Interest Crediting Methods Indexed Annuities

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Hi there, Stan the Annuity Man,

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America's annuity agent, licensed in all

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50 states of Puerto Rico. Today's topic

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is a disturbing one. Interest crediting

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methods with indexed annuities. Get this

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a lot. I've written a book on it. I know

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it backwards and forwards always say I

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there's five people in the world that

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fully understand index annuities and I

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think I know the other four. We'll talk

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about it after this.

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[music]

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So, index crediting methods with index

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annuities, they used to be called equity

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index annuities. Some stupid agents and

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advisors call them hybrid annuities.

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Hybrid's a car. Hybrid's a plant. Hybrid

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can even be a mattress. I found out the

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other day when shopping with my wife at

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the furniture store, but it's not an

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annuity. It's not a hybrid annuity.

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Stan, tell me about the hybrid annuity.

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There's no such thing. I used to draw I

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used to drive a Honda Insight, which was

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the first hybrid car in this country. 68

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miles a gallon, put 275,000 miles on it.

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But that's a hybrid. It's not an

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annuity. But let's talk about index

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crediting methods. I'm going to start

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right here. I've written a book on index

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annuities that describe index crediting

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methods, caps, spreads, and

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participation rates

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till your stomach hurts. I've done, if

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you go to my YouTube channel and you

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type into the space bar indexed annuity

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or index annuity crediting methods. I've

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done numerous videos on the details of

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this. The reason I wanted this topic

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again for my consultants and lawyers and

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all the people that choose this stuff

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for me is I want to make sure that

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you're not buying the dream.

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Indexed annuities were put on the planet

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in 1995

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to compete with CD returns to compete

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with CD returns to compete with CD

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returns. They're not market products.

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I know the pitch. Market upside with no

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downside. Market participation with

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principal protection. Sounds great,

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superhero,

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but it doesn't it doesn't work like

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that. At the time of this taping, check

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the date. There's over 800

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800 versions and combinations of index

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crediting methods. You want to go

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through all 800? Okay, let's do it right

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now. All 800

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were designed to give you CD type

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returns.

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How about that hate mail?

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Stantheanuityman.com.

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But you know I'm right. Written a book

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on it. Fixed index annuity owners

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manual. You can go to my site at

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theanuityman.com and download it or you

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can watch a bunch of videos where I

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actually did go through it. I I mean

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they had to have a vomit bag beside me.

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The reason it's a vomit bag is because

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the way they're sold.

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Well, you know, this boy over here said

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that uh he gave me 7 n 10 11%. Like if

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id have owned it 10 years ago, this is

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what it would have been. If you know the

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potential, the hypothetical, the

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theoreticals,

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the unicorns chasing the butterflies,

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returns that never seem to happen. Now,

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what happens in the index annuity world

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a lot of times, not all the time, okay?

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There's some

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ones that I guess are acceptable, but we

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don't look at that. Okay, we we use

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index annuities as a delivery system for

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the contractual guaranteed income

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writers if you need income in the

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future. But the index annuity story is

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flawed. The majority, not all, the

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majority of index annuities, you can you

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can lock in your gains one day per year.

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The other 364, you're an annuity unic.

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Look it up. Unic can't do a thing.

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You got to wait for hold hold. Like

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Braveheart, right?

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A lot of times those last two weeks

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things happens in in the market and you

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don't get the return. They're CD

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products. There's nothing wrong with

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that. If the index annuity world would

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talk about them as C D products, which

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they are, which is how they were

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designed in 1995, and oh spoiler alert,

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since then have have returned CD

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type returns. The rational people in the

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index annuity world call me all the

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time. What's a CD or a little bit better

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product? Well, let's present it like

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that. I agree with you. CD or a little

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bit better, maybe.

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can't lose money because it, you know,

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it's a fixed annuity. It's not a

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security. It's regulated at the state

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level. It's not regulated by FINRA and

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the NA the NESD and and SEC. It's a

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state regulated uh product that you have

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to pass a state life insurance license

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test and get a 70 on it to sell it. It's

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also the product that attaches the

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upfront bonus, which is garbage, which

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is candy for the stupid.

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100 pennies in the dollar. There's not a

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100 pennies plus 30 extra pennies for

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the bonus. There's not that.

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And now the brokerage world where I came

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from Morgan Stanley Dean would have pain

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of UBS. I guess I say UBS kind of in a

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Swiss Ush.

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Is that Swiss Dr. V? I don't know what

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that is. Anyway, work work there. They

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have a product now that's um called a

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registered index linked annuity. That's

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their version of the index annuity. And

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the reason they have a version is

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because so much money was coming out of

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the brokerage and bank world to the

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index annuity dream pitch garbage that

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they had to come up with their own.

