What Are The Downsides Of Indexed Annuities?

0:00
Hi there, Stan the Annuity Man,

0:01
America's annuity agent, licensed in all

0:03
50 states in Puerto Rico. Sporting the

0:05
red Adidas retro Stan the Annuity Man

0:08
custom jacket, wanted by all but owned

0:11
by one. That would be me. They don't

0:14
even think they make these anymore. This

0:15
it's all like for thin people. Like this

0:17
is kind of boxy. They're all like

0:19
tapered, which means that when people

0:21
wear them, they look like a sausage, you

0:23
know? It's like Yeah. Because it's not

0:24
me. People like the two guys behind the

0:26
camera. They're like they're like tight.

0:28
They're like they're like chiseled tiger

0:30
flesh with steel. It's unbelievable. I

0:33
mean, they're just cut up. I mean, they

0:34
move and it's like a donus. It's like

0:36
what is I don't know what's going on.

0:39
But anyway, the um topic of today, what

0:41
are the downside of indexed annuities?

0:44
You know, I'm going to be fair as only

0:46
as I could be. And I'm going to give you

0:48
the upside, too. But there are some

0:50
downsides to index annuities because I'm

0:52
assuming the reason you clicked this is

0:54
you someone pitched it to you and you

0:56
walked out going

0:58
that sounds great.

1:01
And you go, it can't be that great. I've

1:03
got to I got to find some, you know,

1:04
pessimistic realist communion on the

1:06
internet that's going to tell me the

1:08
truth. Hello, here I am, Stan the Man.

1:13
We're going to cover it all after this.

1:21
So, you like pessimistic realist? Yeah,

1:24
that's me. Forget glass half full. I'm

1:26
I'm looking for the glass. Okay. Indexed

1:29
annuities were put on the planet in 1995

1:31
as a alternative for CDs, not the

1:35
market. It's the agents and adviserss

1:37
who have bastardized this whole thing

1:40
and it's now just spiraling out of

1:44
control into sales pitch nonsense.

1:46
Let's talk about the upside real quick.

1:50
How's that on the mic? Is that good?

1:56
Upside of fixed index annuities is

1:58
they're principal protected products.

2:00
You're not going to lose any money. I

2:01
hit that. Hit that. You hear that? Okay.

2:04
That's the And I'm on I'm on top of it

2:07
now. It's the topic, man. It's the index

2:09
annuity topic.

2:11
All right. Upside principal protected.

2:14
You can attach an income writer for

2:16
lifetime income in the future if you

2:18
need it. If you answer the two

2:19
questions, what do you want the money to

2:21
contractually do? And you say lifetime

2:22
income and when do you want those

2:23
contractual guarantees to start? And you

2:25
say two, three, seven years from now.

2:27
That's an income writer. Okay, that can

2:28
be attached to an index annuity. That's

2:30
great. We don't look at the index

2:32
annuity from an accumulation standpoint.

2:34
So, let's get to the downsides of index

2:37
annuities. And before you say, well,

2:39
you're just going to take a big dump on

2:41
this thing. Listen, remember the thing I

2:43
just told you about index newies of

2:44
income writers? We sell more than

2:46
anybody. We just don't pay attention to

2:48
the caps and spreads and participation

2:50
rates and upfront bonuses and all that

2:52
crap. Which leads to the downside. The

2:55
downside is a sales pitch. Here's this

2:57
typical sales pitch. Before I say it,

2:59
I'm going to warn you, it's going to

3:00
sound so good you're going to want to

3:01
buy it. Hey, you get a 25% upfront

3:05
bonus, maybe up to 50% depending on the

3:07
carrier. Upfront bonus, free money. Um,

3:09
you get market upside with no downside.

3:11
principal protection with with market

3:13
participation and you get free long-term

3:15
care all in one policy called a fix

3:17
fixed index annuity. Where do I sign

3:19
Stan? All right, slow down there,

3:21
Chester. Okay, that's the sales pitch.

3:24
That's what's wrong. Upfront bonus candy

3:27
for the stupid. There's not a

3:29
philanthropist in the annuity compuity

3:31
world at index annuity going, I don't

3:33
care what Stan says. I love people and

3:36
I'm going to give money away. That's

3:38
what I'm going to do today and I'm going

3:39
to give it in the form of an upfront

3:41
bonus with an index annuity. No, there's

3:44
nobody that does that. 100 pennies in

3:46
the dollar. So, if there's a 25% upfront

3:48
bonus, that doesn't mean Chester there's

3:50
125 pennies. Okay. No. 100% 100 pennies

3:54
in the dollar. It's just part of the

3:55
overall contractual guarantee. Market

3:57
upside with no downside, complete not

3:59
garbage. I don't even know what to do

4:00
with that one other than say crapola

4:03
index annuities or CD products. Period.

4:05
And the long-term care part of it is

4:07
complete crap because that's a health

4:09
insurance product. Index annuities are

4:11
life insurance products. So that doesn't

4:14
jive as they say on the street. Okay. So

4:17
the bad of index annuities, what's the

4:19
downside? That sales pitch and that

4:22
sales pitch that so many people buy that

4:24
sales pitch of here's another one. If

4:26
you'd have owned it 10 years ago, Mr.

4:28
Jones, if you look at these back tested

4:30
numbers, Mr. Jones, if you look at the

4:32
potential, Mr. Jones

4:35
and Mr. Jones. Well, that looks good.

4:37
Like 7 11 13%.

4:42
Doesn't work. Doesn't work like that.

4:43
Oh, by the way, I forgot to tell you.

4:45
Um, the index annuity companies can

4:47
change the rules after year one. Hello.

4:51
Hello. Hey. Hey. Let me say it again.

