How Interest Rates Affect Specific Annuities

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How do interest rates affect specific

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annuities? Hi there, my name is Stan the

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Annuity Man, America's annuity agent,

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licensed in all 50 states in Puerto

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Rico. Good question. A lot of people get

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fixated on the Fed, the 10ear Treasury,

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interest rates. I think you're going to

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be surprised on how annuities are

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affected by interest rates, and we'll go

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over all of that after this.

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[music]

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So, if I had a dollar for every time

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someone said, "I'm just going to wait

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until the Fed meeting, then I'm going to

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make my decision on annuities." I I

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don't say it to them on the phone, but

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I'll say it right here. That's the

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dumbest thing I've ever heard. Okay?

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I understand that we've been trained as,

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you know, watching CNBC and Fox Business

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and reading the Wall Street Journal and

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Baronss and all that stuff about

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interest rates and the Fed and all that

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stuff. But [clears throat]

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with annuities, it's different. And and

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I say annuities plural because there's

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so many different types of annuities.

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All right, so let's look at there's four

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different there's four things that

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annuities solve for contractually. The

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the acronym I came up with is pill. It's

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easy to remember. P stands for principal

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protection. I stands for income for

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life. L stands for legacy. And the other

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L stands for long-term care. Okay. So,

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um, income for life. Let's start with

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those. There's four types of products

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that solve for lifetime income, meaning

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it's going to pay for as long as you're

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breathing. There's no ROI until you die.

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You can't figure it out until you pass

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away. So those four are single premium

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immediate annuities acronym SPIA,

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deferred income annuities, acronym DIA,

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qualified longevity annuity contracts,

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acronym QAC, and then income writers,

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which are attached to policies, but they

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provide the income writer provides a

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lifetime income guarantee.

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With all four of those, interest rates

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play a secondary role. Focus.

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Interest rates play a secondary role

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with lifetime income. Lifetime income

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products and guarantees. The primary

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pricing mechanism is life expectancy if

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it's just run on your life or life

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expecties

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if it's run joint life. And if it's run

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joint life, typically the younger of the

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two of you, that's where the company's

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going to focus in price. And obviously

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just common sense would tell you um the

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guarantees would be higher on one life

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guarantee than two life guarantee.

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That's just common sense.

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Interest rates don't move the train, the

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pricing train. Life expectancy does. And

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right now at the time of this taping,

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check the date. Life expectancy is a

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bargain because AI, artificial

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intelligence and the medical

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breakthroughs that's going to create

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um it hasn't hit the life insurance

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industry yet. So eventually life

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insurance companies will will lengthen

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out those life expectancies which means

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the payments will be more which means

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they'll be lower. So I think they're a

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bargain right now. But also too

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interest rates play a minor role a

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secondary role in life lifetime income

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pricing because annuity companies life

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insurance companies that issue annuities

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life insurance companies they they're

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looking for age ranges tanches. Think

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about it like this. Think like when you

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put together your first portfolio, you

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had large cap, small cap, international

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value mutual funds. Let's just say that

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as an example. Life insurance companies

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that issue lifetime income products.

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They're looking for age ranges. So,

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think about your age, a football stadium

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of everybody your age and your gender.

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If the football stadium is full, the

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life insurance company's going to lower

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the guarantee to not attract you because

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they don't need any more of you.

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If the upper bowl's empty, then they're

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going to raise the guarantee to attract

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you to fill it. Because remember,

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annuity, life insurance companies are

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they issue annuities and life insurance

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companies have the big buildings because

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they know when we're going to die.

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So if they have trunches filled of every

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age range and their actuaries come out

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of the closet in the office and go,

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"We're good. We're lined up." Then

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they're happy.

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give you an example you won't believe

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but it's true. There's a lot of times

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that the Fed will either raise rates or

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lower rates and the incomes the income

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guarantees will do the opposite. Why?

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Because they need your age. That's the

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reason that annuitities are commodity

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products. We shop all carriers for the

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highest contractual guarantee because I

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know that one of those A+ or better

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carriers is going to want your age range

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and they're going to raise the

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contractual guarantee to get your age

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range in their portfolio because they

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know when you're going to die.

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Interest rates be damned. You can't time

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it. There is no arbitrage moment. There

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is no sweet spot. You can't thread the

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needle. I know that you say that you

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can. You cannot. If anybody could, it'd

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be me because I [clears throat] have

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Wall Street training with Morgan, UBS,

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Payne, Payne, Weber, Dean Witter, and

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I'm the top guy out here in the annuity

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side. So, I know both sides. There's no

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arbitrage. These are commodity products.

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Now, let's let's go to another one.

