How Do Annuities Actually Work?: Q&A Friday

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welcome to Q&A Friday I'm your host Stan

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the annuity man America's annuity agent

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licensed in all 50 states today's

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question is a big one and it could take

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me hours to uh answer but I'm going to

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do it in a couple minutes it's how do

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annuities work that's the question how

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do annuities work first thing is there's

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many types of annuities most people

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think that there's just income annuities

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there are four types that are Income

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annuities we'll cover that in a second

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then there are what's called

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accumulation annuities there's CD typee

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annuities there's variable annuities Etc

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but at the at the start at the at the

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starting line life insurance companies

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issue

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annuities okay life insurance companies

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life know lifetime income annuities are

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primarily based on your life expectancy

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but all annuities are not income

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annuities so for instance multi-year

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guarantee annuities are the annuity

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Industries version of a CD and another

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CD type product is an indexed annuity

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even though you're going to hear that's

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the best thing since sliced bread and it

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gets you everything and market growth

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and all that stuff no it's put on the

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planet 1995 for CD returns but just

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think of it like this you you have a

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contract with a life insurance company

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you are transferring risk so you're

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taking risk off your shoulder you're

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transferring that risk to the life

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insurance company that's issuing the

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specific type of annuity that you have

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chosen and the way to choose is ask two

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questions

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what do you want the money to

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contractually do when do you want those

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contractual guarantees to start and then

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the acronym that I've developed that

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tells you what annuity Sol for is very

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easy it's called pill P stands for

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principal protection I stands for income

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for Life L stands for legacy leaving

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money to your heirs and the other l l

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stands for long-term care so you're

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transferring the risk to the life

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insurance company that's issuing the

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annuity to solve for either principal

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protection income for Life Legacy or

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long-term care that's it there's no

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growth you don't transfer the risk for

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growth if you're buying a Miga which is

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a CD type product the annuity Industries

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version of a CD you're transferring the

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risk to the life insurance company to

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pay that

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guaranteed annual interest rate for the

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specific duration that you have chosen

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so how do annuities work they transfer

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of risk products when you buy one

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hopefully from us the annuity man.com

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you're going to get a policy in the mail

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from the life insurance company that

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issued the annuity that policy is a

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contract between you and the life

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insurance company so when you buy anues

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depending on what you're trying to solve

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for remember the two questions and the

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pill acronym you are signing a contract

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that the life insurance company is going

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to back up that transfer risk guarantee

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that you're looking for and that that's

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how annuities work in the Stan the

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annuity man simplistic world of brutal

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factual annuity truths that people have

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come to know and love even my wife

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occasionally my name is Stan the annuity

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man I'll see you next time