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Transfer Your Risk to Annuity Contractual Guarantees: Shootin' It Straight With Stan

Stan Haithcock
April 10, 2024
Transfer Your Risk to Annuity Contractual Guarantees: Shootin' It Straight With Stan

Welcome to Shootin' It Straight With Stan. I'm your host Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is a very good one, and the title is Transfer Your Risk to Annuity Contractual Guarantees. This is very important in the current sales environment of most annuity bad chicken dinners and expensive steak dinner seminar sales pitches of hypothetical, theoretical, projected, backtested unicorns chasing the butterflies stuff that's out there that you should never base your buying decision on. You should only base your decision on what an annuity will do, not what it might do, and the will do are the contractual guarantees of the policy, and policy equals contract.

‌You're going to get a policy/contract in the mail, so you should be making your decision solely on those contractual guarantees. That said, annuities are plural, and there are many different types. Please don't say, "I hate all annuities. I'd never buy an annuity," that's like saying I'd never buy an automobile. I'd never go to a restaurant. I'd never buy clothes. I mean that's just dumb. You already own one; it's called Social Security. Required Minimum Distributions on your IRAs, in my opinion, two. If you have a pension, you own three. So, slow down there with the hate.

‌The P.I.L.L Acronym

‌The facts are the facts. Social Security is the best inflation annuity on the planet. Still, in my world, which is the perfect annuity world that everyone, including the industry, should live in, annuity is primarily solved for four things. The acronym is PILL. P stands for principal protection. I stands for income for life. L stands for legacy. The last L stands for long-term care/confinement care. PILL, principal protection, income for life, legacy, long-term care/confinement care. Those are the four primary things that goals and annuities solve for. That's what you're transferring your risk to.

‌Notice there's no G for growth, no R for a reasonable rate of return, or no M for market. If you want those things, do not buy an annuity of any type. Annuities that pitch those types of markets with a reasonable rate of return, "See these backtested numbers"; all of them have limitations on the upside. So, be very, very careful. Even the Variable Annuity people are yelling at the screen right now. Variable Annuities have limitations. "What do you mean, Stan? How do Variable Annuities have limitations? I thought those were just mutual funds."

‌Transferring Risk

‌Yes, they're called separate accounts. You and I call them mutual funds, but you're limited by the choices within that specific Variable Annuity. So, let's talk about transferring risk and contractual guarantees. There are four strategies right now in the annuity industry that are the primary strategies for lifetime income, and that's where most people think annuities should be used. Now, there are some ones for principal protection. There are some out there for legacy, meaning leaving money to your beneficiaries if you cannot qualify for life insurance and that underwriting. Then long-term care, we all know what that is, but the I in the PILL, P-I-L-L, is income. Income for life. You're transferring the risk to the annuity company to pay as long as you are breathing, even if you're on a ventilator.

‌As long as you're breathing, you have transferred that risk to the annuity company, the life insurance company that issues the annuities; by the way, life insurance companies issue annuities for as long as you're breathing. You're transferring that risk. Now, the really smart people in the room with the ascots and those jackets, those tweed jackets with the elbow protectors on them because they're all sitting around going, "I really wonder what's the value," I mean for those people, you're transferring the risk for lifetime income. Still, those smart people in the room call it longevity risk. You're transferring for longevity risk.

"What does that mean, Stan? I'm from Charlotte, North Carolina, where you're from, son, translate longevity risk." What that means to you, player, is as long as you're breathing, regardless of how old you are, the annuity company's on the hook to pay, and that's the value proposition. People always return to me and say, "What if I lived to 145?" It's going to pay. "How about if I live to 157?" It's going to pay.

‌That's the benefit proposition of transferring risk for lifetime income as long as you're breathing. "What's the ROI on that, Stan? I'm a player. I'm Gordon Gekko, son. I'm playing the markets, I need ROI." Well, I don't know that until you die. It's a transfer risk up until that point, so there's no ROI until you die. That should be a T-shirt that I sell, but I don't have the energy to do that.

‌You can also transfer risk for principal protection, Multi-Year Guarantee Annuities or a CD principal protection product, Fixed Index Annuities, or a CD principal protection product. "Wait, what, Stan? Index Annuities are a CD type product?" Yes, it was put on the planet in 1995 to compete with CD returns. It is not a market product; it's not a security. Regardless of the sales pitch you hear and all that upfront bonus. Upfront bonus in my world's called candy for the stupid.

‌If you think there's a guy waking up, a CEO of an XYZ company, an annuity company going, "Do you know what? I think I'm going to give money away. I'm just going to flat out give it away. Give it away, upfront bonus, because that's who we are at XYZ Annuity Company. That's what we're going to do." No, it's part of the overall contractual guarantee, and you have to look at the contractual guarantees, not putting any weight on the bonus. Sometimes, it works out in your favor; many times, it does not.

‌The Two Questions

‌What I want you to realize about annuities and whether you need one or not is that I always ask people two questions. What do you want the money to contractually do? And when do you want those contractual guarantees to start? From those two answers, we, at The Annuity Man can determine if you even need an annuity. If you do, which of those types, and there are many different types, can provide the highest contractual guarantee for your specific situation?

‌The basic raw nine-year-old, no offense to nine-year-old, decision-making process is, do I, I'm speaking for you, do I need to transfer risk to solve for principal protection or to solve for income, lifetime income, like a pension income or legacy to leave to the young'uns or long-term care, etc. Remember, there are three phases of retirement. Go, go slow, go, and no go. If you get to slow go and no go, you're going to need long-term care, confinement care type transfer of risk coverage. That's how simple it is.

‌Now, you could come back to me and say, "You know what, Stan? I don't need to transfer risk. I'm a baller. I don't need to do that." Okay, that's fine, but that's how you need to look at it. Do I need to transfer risk? Do I need to transfer risk to enhance my income floor? Do I need to transfer risk to protect myself from market downturns, etc.? MYGAs, Indexed Annuities for CD type returns in combination with CDs, in combination with treasuries, in combination with AAA, AAA annuities, whatever you're doing to protect the principal and never lose a penny.

Then legacy, if you cannot qualify for life insurance, which is the best legacy product on the planet because that lump sum goes tax-free and probate-free to your beneficiaries, if you can't qualify for that, there are some guaranteed issue annuities that have death benefit guarantees on them, and then, of course, long-term care.

‌So, what are annuities? They're literally transfer of risk strategies. They're transfer of risk contracts. It's all about transferring risk. If you're not going into the annuity contract to transfer risk, don't buy it. If you're going into the annuity contract because I could get a good return, that chart that dude showed me at the steak dinner, no. No, no, no, no, no, no, no, no, no, no, no, no, no. Okay? You buy an annuity to transfer risk. You buy the contractual guarantees. You shop all carriers for the highest contractual guarantee for your specific situation.

‌When you're thinking annuities, when you're getting pitched annuities, hopefully, you visit us at The Annuity Man. We'd love to have you as a client. We're only going to talk about contractual guarantees, and we're only going to ask you what type of risk you are looking to transfer. It's really that simple. My name is Stan The Annuity Man. I am America's annuity agent. There's no arguing that, and 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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