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The Perfect Annuity Does NOT Exist: Shootin' It Straight With Stan

Stan Haithcock
May 15, 2024
The Perfect Annuity Does NOT Exist: Shootin' It Straight With Stan

Welcome to Shooting 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, the perfect annuity does not exist. It does not. Even though you might have heard something at the bad chicken dinner, expensive steak dinner seminar, or some online product presentation where it sounded too good to be true because it is every single time with annuities. There's no exceptions to that rule. Now, the argument to, "There is no perfect annuity, so stop looking for it." You already own the closest version to the perfect annuity, which is called Social Security, the best inflation annuity on the planet. So, you can't say you hate all annuities and take your Social Security payments or plan on taking your Social Security payments because that's the best annuity on the planet. At a close second to the best annuity on the planet would be the pension.

‌Annuity Types

‌If you're so fortunate and one of the 9% of the workers out there who will get a pension from their employer, just that stat alone makes it pretty good and up there. But after that, when you get to the commercial side of annuities, of which I'm involved in as Stan The Annuity Man, America's annuity agent, there is no perfect annuity even though they're all pitched as such. They all have limitations and benefits. They all have good and bad, and when I say, "they all", all types. There are Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts. There are Income Riders attached to Variable Annuities and Index Annuities. There are Variable Annuities, standalone, and Index Annuities. There are RILAs, there are charitable gift annuities, and there are traditional fixed annuities. There's many different types. What you need to understand is every single type has limitations and benefits to them. They're not too good to be true.

‌The Dream Pitch

‌So, if you're hearing that 30,000-foot view sales pitch from the local person at the expensive steak dinner seminar and you're nudging your spouse going, "That sounds great." There's a catch somewhere. Okay? If you're hearing upfront bonus, that doesn't mean free money. If you're hearing market upside with no downside, there is no such product. What you're being pitched is a dream, and you're going to own the contractual realities of the policy. Don't look for the best product, and this is the one that the annuity industry has an issue with when I start talking like this. But in the big rooms with the marble table, when they close the door, and they take everyone's phone away, and nobody is filming it, they all agree with me. Not one annuity product is better than the other. Not one annuity company or type is better than the other.

‌Contractual Guarantees

‌Not one little marketing name of a product is better than the other. Annuities are commodity products. They are contractual guarantee products. Now, a lot of them aren't sold for that. A lot of them are sold showing hypothetical, theoretical, back-tested, unicorns chasing the butterfly, non-guaranteed return scenarios for which you should never, ever, ever, ever, ever buy an annuity for. You should buy it for the contractual guarantees. Once you do that, once you go into looking at the contractual guarantees of the policy, then you've commoditized the product that you're looking at and you can shop all carriers for the highest contractual guarantee. There are only two questions to ask when looking at annuities: what do you want the money to contractually do, and when do you want those contractual guarantees to start? From those two answers we can determine, A, if you need an annuity, and B, if you do, what type will provide the highest contractual guarantee.

‌Marrying the Product

‌If you answered the first question, what do you want the money to contractual contractually do? And your answer was something like, "I'd like a reasonable rate of return or like a market-type return." That's not the answer. That's not a contractual answer. That's a pie-in-the-sky answer. That's a non-guaranteed answer. That's a hypothetical answer. That's a back-tested return answer of which you shouldn't base any of your decisions whatsoever. Just remember, annuities are commodity products when you strip them down to that contractual guarantee. And not one's better than the other. Now, when you visit my site at The Annuity Man and run quotes, we're using our proprietary calculators. Obviously, we're going to point you to higher-rated companies, especially for lifetime income. I always say jokingly, "A plus or better, you don't need a sweater." Right? For lifetime income, we're going to point you in that A plus or better scenario because you're marrying.

M-A-R-R-Y-I-N-G. It's hard for Southerners to say for some reason. You're marrying the product, not dating the product. You're marrying that company. They're on the hook to pay for as long as you live, contractually, solving for longevity risk. And most of these products like Immediate Annuities, QLACs, Qualified Longevity Annuity Contracts, Deferred Income Annuities, lifetime Income Riders, these are all lifetime products. There's no ROI until you die because they're going to pay as long as you're breathing. And remember, with lifetime income products, the payment you're getting is a combination of return of principal plus interest. So, you're drawing down on the total amount; drawing down in southern means subtracting. There is a possibility that if you outlive your life expectancy, there will be zero in the account, and the annuity company will still be on the hook to pay because they're contractually obligated to do that as long as you're breathing.

‌We have thousands and thousands of clients who've drawn down their accounts to zero, yet they're still getting paid. There's no ROI until you die. So annuities, in my opinion, as The Annuity Man, American's annuity agent, they're not investments. They're contracts. If you want market returns, buy market products. Now, I know the annuity industry is trying to eat into that market product type place with some products like Index Annuities, Variable Annuities, and RILAs and things like that. Still, in my opinion, Stan The Annuity Man, at the time of this blog, I think you should buy non-annuity products for market-type growth. Period. End of story. I've been on that side of the table; I know what I'm talking about. I was with Dean Witter, Payne Weber, Morgan Stanley, and UBS. The first two, Dean Witter and Payne Weber, tell you how old and long I've been in the business, but I am familiar with market growth-type products.


‌Market growth-type products, to me, mean unlimited upside. And with annuity types, the ones that provide potential hypothetical growth, they all have limitations to that upside. And in my opinion, in the perfect world that I live in with Stan The Annuity Man, there should be no limitations, et cetera. Just remember two questions. What do you want the money to contractually do? When do you want those contractual guarantees to start? Annuities do not solve for market growth. There's no G in pill. P stands for principal protection. I stands for income for life. L stands for legacy, and the other L stands for long-term care and confinement care. If you do not need to contractually solve for one or more of those items in that PILL acronym, then you do not need an annuity. There's no annuity that's better than the other. There's no company that's better than the other, even though they're all going to pound the table and tell you why.

The only argument that one might have over the other is just ratings. They might be A double plus versus A plus versus A, but when it comes down to the contractual guarantees, those are the contractual guarantees. You should have them compete by going to The Annuity Man. If you run the course, we're only going to show contractual guarantees, not hypotheticals and theoreticals. So, you can look at that, and then you "filter the bodies," as they say, by the Claims-Paying Ability and the rating that you feel comfortable with. The annuity industry, this is easy stuff, okay? The only thing complex about the annuity industry is that there are too many people who are selling annuities. They make it complex for, I don't know why, whatever reason, or they just sell one product type or from one carrier because if they sell enough, they go to Bora Bora with their girlfriend, boyfriend, or whatever.

‌Whatever applies. That's garbage. When you're quoting annuities, and you go to The Annuity Man, you're going to see all the companies listed. Whether you're looking at a Fixed Rate Annuity, Multi-Year Guarantee Annuities, what those are called, the annuity industry version of a CD, or if you're quoting Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Income Riders. You're going to see multiple companies, not just one. If you see just one, that is a red flag. That agent or advisor is either lazy and didn't learn the other ones, doesn't have the type of calculator and quotation machine we've invested in for you, the consumer, that can run 24/7, 365, or is just trying to sell a product. And the problem with the annuity industry, in my opinion, it's not about product. It's about contractual guarantees. And when it's about contractual guarantees, then you're shopping all carriers for the highest number for your specific situation. That simple.

‌I'm glad you joined me. That was Shooting It Straight With Stan. My name is Stan the Annuity Man, America's annuity agent for a reason. I'll see you next time.

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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