Why You Should Only Buy Contractual Guarantees

Why should you only buy annuities for contractual guarantees?

If you remember one thing I ever say, this is it.

An annuity is a contract between you and a life insurance company.

If that is the case, then the decision becomes simple.

You buy the guarantees.

That’s it.

Everything else is noise.

Key Takeaways

• Annuities are contracts, not investment products
• You should only buy annuities for contractual guarantees
• Market projections, bonuses, and hypotheticals are sales pitches
• Fixed Indexed Annuities were designed to compete with CD returns
• Variable Annuities come with fees that reduce returns
• The PILL framework defines what annuities actually solve for

Annuities Are Contracts, Not Investments

When you buy an annuity, you are entering into a contract with a life insurance company.

That contract spells out exactly what will happen.

So the logical approach is to focus on what is guaranteed in writing.

However, the industry often pushes something different.

You hear things like:

• Market returns
• Market participation
• Bonuses
• Upside with no downside

If it sounds too good to be true, it is.

Every single time.

The Industry Sells the Dream

There are a lot of people out there selling what I call the dream.

They will show you projections.

They will show you back-tested numbers.

They will show you hypothetical scenarios.

I call those unicorns chasing butterflies.

Because they never happen.

I’ve had a standing offer for years.

Show me a projection that actually played out exactly as illustrated, and I’ll write you a big check.

No one has ever done it.

What Annuities Were Originally Designed To Do

Annuities have been around since Roman times.

The original annuities were Single Premium Immediate Annuities, where people received guaranteed lifetime income.

That’s what annuities were built for.

In 1954, Variable Annuities were introduced.

Those are essentially mutual funds with a life insurance wrapper.

They come with fees, and those fees reduce performance over time.

In 1995, Fixed Indexed Annuities were introduced.

They were designed to compete with CD** returns**, not stock market returns.

But that’s not how they are typically sold.

They are sold using market language.

That’s where the confusion starts.

If You Want Market Returns, Do Not Buy an Annuity

If your goal is market growth, listen closely.

Do not buy an annuity.

Go to the market.

Annuities are not designed for that.

If you try to use them that way, you are setting yourself up for disappointment.

What Annuities Actually Solve For

Annuities solve for four things.

The acronym is PILL:

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

There is no:

• G for growth
• M for market
• B for Bitcoin

Those do not exist inside annuity contracts.

The Problem With Overcomplication

There are hundreds of indexed annuity options.

Caps, spreads, participation rates.

All of it is noise.

They are all designed to produce similar results over time.

Spending time trying to optimize those options is a waste of time.

The focus should always be on the contractual outcome.

Why Simplicity Wins

The simpler the annuity, the better it is for the consumer.

Lower complexity typically means:

• Lower commissions
• Clearer guarantees
• Better understanding

If you cannot explain the annuity to a nine-year-old, you probably should not buy it.

The Two Questions That Matter

Every annuity decision should come down to two questions.

What do you want the money to contractually do?

When do you want those contractual guarantees to start?

That’s it.

From those two answers, you can determine whether you even need an annuity.

And if you do, which one fits.

The Bottom Line

If you buy the dream, you will eventually own the contractual reality.

So you might as well start with the contractual reality.

Annuities should only be purchased for what they guarantee in writing.

Nothing else.

If you want to compare those guarantees across all carriers and see what is available right now, you can run live quotes here:
https://www.stantheannuityman.com/ annuity-calculator/