021: Potential vs. Contractual Annuity Returns

0:04
welcome to

0:05
fun with annuities with your host me

0:07
stan

0:08
the annuity man america's annuity agent

0:11
can annuities be fun

0:12
can contractual guarantees be fun

0:14
absolutely they can find out the brutal

0:17
facts about annuities

0:19
with no sales pitches or high pressure

0:21
nonsense

0:22
just the brutal and factual annuity

0:25
truth which is all you need to hear

0:27
let's have some fun with annuities and

0:29
let's have that fun start

0:31
right now

0:37
hey this is stan the annuity man

0:39
america's annuity agent license in all

0:41
50 states

0:43
and i'm here to talk about potential

0:45
annuity returns versus contractual

0:48
annuity returns that's the topic for

0:51
today

0:52
why is that important because annuities

0:55
are contracts but the vast majority of

0:57
annuities

0:58
sold in the united states are sold based

1:01
upon

1:02
hypothetical theoretical non-guaranteed

1:06
projected back-tested hopeful agent

1:08
return scenarios

1:10
so the majority of annuities sold are

1:13
variable annuities which i don't sell

1:15
disclaimer i just don't sell them

1:16
i only sell fixed products with

1:18
contractual guarantees

1:19
so variable annuities and indexed

1:21
intuition indexed annuities are sold for

1:24
the hypothetical upside of a call option

1:28
you know based on an industry like the s

1:30
p and so

1:32
people are buying annuities for what i

1:34
believe is the wrong premise the wrong

1:36
premise being growth

1:38
so i got a call and i get i got a call

1:40
today and it's the same call i get

1:42
pretty much every week two or three

1:44
times a week i'm not kidding you

1:46
and the call goes something like this

1:48
hey stan the annuity man i've been

1:50
following you for a long long time and i

1:51
just bought an 8

1:53
annuity and stop first of all you

1:56
probably went wow an eight percent

1:57
annuity that sounds great

1:59
it does except for in fact it doesn't

2:01
exist so then i have to stop the person

2:03
and squash on their parade a little bit

2:06
and go wait a minute

2:07
you did not buy an eight percent annuity

2:09
you bought an income rider which is an

2:11
attached benefit to a policy

2:15
that grows at that percentage that can

2:18
only be used to calculate your first

2:19
income payment

2:21
of course it always escalates into

2:24
that person saying no you're wrong it's

2:26
eight percent

2:27
you know the agent told me eight percent

2:29
it's going to be eight percent and

2:30
you know we go down this path etc and

2:33
always end up going

2:34
all right so if you don't think the

2:36
number one agent in the country

2:37
license in all 50 states been doing this

2:39
forever and written seven books

2:40
thousands of articles

2:42
if i'm not right about it okay then call

2:45
the annuity company

2:47
and say hey that eight percent amount

2:49
can you just send me that interest

2:50
monthly

2:51
and see what they have to say they're

2:54
gonna say

2:56
no we can't or try to call them and try

2:58
to cash out you can't

3:00
there's no philanthropist at annuity

3:02
companies okay no one's waking up in the

3:04
morning going you know what

3:05
i'm gonna give money away to the public

3:07
i think i'm gonna give away

3:08
you know eight percent interest on this

3:11
annuity even though the tenure treasury

3:13
is below two percent

3:14
at the time of this podcast recording

3:16
there's no genius

3:18
at an annuity company that's figured out

3:19
how to give you jimmy carter returns

3:23
on an annuity that's what i call a shiny

3:25
thing to attract people to sign

3:26
applications

3:28
you know there's no eight percent seven

3:30
percent

3:31
six percent real yield out there

3:35
when the ten year treasury's at these

3:36
low or perceived low

3:38
interest rate levels so that's the first

3:41
thing that i get

3:42
which is the eight percent annuity call

3:44
which is you know they're they're

3:46
convinced

3:47
they have an eight percent and they're

3:48
convinced that the upfront bonus they

3:51
can get to and they can't get to that

3:52
either

3:53
you know upfront bonuses are nothing

3:55
more than part of the overall

3:56
contractual guarantee is nothing

3:59
great about it it's just it's a shiny

4:02
thing

4:03
for to attract people just like the

4:04
eight percent's a shiny thing

4:06
when it comes to annuities all of that

4:08
stuff means nothing what what

4:10
matters is the contractual guarantee at

4:12
the back end

4:13
so someone says i've got a 10 bonus and

4:15
8 guaranteed

4:17
growth on my income writer account my

4:19
comments so what

4:21
what's the guarantee of the income

4:22
stream because

4:24
we're going to quote all carriers where

4:26
they have bonuses or high percentage

4:27
income riders it doesn't matter to us

4:29
we're just going to look for the highest

4:30
