Why the “Perfect Annuity” Is a Myth

The Perfect Annuity Does NOT Exist

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 simple: the perfect annuity does not exist.

It doesn’t matter what you heard at a bad chicken dinner or high-pressure steak seminar. If it sounded too good to be true, it was. Every time. With annuities, there are no exceptions to that rule.

Social Security: The Closest Thing to Perfect

You probably already own the closest version to the perfect annuity. It’s called Social Security. Social Security is the best inflation annuity on the planet, period.

If you’re one of the 9% of workers fortunate enough to have a pension, that’s a close second. But once we move to the commercial annuity marketplace, the reality is this: there is no perfect annuity.

Every Annuity Has Limitations

There are many types of annuities:

• Single Premium Immediate Annuities (SPIAs) 
• Deferred Income Annuities (DIAs) 
• Qualified Longevity Annuity Contracts (QLACs) 
• Income Riders on Variable or Index Annuities
• Variable Annuities
• Fixed Index Annuities 
• Traditional Fixed Annuities
• Charitable Gift Annuities

Every single type has both limitations and benefits. None are “too good to be true.” If you’re hearing an upfront bonus pitch, that’s not free money. If you’re told you’ll get market upside with no downside, that product does not exist. You are being pitched a dream. What you actually own is the contractual reality of the policy.

Annuities Are Commodity Products

Behind closed doors, even the industry acknowledges: no single product is inherently better than another. Annuities are commodity products, pure and simple. They are contracts providing contractual guarantees.

Don’t ever buy based on hypothetical, back-tested, or “unicorn” return scenarios. Buy only for the contractual guarantees. Once you focus on those, you can shop across carriers and find the highest contractual guarantee for your situation.

The Only Two Questions That Matter

When considering annuities, only two questions matter:

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

If your answer sounds like “I want a reasonable rate of return” or “I want market-type growth,” that’s not contractual. That’s hypothetical. That’s not what annuities are designed to do.

Marrying the Company

When you buy lifetime income products like SPIAs, DIAs, QLACs, or Income Riders, you are marrying the company. They’re on the hook to pay you for as long as you’re breathing. That’s why carrier ratings matter.

I always say: A+ or better, you don’t need a sweater.

Remember, lifetime income payments are a combination of principal and interest. That means if you live long enough, your account value may go to zero—but the company is still obligated to pay you as long as you’re alive. There’s no ROI until you die.

Annuities Are Contracts, Not Investments

Annuities are not investments. They’re contracts. If you want true market returns with unlimited upside, buy market products. I spent years at firms like Dean Witter, Payne Webber, Morgan Stanley, and UBS. I know how the market side works.

When annuities are pitched as “growth” products, the reality is they always come with limitations. That’s not what they’re designed for.

The PILL Framework

Annuities solve for very specific things, summarized in my PILL framework:

• P = Principal Protection
• I = Income for Life
• L = Legacy
• L = Long-Term Care/Confinement Care

There’s no G for Growth in PILL. If you’re not solving for one or more of those four, you don’t need an annuity.

Keep It Simple

The only complexity in annuities comes from salespeople who make it complicated—usually to push one product. If you’re only being shown one company or one product, that’s a red flag.

When you run quotes on my site, you’ll see all carriers and all types available. The focus is solely on contractual guarantees, not hypothetical scenarios. From there, you decide which company’s claims-paying ability and rating you’re most comfortable with.

Final Thoughts

There is no perfect annuity. Social Security is the closest thing you’ll ever find. Beyond that, all annuities have limitations and benefits. None are better than the other.

The only questions that matter are: what do you want the money to contractually do, and when do you want those guarantees to start?

Answer those two, and you’ll know whether you need an annuity—and if you do, which type will deliver the highest contractual guarantee for your situation.