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And they did. And I told I told someone

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the other day because they asked me

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which one would you buy? I said am I on

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a deserted island? Yes. Got to buy just

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these two? Yes. Do you have a loaded gun

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in your hand? [snorts] Yes. Is it

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loaded? Yes. You just asked that. and

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you got to buy one, buy the RIA.

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And I don't sell Rialas. I'll never sell

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a RIA, okay? Because it's not

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guaranteed.

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RIA or index annuity, index crediting

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options, cap spreads, participation

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rates, and go down the rabbit hole.

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There's even firms that do analysis of

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this crap. Unbelievable. I would rather

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you look at your hand and go, you know

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what? there's a line here and and

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there's a line here and and there's

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another line that that intersects those

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two lines. That's more fruitful than

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looking at and trying to figure out

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index call options because by the way

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the index call options cash spreads

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participation rates you can combine them

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too. You can have a cap with a

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participation rate. You can have

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participation rate with the spread.

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[sighs]

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You're [snorts] talking about showing

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paintings to blind people. Oh my

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goodness. Okay. All those mean

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limitations.

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They're limitations to the upside, which

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leads to the overall comment about this

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video. And the reason I wanted to do it,

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if you want market growth, don't buy an

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annuity. Let me say it again, player. If

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you want market growth, don't buy an

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annuity. When I came, my last stop in

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the brokerage world was UBS, UBS in

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English. Um, and I came out to the

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annuity world and I saw that the pitches

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for for equity index annuities at the

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time now index annuities. I couldn't

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believe it. I'm like, what? You're

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pitching that for market growth? No,

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that's that's a principal protection

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products, a CD product. That's fine. No,

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it's got it's morphed into this crazy,

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insane, overhyped, over pitched,

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overpromised product. We probably sell

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more index annuities in in in the

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country than anybody.

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But we sell them as a delivery system

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for the income writer, not for the

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accumulation story. If you really if

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you're if you if you're an engineer, if

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you say now, I just still have to know.

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I still just have to know. Well, then go

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to my site, download the book on index

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annuity owners manual and read about cap

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spreads and participation rates. I broke

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it down in simple, easy to understand

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stanglish. That's English Stan style.

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and you can understand it. Or you can

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watch more videos on these. Early in my

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video career, they convinced me somehow

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to do the ones on the actual how they

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work. Good lord, [sighs]

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terrible. You know, my comment now is

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why are you doing that? What's your

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goal? Is your goal market participation?

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Then go by then go by the market. Don't

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buy an annuity. Can't have your cake and

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eat it too, even though it's presented

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as such. If you want a CD type return,

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then my advice would be get a MA

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multi-year guarantee annuity, which is

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the annuity industry version of a CD.

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Why? Good question. It's because the the

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interest rate guarantee is guaranteed.

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There's nothing guaranteed on the index

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side. Most of them do have what's called

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a declared rate. In English, that means

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fixed rate. instead like if you said I

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don't want the cap and the spread and

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the participation rate or whatever

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combination I just want a declared rate.

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It's horrific. It's it's one half of

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what you can get on AMA because they

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want you to participate in the index

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options. So in summary, if you want

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market growth, don't buy an annuity. If

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you're overanalyzing index annuities,

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CAT spreads, and participation rates,

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you're wasting your darn dang time.

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Email me at stantheananuityman.com

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if you want to get me on the phone

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oneonone and I will describe this. I'll

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go over it and if you've purchased one

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and held it for two or three years, you

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know that it's not a market return

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product. 99% of you, one last thing

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above my head correlating to this is why

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people still hate annuities. Why people

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still hate annuities is a lot of the

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reason of what we talked about in this

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video. hopes and dreams and unicorns and

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caps and spreads and participation

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rates. Give me a break. There's CD

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products. That's fine. Sometimes you do

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better than CDs. Sometimes you do less

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than CDs. Sometimes you get zero. My

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comment is why wouldn't you just buy MA

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and get and get a guaranteed interest

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rate. But that video you're going to

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have fun with because I it's it's why

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people still hate hate annuities. They

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don't hate me though, I don't think.

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Well, I think some of the industry does,

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but they don't they don't know me yet.

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you they haven't they haven't sat down

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and as they say in the south they've not

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broken bread with me. Let's break some

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bread with some butter, you know,

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because I am right about this. You buy

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an annuity for what it will do, not what

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it might do. Thanks for letting me vent.

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We'll see you next time.