contractual guarantee payout at the end

4:32
that's all that matters

4:34
all the rest is monopoly money and

4:35
fandom account stuff so

4:37
getting to the potential annuity returns

4:39
versus contractual

4:41
that's a great example of agents

4:44
blurring the line

4:45
or you know maybe the agent told told

4:47
exactly the truth and

4:48
and the client wanted to believe they

4:51
found an eight percent annuity listen if

4:52
it sounds too good to be true it is

4:54
every single time with annuities

4:55
annuities or contracts

4:57
no exceptions to that too good to be

4:59
true thing i know that's not what you

5:01
want to hear but it's

5:02
it's reality so remember there's only

5:05
two questions to ask when you want to

5:06
even find out if you need an annuity

5:08
what do you want the money to

5:09
contractually do

5:10
and when do you want those contractual

5:12
guarantees to start from those two

5:14
answers number one i can tell you if you

5:15
need an annuity and number two if you do

5:18
i can tell you what type can best

5:20
contractually solve for that and

5:21
and will provide the highest contractual

5:23
guarantee when we go shop all carriers

5:26
so that's the first two questions and

5:27
then the acronym pill p stands for

5:29
principal protection i stands for income

5:31
for life

5:32
l stands for legacy other l stands for

5:34
long-term care

5:36
if you don't need to contractually solve

5:38
for one or more of those you don't need

5:40
an annuity so principal protection

5:42
income for life legacy and long-term

5:43
care confinement care

5:45
type situation you don't need an annuity

5:47
if you don't need any of that

5:48
it's that simple so there's no g and

5:50
pill no g for growth no

5:52
m for market no mg for market growth

5:55
okay so my opinion since i've worked for

5:59
dean wood or morgan stanley ubs payne

6:01
weber you know i know what i'm talking

6:03
about when it comes to that side of the

6:05
ledger growth side

6:06
you know when you're looking for market

6:08
growth you really don't need annuities i

6:09
know my variable annuity friends out

6:10
there throwing things at me but

6:12
you know they have to rationally answer

6:14
the question are there limitations on

6:16
the separate account mutual fund choices

6:18
the answer is yes that doesn't mean it's

6:19
bad it's just there's limitations and in

6:21
my opinion my

6:22
opinion when you're looking for market

6:25
growth there should never be limitations

6:27
on that upside it should be full

6:28
right full on like with index and news

6:31
you can only lock it in one day or one

6:33
you know one specific time

6:35
there should not be limitations and

6:37
index annuities or cd products that were

6:39
indeed

6:40
introduced in 1995 and that's kind of

6:41
the return range that they've

6:43
produced even in these raging bull

6:45
markets i know there's anomaly years

6:47
that

6:48
agents always point out but you know the

6:51
blended returns

6:52
reflect cd type returns that's just a

6:54
fact so let's go through contractual

6:57
most annuity types are contractual

6:59
there's no potential even

7:01
in the building there's no potential

7:04
even in the policy

7:05
there's no potential built into the

7:07
contract it's will do

7:08
you know i say own an annuity for what

7:10
it will do not what it might do

7:12
most annuity types are will do there

7:16
is no might do now let me give you an

7:18
example single premium immediate

7:19
annuities

7:20
will do what is that that is a pension

7:23
product

7:24
a lifetime income stream product or an

7:26
income stream product if you set it up

7:27
for a

7:28
specific period of time but the bottom

7:30
line

7:31
is it's transparent it's contractual

7:35
there's no wiggle room what it says in

7:37
the contract that you're going to get

7:38
paid you're going to get paid

7:40
same thing that goes for deferred income

7:42
annuities also called diaz

7:45
which are the cousin of immediate

7:47
annuities because it's the same

7:48
structure but you just defer it longer

7:51
for instance immediate annuities income

7:53
starts between 30 days from contract

7:55
issue date up to a year

7:57
deferred income annuities start as soon

7:59
as 13 months

8:00
and it can be deferred as far as 40

8:02
years okay

8:04
you know you say who would do that i did

8:06
that for my daughters i bought them

8:07
deferred income annuities

8:08
deferred them for 40 years so they can

8:10
have a pension income stream why because

8:12
they're 20 year old wandering ambiguity

8:14
people that i love but i'm not sure

8:16
they're ever going to have a lifetime

8:17
income stream so i set it up for them

8:19
but that's contractual deferred income

8:21
annuities are contractual

8:22
there's no potential to them what you

8:25
get in the policy what you the number

8:27
you see in the policies the number

8:28
you're going to get

