning you don't have to go through the medical exams, but you have to go through 20 or 25 questions and answer them to see if you qualify. So, there's a long-term care annuity, and then there's a rider that can solve for some confinement care benefit. If you are still drinking a bottle of tequila every day, which doesn't make you a bad person, you're just a goal-setter, but the goal is going to be challenging in the end.

That's how it fits in a portfolio. But you do not need an annuity if you don't need to solve for principal protection, income for life, legacy, or long-term care. It's pretty simple, isn't it?

Client Example

Okay, so I had this guy, he was 82 or 83, and he called me the other day. We went through the whole PILL scenario and the two questions. What do you want the money to contractually do? And when do you want those contractual guarantees to start? And he was fantastic. He was your typical A personality. He was kicking butt. I love this guy. And he's like, "You know what, Stan? I don't really need any. I've got the money. I've made the money I don't growth. I really don't need an annuity."

And I'm like, "Fine." So, I asked, "Well then, why are you calling me?" He says, "Well, I've got this brand new great-grandson, and I want to do something special for him." I threw this at him because I had a client do this in the past. I call it the Legacy Income Monster. And I told him to consider an Immediate Annuity joint life with him and his great-grandson, who at the time was less than one year old or something like that. Not all carriers will quote that, but a lot of them will.

And he ended up buying an Immediate Annuity joint life with his great-grandson, which I thought was cool. In that scenario, because annuity lifetime income streams are based on life expectancy at the time of the payment, the annuity companies pretty much ignored him. Still, they based the payment on the great-grandson, which is fantastic. Now, from a legacy standpoint, I'm going to tell you how neat this thing is. Every month for the rest of that great-grandson's life, he will get a check or a wire into his bank account forever. And you look at the guy who's 83; he's got three or four more years of life expectancy. He might live longer than that, but let's say he dies four years from now. I mean, that kid's going to get paid forever. And that was a neat way to do it for someone who didn't need an annuity but wanted to leave a unique legacy to his great-grandson. So, food for thought.

The reason I bring that up to you is annuity strategies, and quotes are customizable. It's not some cookie-cutter thing, even though they are sold like that. Schedule a call with me, and we can discuss putting together something unique and customized for your specific situation.

Thanks for hanging in there with me. I have done a unique video on how annuity companies make money on Indexed Annuities. Many calls I get are on Indexed Annuities, and a lot of the stuff that's out there from the agent standpoint is over-hyped. But I clear up many of the misconceptions and misperceptions from the consumer standpoint in that video. I encourage you to do that. And if you want to work with us, we certainly would love for you to be a client. Stan The Annuity Man, America's annuity agent.

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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