Why The Annuity Man Tells You to Focus on Guarantees, Not Hype

If you’ve been researching annuities, you’ve probably noticed one thing: there’s a lot of hype. From steak dinner seminars to flashy brochures, everyone in the industry seems eager to tell you about “market upside with no downside” or “inflation protection at no cost.”

It sounds great, but it isn’t real. In fact, the first rule of annuities is simple: if it sounds too good to be true, it is every single time.

That’s why I tell people to ignore the hype and focus only on one thing, the guarantees written into the contract.

Annuities Are Contracts, Not Investments

Too many people approach annuities like they’re investments. They expect stock-market-type returns or think they’re buying into some growth strategy. That’s not how they work.

Annuities are risk-transfer contracts. You hand risk to an insurance company, and, in exchange, they promise to do something for you. Maybe that’s protecting your principal, maybe it’s paying you income for life, maybe it’s ensuring a legacy for your heirs, or maybe it’s providing long-term care coverage. That’s it.

If your goal doesn’t fall into one of those buckets, then you probably don’t need an annuity at all.

The P.I.L.L. Framework

Here’s how I explain it. Every annuity solves for one or more of four things:

• Principal Protection
• Income for Life
• Legacy
• Long-Term Care or Confinement Care

I call this the P.I.L.L. framework. If the problem you’re trying to solve isn’t on that list, keep your money where it is.

The Difference Between “Will Do” and “Might Do”

One of my favorite sayings is that you own an annuity for what it will do, not for what it might do.

A contract that guarantees you $2,000 a month for life will deliver exactly that. A MYGA with a 5% rate for five years will grow at exactly that rate. The guarantees are the only thing that matters.

The hype always centers around “might do.” Indexed annuities are a perfect example. The pitch is “market upside with no downside.” The reality is that over time, they typically average bond-like returns in the 2% to 4% range. Not bad, but nowhere near what people are led to believe.

Real-World Example: Lump Sum vs. Pension

Take someone retiring from a large company. They’re offered a choice: take a lump sum or take a lifetime pension. The pension is really just a Single Premium Immediate Annuity (SPIA).

What’s the right move? It depends on the guarantees. The first step is to get the company’s exact pension payout offer. The second step is to shop outside SPIA quotes using the same parameters. If the company’s guarantee is higher, you stick with them. If the outside SPIA is better, you take the lump sum and roll it over.

No drama, no emotions, no sales pitch. Just compare the guarantees side by side.

Why Hype Is So Tempting

So why do people keep chasing hype? Because it’s seductive.

Everyone wants stock market growth with no risk. Everyone wants inflation protection without giving anything up. Everyone wants one product that solves every retirement problem.

But insurance companies aren’t charities. They don’t give benefits away for free. If you see a bonus, a rider, or some special feature that sounds like a free lunch, I can guarantee you’re paying for it somewhere in the contract.

Principal Protection in Today’s Market

With markets up one day and down the next, many people are starting to realize that guarantees matter more than hypotheticals.

Take a simple example: $500,000 in a five-year MYGA at 5%. That’s $25,000 a year in guaranteed interest, with your original $500,000 still intact at the end. Add Social Security to that, maybe a pension, and suddenly you have a dependable income floor without ever putting your principal at risk.

It may not sound exciting, but I’d take guarantees over “maybe” every single time, especially in retirement.

Two Questions to Ask Before You Buy

Whenever someone calls me about annuities, I always ask the same two questions:

1. What do you want the money to contractually do?
2. When do you want those contractual guarantees to start?

If you can answer those, then we can look at the right type of annuity. If you can’t, you’re not ready to buy.

Final Thoughts

At the end of the day, retirement planning comes down to this: you don’t need hype, you need guarantees.

Annuities are contracts. You buy them for what they will do, not for what they might do. And if you stay focused on the guarantees, you’ll avoid the sales traps, the steak dinner pitches, and the disappointment that comes with buying the dream instead of the reality.

That’s why I’ll always tell you: focus on guarantees, not hype.