8:30
no more no less period that's it

8:34
queue lacks are the same thing qualified

8:35
longevity annuity contracts which are

8:37
deferred income annuities that you use

8:39
inside of your ira

8:41
same structure as an immediate annuity

8:42
no moving parts no annual fees

8:45
you get what the policy says when you

8:48
get those policies with immediate

8:50
annuities deferred income annuities and

8:52
qualified longevity annuity contracts

8:54
that income stream number that you see

8:55
in your contract and your policy

8:57
you are going to get it's contractual

9:01
which leads us to the next contractual

9:04
policy

9:05
multi-year guarantee annuity is the

9:08
annuity industry version of a cd

9:10
it's contractual there's no potential

9:13
hypothetical theoretical

9:15
you're going to get a specific annual

9:17
yield

9:18
for a specific period of time you get to

9:21
choose that specific period of time an

9:23
annual yield you can say i want a five

9:24
year or seven year or three year or four

9:26
year or ten year whatever

9:28
but the multi-year guarantee annuity i.e

9:31
fixed rate annuity works like a cd

9:35
is going to be contractual when you get

9:36
the policy it's going to have the

9:38
percentage that you're going to get

9:41
every year it's contractual so there's

9:44
four different types of annuities

9:46
that are contractual period no

9:48
hypotheticals no potential

9:51
and then the other one that's not an

9:52
annuity but it's it's a

9:55
it's an attachment to a deferred annuity

9:57
specifically

9:58
attached to most of the time to either

10:00
indexed or variable annuities those are

10:02
called income riders and the vast

10:03
majority

10:04
not all but the vast majority of income

10:07
riders

10:08
are contractual in other words

10:11
if you bought an income rider attachment

10:13
to an indexed annuity and you wanted to

10:15
turn the income stream on in 10 years

10:17
from the time you purchased the policy

10:20
you're going to be able to know to the

10:21
penny

10:22
what the contractual lifetime income

10:23
stream guarantee is 10 years from now

10:25
or seven years from now or nine years

10:27
from now or 12 years from now or five

10:28
years from now

10:30
it's contractual now there's some income

10:32
writers out there that's a little fuzzy

10:34
and there's some moving parts to them

10:36
but i don't like them because they're

10:37
not contractual

10:38
but the majority of income writer

10:40
attachments

10:42
are contractual they are will do now the

10:46
only

10:47
two primary products that are might do

10:49
are variable annuities which i don't

10:51
sell

10:52
there's nothing wrong with them they're

10:53
mutual funds they call them separate

10:54
accounts but me and you call them mutual

10:55
funds inside

10:57
of annuity structure for tax deferred

10:59
growth that's when they were put on the

11:00
planet 19 i think 1955

11:03
for tax deferred growth nothing wrong

11:05
with that nothing at all i just don't do

11:07
that

11:08
i don't do might do's you know in in my

11:11
opinion

11:12
is that if you're going to buy mutual

11:15
funds then go buy mutual funds

11:17
but for people that just pound the table

11:19
and say you know what i have to buy a

11:20
variable annuity then buy it for the

11:22
contractual guaranteed writer if you're

11:24
going to attach one

11:26
buy it for that same goes for the

11:28
indexed annuity

11:30
do not buy a fixed indexed annuity they

11:33
used to be called

11:34
equity indexed annuities but the

11:36
industry was shut down on that because

11:38
guess what they're not securities

11:39
they're life insurance products

11:42
which nothing wrong with that it takes a

11:43
state life insurance license

11:45
exam you got to pass that to sell it in

11:48
your specific state

11:49
it's a life insurance product was

11:51
designed in 1995 to compete with cds

11:53
that's exactly what it does

11:55
anomaly years some are a little bit

11:56
better than others but the blended

11:58
return

11:58
is either cd or type returns a little

12:00
bit more than that but not guaranteed

12:04
you know indexed annuities do have a ga

12:06
and variable annuities for that matter

12:07
have a guaranteed rate in other words

12:09
well most of them you can buy what's

12:11
called a declared rate

12:13
instead of doing an index option you

12:14
could say i just want the declared rate

12:17
which is a declared interest rate for a

12:19
specific

12:20
typically it's for a year so and each

12:22
year you can say i don't want to do the

12:23
options on the s p or whatever the index

12:26
option is

12:26
i want to do the declared rate so you

12:28
you literally could buy

12:30
an indexed annuity and by

12:34
the the contractual part which is the

12:36
declared rate but most people

12:38
are buying them for the pie in the sky

12:40
unicorn chasing the butterfly

12:42