4:56
With the vast majority of index

4:58
annuities, after year one, the annuity

4:59
company can change the rules on how the

5:01
gains are calculated.

5:04
Hello.

5:05
Get your attention on that one. Let me

5:07
give you another example of that. You

5:09
buy a 10-year fixed index annuity. You

5:12
know what the cap and the spread is

5:14
going to be on on the first year because

5:15
Johnny Apples Seed agent told you,

5:17
right? The other nine, he can't tell

5:19
you.

5:21
Hello. Hey, how you doing? Didn't hear

5:25
that one, did you?

5:28
Did you also hear the one where the you

5:30
attach the income writer? The income

5:31
writer is not covered by the state

5:32
guarantee fund. Hello.

5:37
Gosh, Stan, why didn't they tell me all

5:39
these things? I don't know.

5:43
Did you know that there's over 800 index

5:45
options and they're all pretty much

5:46
designed to create the same return?

5:51
800.

5:52
Did you know that with most index

5:54
annuities, the gains can only be locked

5:56
in on the contract anniversary date? the

5:58
other 364 you are what's called in the

6:01
Greek world an annuity unic look it up

6:05
can't do a thing for 364 days were you

6:08
also told that the index the index

6:10
options let's say it's on the S&P that

6:13
S&P doesn't include dividends and

6:14
dividends historically with S&P 500

6:17
returns represent over 54% of the

6:19
returns

6:21
it's not included with index were you

6:23
told that a lot of the indices that are

6:26
used with index annuities were created

6:27
out of thin air. So when they show you a

6:29
back tested number and it's only been on

6:31
the planet for three months, how do they

6:32
show you 10 years ago when it's only

6:34
been on the planet three months? Most of

6:37
the problems with the index annuities

6:39
that are out there are how they're being

6:41
sold, pitched, promoted, overhyped.

6:46
Stan, sounds like you hate them. Tell me

6:48
again how you use them. I'm glad you

6:49
asked. You asked two questions. What do

6:51
you want the money to contractually do?

6:53
When do you want those contractual

6:54
guarantees to start? If you said in the

6:55
future we're going to quote deferred

6:57
income annuities and income writers

6:59
attached to index annuities yet we're

7:01
going to ignore the index annuity. Draw

7:03
on down sheet down the sheet of paper.

7:05
Here's the paper. Here's the line. Index

7:07
on this side. Don't care. Income writer

7:11
on this side. That's all we care about

7:13
because that's contractual.

7:15
We just know you're not losing money

7:16
over here. Great. It's a crappy CD.

7:18
Great.

7:21
If you go into a index annuity thinking

7:23
you're going to get market returns,

7:25
you're not. You're not. You might get it

7:28
one out of every six years,

7:32
but the blended return is going to be a

7:34
CD. And there's nothing wrong with that.

7:38
But don't be don't be don't think you're

7:41
Gordon Gecko going, I found this product

7:44
the other day, son. Never heard of it.

7:46
Index annuity. I know that Bill over

7:48
here, my neighbor doesn't know about it.

7:50
boy, I'm gonna kill it. I'm gonna get a

7:51
30% upfront bonus. I'm gonna get market

7:53
upside with no downside. No, you're not.

7:57
You're just not. And I hate to be the

7:58
grim reaper of annuity truth. I am the

8:00
walking middle finger of annuity truth,

8:03
but I'm also the grim reaper of annuity

8:04
truth. I'm not going to allow you,

8:07
hopefully you'll be my client, but even

8:09
if you're not my client, I'm not going

8:10
to allow you to fall for that. I'm not

8:11
going to allow you to believe that's too

8:12
good to be true because it is too, it's

8:15
Listen, if it sounds too good to be

8:16
true, it is every single time without

8:18
exception. I get passionate when I hear

8:20
this stuff because I was

8:24
story of the day. Talked to a lady the

8:26
other day. She was sold seven different

8:30
index annuities, four from the same

8:33
company. Average rate of return over a

8:35
seven-year time period was less than 2%.

8:38
And I'm not saying that happens with all

8:40
index annuities, but that's not why she

8:42
bought them. Well, he told me we're

8:45
going to get market returns.

8:48
Okay.

8:49
Be careful out there. If you want

8:51
growth, never buy an annuity. If you

8:53
want growth, never buy an annuity. Let

8:55
me think. If you want growth, never buy

8:57
an annuity.

8:59
If you want contractual guarantees, buy

9:00
an annuity. It's that simple. Don't make

9:03
it any more difficult than that. And if

9:05
anyone tells you otherwise, they're full

9:07
of crap. And they can call me. They can

9:09
email me. They can come see me. It's

9:12
okay. Listen, the hate mail flows. But I

9:14
know I'm right. And they know I'm right.

9:17
And you better know that I'm right so

9:19
you don't make a bad mistake. Go to my

9:22
site if you want to learn about index

9:25
annuities. I've written a book on it.

9:26
Owner's manual about I think it's 90

9:28
pages. Read it. Vomit. You'll get it.

9:31
You'll understand it. There's five

9:33
people on the planet that know about

9:34
index annuities. I think I know the

9:36
other four. I'm one of them. Do me one

9:38
last favor. I I did a video on how

9:40
annuities can help your family. And

9:43
you're saying, "What?" Yeah. like

9:45
contractually help your family, provide

9:47
things when you're alive and when you're

9:49
dead. And I'm going to go over all of

9:50
that because I do that for my family as

9:52
well. I got two daughters, a grandson.

9:54
Um, and they're set up they're set up

9:56
with contractual guarantees and I'll

9:58
tell you how to do it. All right. Did

10:00
you get the the gist of the whole topic

10:02
here, Chester and Chesterette?

10:06
Hope so. If not, set a time with me and

10:09
I'll explain it further.