Can I Buy An Immediate Annuity At Age 45 Or Younger?

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Hi there, Stan the Annuity Man, America's annuity agent licensed in all 50 states. Today's question

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is, can I buy an immediate annuity when I'm young, like 45 or younger? I'm going to talk about that.

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Just a reminder: played a little basketball in college at the University of Central Florida.

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Shot the ball pretty well. You know, my Mom and Dad were both basketball coaches, so, you know,

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you’re college basketball coaches. So you don't really have a choice. You know, it's not like

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you can go outside and play on the swing set. You know, you're shooting the basketball. I don't know

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if that's good or bad, but if you went out, if you saw our offices in Las Vegas, there's little

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basketball hoops everywhere because, hey, you know, you take shots in life. That's what I tell

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people. We just take shots. There's also guitars, which means we rock and roll and take shots. But

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we're going to talk about youngsters and immediate annuities. And, hey, man, why shouldn't the

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youngsters buy the immediate annuities? I'm going to tell you why and why not after this.

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So, you're 45. I kind of remember that vaguely, when I was 45. I certainly wasn't thinking

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about annuities at that point in time, even though I was kind of pseudo in the business

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from a standpoint of purchasing one. And I don't see a need for people at that young

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age to buy immediate annuities. Now, the immediate annuities are the grandfather of all annuities.

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They're pension products. They were developed in Roman times for the beautiful Roman soldiers and

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their families. That's where the word annuity came from— annual meaning payment, I think, in Latin.

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Last time my Latin friends were over— do you have Latin friends, like speaking Latin? I don't know.

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But the point is that's where they came from, and they've been sold in the United States for

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hundreds of years. They're pension products. So the question is, should a 45-year-old or

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younger need a pension product? Maybe, but it's not all the time. Let's kind of go

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backwards and say, okay, how is a single premium immediate annuity priced? Well, first of all,

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the primary pricing mechanism is your life expectancy at the time you take the payment.

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So if you're 45 years old, the life expectancy at the time of this taping is about 40 years. So

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that's 40 years of payments. That's a lot of payments, and those payments are going

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to be low. Okay? So typically, I would rather see 45-year-olds, youngsters— especially below

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45— you’re in non-annuity products. Okay? You're in growth products. Notice I said non-annuity

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products. I'm the top agent in the country selling annuities, but I'm saying to you, if you're young,

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do not do it. Alright? Do not do it with the money. It should be in pure growth. You

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have time for markets to go up and down. You have time to recover from losses. Okay? You're young.

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Now, let me give you a couple scenarios where that maybe doesn't work, okay,

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and maybe you should look at annuities. My daughters, 29 and 27, living a good life,

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buying nice shoes, flying all over— you know, Dad living under the umbrella of capitalism that Dad

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provides so eagerly. I put in place for them annuities when I pass away— immediate annuities

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that will be purchased when I pass away. It's in the trust that you're going to purchase an

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immediate annuity, and they're going to cuss me every time that payment hits their bank account

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because they didn't get the lump sum. That's called lovingly handcuffing your beneficiaries.

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The other way that this happens pre-45— and this is kind of a sad thing, truly— is when

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people get injured, like in a truck accident or just horrible accidents, and they're young.

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They get what's called a structured settlement. And a structured settlement is, in essence,

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an immediate annuity that the judge hits the gavel and says that company that hurt that youngster has

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to pay them for the rest of their life. It's still an immediate annuity, but that's how that happens.

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Alright? My rule typically is that if you're below 50, you shouldn't be looking at annuities

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unless you can explain to me why. You can send me that email, [email protected]. We probably

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have five to ten cases every single year— and again, we have quadrillion clients— but five

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to ten cases a year where a very young person or a parent of a very young person tells me

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a situation where it actually is suitable and appropriate for them to have an immediate annuity

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in place for that youngster. Okay? And we'll quote that, and we'll work with them and the

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lawyers and the CPAs and everybody to come up with a good plan. Okay? We'll do that.

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And that happens, and most of those stories are either tragic or they're stories like mine,

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where you have, you know, people in your family that are young that you want to set them up in the

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future with immediate annuity payments. And we can show you how to do that and work with your lawyers

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on how to write that into your trust. I mean, I'm not a lawyer, but we've done this a lot. I've done

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it for my own kids, so I know how to do it. But I think if you're watching this and

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you're young— let's just say you're watching this and you're less than 50 years old— I'm going to

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encourage you not to buy an annuity. I know you're saying, "Wait a minute,

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Stan. Isn't that how you make money?" Yeah. But the truth is the

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truth. And my grandfather always said, "If you tell the truth, you don't have to remember

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anything." And this is a great example of it. If you really need growth, I really think, you

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know, from age 30 to 50, you need to be focused on growth. Once you hit 50, you might be turning the

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corner for retirement, chapter two. I did have a guy call me the other day, and he was young. He

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was either 49 or 51— I can't remember. He's in that age range. And he was getting ready to retire,

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so that was pretty cool. And he said, "I want a lifetime income stream," blah, blah,

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blah. And I asked him, etc. We decided to hold for now because one of the things that we have

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to make sure of is there is what's called a pre-59-and-a-half rule that, with annuities,

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there are some penalties if you don't structure it correctly pre-59 and a half.

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That rule, if you want to look it up, is called 72(t). It's the IRS code 72(t) that annuities have

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for lifetime income— have to be structured in a specific way to circumvent a penalty if you start

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doing that pre-59 and a half. So even the annuity industry and the IRS have kind of figured out that

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youngsters should stay in the markets. Youngsters should look for growth. And the rules are in

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place to kind of prevent people from doing that. But there always are exceptions and anomalies out

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there that, you know, we will work with you. And because I'm the top agent in the country,

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we get a lot of calls with people like, "Hey, we have this situation." And we work with them.

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You know, we work with them all the time if there's a situation where an immediate

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annuity is needed for that young person. Okay? Do me a favor. Above my head, there is a

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video I did on lifetime income that will explain everything. It's about life expectancy. And this

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video I just did talks about life expectancy and the downside of if you are so young, you're going

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to have a long life expectancy— the payments will be lower. But that video does explain things for

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you. So take a look at that, and I'll see you next time. My name is Stan the Annuity Man.