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Multi-year guarantee annuities, which is

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the annuity industry version of a CD. I

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call it an annuity bond. Guaranteed

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interest rate for a specific period of

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time. And you're saying, "Well, wait,

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Stan, now that one's got to be linear.

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It's got to be interest rates. MAS move

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with interest rates. The answer is no.

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The answer is no. Once again, life

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insurance companies issue MAS. Life

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insurance companies have many levers of

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profit within their company. Life

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insurance, lifetime income products,

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legacy bond portfolios, mortality risk

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pools, and then interest rates. So,

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interest rates play about 20 25% pricing

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role. Don't believe me? Here's an

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example. Same thing as I gave with the

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the lifetime income. Sometimes the Fed

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will lower interest rates and MA

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guarantees will go up.

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Sometimes the Fed will raise interest

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rates and MA guarantees will go down

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with some carriers, not all.

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Which is why we shop all carriers.

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That's the reason I represent everybody.

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That's the reason names and brochures

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and anybody showing you brochures and

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and logos, it's a joke. It's their tech

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people going crazy. There's no need for

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that. It's a guarantee. It's a

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contractual guarantee. I don't care what

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their logo looks like. I don't care

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about the product name, product

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brochure. I don't care about any of

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that. You shouldn't either, by the way.

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So, interest rates do play a role. They

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don't play a primary role.

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A lot of it has to do with capacity.

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Okay. Now, I'm not even going to talk

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about the potential hypothetical dream

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scenario products that never work out.

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Variable annuities, index annuities,

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registered index, linked annuities.

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Those are growth products you should

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never buy. Never buy an annuity for

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growth. Buy annuities for the

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contractual guarantees.

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Growth should never have a surrender

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charge attached to it. If you just

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remember that, you'll be okay. I mean,

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go buy stocks and ETFs and things that

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are liquid.

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Vanguard mutual funds. I'm not for

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Vanguard. I'm just choosing one.

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Vanguard, Fidelity, whatever. The point

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is not an annuity for growth. So,

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interest rates, who cares? But interest

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rates primarily looking at lifetime

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income products and then principal

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protection. Remember the pill principal

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protection, income life, legacy, and

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long-term care. The P and the I is

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primarily what people look for with

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annuities.

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Interest rates play a secondary role.

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Apologies to the Fed and all the Fed

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watchers out there. And if you don't

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believe me, believe me. I'm gonna prove

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you wrong. Go for it, player. Been doing

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this for three decades. Okay? I know

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what I'm talking about. I've seen it.

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Annuities are commodity products.

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Interest rates play a role, but it's

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secondary.

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Okay? Go to my site at the annuity man.

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Um, it's I we just launched a new site

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and we're we're got all kinds of new

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stuff happening. But one of the things

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I'm proud of is that on our quote

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system, we're the only ones doing this.

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You can get a quote quoting all carriers

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like with a SPIA DAQ like income writer

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and not put in your information. Just

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put in your date of birth, your gender,

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and your state of residence.

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Why do we do that? We do that because we

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want you to see it. A lot of you don't

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want to put in your information or you

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put in a fictitious name and a

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fictitious um date of birth. Don't do

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that. You don't have to do that anymore.

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Just put in your real date of birth and

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mail. Nobody's going to know who it is.

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Annuity companies price life expectancy

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to the day. You can you can look at our

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MGA feed without signing up. See it for

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free. Download my books for free. Why do

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I do that? Because I want you to

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understand how these contractual

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guarantees work. We want you to be a

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client. Don't be confused. We are the

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best. We are the biggest. I have the

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biggest staff. It's not just me in a in

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a car. Some I heard someone the other

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day did a review on me goes just stand,

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you know. It's just stand. Yeah. Just

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stand in a in a huge building full of

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people in a huge

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um

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bunch of salaries I have to pay. Huge

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overhead. But the point is we're open 60

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days, 60 hours a week, Monday through

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Friday, 12 hours a day. and then eight

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hours on Sunday. That's 68 total. Give

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us a shot. Email me

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stantheanuityman.com. You can schedule a

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call. One last thing. There's a video.

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There's a spinning clock. There's a

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video is going to appear called

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Attention annuity haters. You already

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own an annuity.

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Might want to watch that one because you

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might own more than one. I love when

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people say, "I hate annuities."

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You know, I I wear a shirt that's iheart

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annuity haters. I'll wear it through a

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mall or out to eat or in an airport and

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people like, "Yeah." I'm like,

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"Hypocrite."

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Because you already own one. You already

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You might own more than one. Watch that

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video. You'll get a kick out of it. All

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right. I do these once a day, seven days

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a week, video a day until I clean up

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this industry. My name is Stan the

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Annuity Man. See you next time.