index option return scenario that

12:45
looks great on a back tested sheet right

12:48
good friend of mine in the business who

12:50
she is

12:50
arguably the the person for the index

12:52
side said

12:54
she said to me she goes i've never seen

12:56
a proposal

12:57
come true now she's more of a proponent

13:00
on index annuities than i am but i

13:02
we both said it on the same side of the

13:04
table we're both on the same team

13:06
trying to inform the public on

13:09
how these products work and have people

13:12
have make

13:12
rational and informed buying decisions

13:15
on them

13:16
now so the way to kind of visually look

13:20
at the products that are potential

13:23
return products that the index and

13:25
variables is draw a line down the middle

13:26
of a blank sheet of paper left hand side

13:28
is the accumulation value side

13:31
right hand side is the income benefit

13:33
rider side if you choose to attach an

13:34
income rider to that policy

13:37
left hand side is the potential right

13:39
hand side is the contractual

13:41
does that make sense so the accumulation

13:44
value is the potential annuity return

13:47
the income writer or whatever writer if

13:49
you decide to attach one

13:51
that's the contractual now if you chose

13:54
the declared rate or the fixed rate

13:57
for that year or that time period on the

13:59
accumulation value

14:01
then that would also be contractual on

14:02
that side if you want to do it that way

14:06
so that's really i mean that's the

14:07
basics of potential and contractual

14:10
what you need to understand is the the

14:11
vast majority of products annuity

14:13
products out there immediate annuities

14:16
deferred income annuities culax migas

14:18
and in most income riders those are

14:20
purely

14:21
contractual transfer of risk

14:24
guarantees no potential to be found

14:27
anywhere

14:28
and i think in a perfect world most

14:31
annuities purchased should be for

14:33
contractual guarantees only right now

14:36
the index and the variable annuities

14:37
represent the vast majority of annuities

14:39
sold annuity types sold out there

14:42
in the stand the annuity man dream world

14:44
where stand the annuity man is the

14:45
annuities are for

14:46
the country i kind of am anyway as

14:49
america's annuity agent

14:50
but let's just say i had power over the

14:53
annuity industry to run ads and

14:55
and promote the products the way they

14:56
should be promoted

14:58
then variable and indexed annuities

15:00
would be probably ten percent of all

15:02
sales

15:03
and the ninety percent of all sales

15:05
would be the simplistic contractual

15:07
annuities

15:08
you know spies dsq likes mygas income

15:10
riders

15:11
immediate annuities deferred income

15:13
annuities qualified longevity annuity

15:15
contracts multi-year guarantee annuities

15:17
and income riders that's the perfect

15:18
world it should be

15:19
instead of it being 80 20 or 70 30

15:22
indexed annuity variable annuity to the

15:24
other ones it should flip

15:26
to the contractual guarantees and i

15:27
think it will eventually if i have my

15:29
say

15:30
and i keep pounding the table and

15:31
educating the public we will eventually

15:33
get there

15:34
we will eventually convince the public

15:36
that when you think of the word annuity

15:38
you're thinking

15:39
primarily of income you're thinking

15:41
transfer of risk

15:42
you're thinking contract you're not

15:45
thinking potential

15:47
because annuities and potential don't go

15:49
together

15:50
in my opinion because annuities are

15:53
transfer risk products they're commodity

15:54
products you own them for what they will

15:56
do not what they might do which is the

15:57
contractual guarantees only

15:59
because i always tell people if you buy

16:02
the annuity dream you're going to end up

16:03
owning the contractual reality

16:05
of the policy in texas i'll just say by

16:08
the stake not the sizzle

16:12
it just makes sense what i encourage you

16:14
to do is have your thinking cap on and

16:16
be rational

16:17
and if it sounds too good to be true it

16:18
is every single time

16:20
you use an annuity so when it comes down

16:22
to potential annuity

16:23
returns versus contractual annuity

16:26
returns

16:27
with the the five types i told you about

16:29
those are all contractuals so if you're

16:31
looking at that

16:31
you're going to make a contractual

16:33
guaranteed decision because they are

16:34
contractual

16:35
but with the two that are not

16:37
contractual i'm encouraging you to even

16:40
with those make your decision if you

16:43
just have to buy them

16:45
make them on the contractual guarantees

16:47
only because

16:49
you're going to get a contract in the

16:50
mail and you're going to own the

16:51
contract

16:53
so why not base your decision on those

16:55
contractual guarantees

16:56
my opinion you know the annuity world it

16:58
should be that simple and i think

17:00
down the road it will be the more and

17:03
more people realize how commoditized the

17:05
world is

17:07
the annuity world is and for sites like

17:09
mine at the annuityman.com and

17:11
annuities.direct internally

17:13
and you see where quotes change in this

17:15
commoditized world

17:16
and you know all carriers are bidding on

17:19
your product and especially in the

17:20
lifetime income side most

17:22
of the products are pretty closely

17:24
priced because they're basing primarily

17:26
on your life expectancy that's what the

17:27
pricing is based on

17:29
secondarily is interest rates but you

17:31
know they're not have they're not moving

17:32
that around either

17:34
so just remember that you know be

17:37
careful out there

17:38
and the only protection you truly have

17:40
if someone's pitching you something that

17:41
sounds too good to be true

17:43
is to write down exactly what that

17:45
person said to the t and the sales pitch

17:47
the way you understand it sign and date

17:49
that page

17:50
pages if it's pages and then have the

17:52
agent who pitched it sign and date

17:55
and sign off on what they pitched a lot

17:57
of times that pin weighs a thousand

17:59
pounds

18:00
a lot of times they sign it which means

18:02
they own it

18:04
which is good you got to protect

18:06
yourself out there but also understand

18:08
there's a free look time period if

18:09
you've bought something recently

18:12
and you don't feel comfortable don't

18:13
call the agent call the carrier who

18:15
issued the policy

18:16
and then ask them the burning questions

18:18
that's been in the back of your brain

18:20
and those people will tell you the truth

18:22
the annuity industry is on your side

18:24
there's some bad actors in the annuity

18:26
business but the annuity carriers are on

18:28
your side

18:29
they're trying to protect you they're

18:31
trying to make sure that you fully

18:33
understand the product

18:35
it's true do i agree with everything

18:38
that they do

18:38
no do they agree with everything that i

18:40
say i'm sure they don't

18:42
but at the end of the day we all want

18:44
you to understand the products that

18:45
you're

18:46
going to put money in because they're

18:48
contracts so a couple things before we

18:50
close this little thing up i am doing a

18:54
youtube video every single day go to my

18:55
channel there stand the annuity man if

18:57
you type it in the search bar at youtube

18:59
you'll see all my videos so i've

19:01
released a bunch and i'm releasing one

19:02
every day for infinity as long as i can

19:04
keep up that pace

19:05
and i'm also writing an article every

19:07
day as long as i can keep that pace up

19:09
too but i've been doing it for a while

19:11
on major platforms like the street.com

19:13
etc so i would go there and you can also

19:15
see that

19:16
at the annuityman.com i have a blog

19:18
there and you can always email me at

19:20
stan at the annuityman.com bottom line

19:23
is yeah i do want you as a client but i

19:26
want you as a client when you're

19:27
informed

19:28
and you understand the product and the

19:29
strategy and the benefits and the

19:30
limitations

19:31
and you've made the decision on your

19:33
terms in your time frame not not an

19:35
agent

19:35
yours every one of our clients every

19:38
single one of them

19:40
every one of them has come to us and

19:43
said i'm ready to buy now

19:45
the the comment i made to someone the

19:47
other day is is really our tagline

19:49
should be where annuities are bought not

19:51
sold

19:52
because do we sell them yeah but we only

19:55
sell them when you tell us you're ready

19:56
to go

19:57
sound attractive might want to give us a

19:59
try at the annuityman.com

20:01
so my name is standing new to man and i

20:03
really appreciate you joining me on

20:05
fun with annuities thanks for listening

20:09
to fun

20:09
with annuities please hit the subscribe

20:11
button and make sure to go to my site

20:14
at the annuityman.com where you can run

20:17
your own spea dia

20:18
and q let quotes and see a live feed of

20:21
the best mica fix rates

20:23
in the country and even get indexed and

20:25
income writer quotes as well

20:27
you can also sign up for my six annuity

20:30
owner's manual books and i'll ship them

20:32
for free and under no

20:33
obligation i also encourage you to

20:36
schedule a one-on-one call with me

20:38
stan the annuity man so we can have a

20:40
full discussion

20:41
of your specific situation it will be

20:44
the best

20:45
brutally factual and truthful advice you

20:48
will ever get and that's one guarantee

20:50
you should definitely take advantage of

20:52
so join me next time for the number one

20:54
annuity podcast

20:55
on the planet fun with annuities

21:01
[Music]

21:09
you