What Is A Participation Rate In An Annuity?

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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 in Puerto Rico. Today's topic

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is a weird one. What is a participation

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rate in an annuity? I'm assuming the

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question is about indexed annuities,

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which is where a participation rate

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index option can be found. Um, we're

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going to talk about that. You're

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probably not going to get the answer

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that you're expecting, but it's going to

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be the truth. So, I would advise you to

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hang in there after this.

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So participation rate in an annuity in

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this case I think it's what you're

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probably asking index annuity index

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annuities were put on the planet in 1995

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to compete with CD return since that

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time in the biggest raging bull market

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of all time it has produced CDT type

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returns

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not market returns not what you hear at

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the expensive steak dinner seminar are

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or some fraudulent pitched thing you see

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on the internet. Market upside with no

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downside. Market participation with

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principal protection. 8 10 11 12 17.

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Come on, man. Returns. Come on. It it's

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it's not participation rate is one of

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the limiting levers.

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Cap, spreads, participation rates within

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an indexed annuity.

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It's a limiting part. Okay. Now, people

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say, "What if it says 100% participation

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rate?" Well, what what if it says that?

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Well, remember with most index

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annuities, you can only lock in the gain

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one day per year. The other 364, you're

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what I call an annuity unic

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if you want to pull it up. That's what

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you are. You can't do a darn thing.

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Okay? some there are some longer term

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index options that allow you to to lock

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in during that longer term time period,

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but boy are we getting down a rabbit

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hole. Now, what I want to tell you is if

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you're looking at participation rates,

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you're looking at the wrong thing. If

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you're looking for market growth

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attached to a participation rate, you're

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looking for the wrong thing. If you're

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thinking that participation rate can

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give you your cake and eat it too,

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you're getting ready to sign the

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paperwork and get taken for a ride. We

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have no problem with index annuities. We

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use them as a delivery system for the

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income writer guarantee that's

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contractual for future lifetime income.

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That's how we use them. We don't use

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them as a standalone. We just don't.

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Why? Because the annuity companies can

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typically typically and historically

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change the rules at their discretion. So

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you might have a really large

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participation rate, okay, the first

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year, second year is low. They get to

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change that at their discretion.

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It is not a market product. It is not a

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security. It is not a replacement for

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stocks, bonds, mutual funds. If you want

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to get market growth, go get market

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growth. I do not care what Johnny Apples

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Seed agent showed you as non-g

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guaranteed return scenarios.

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Well, if you'd owned it 10 years ago,

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you'd have gotten this. If you owned it,

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you know, the the the participation then

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was great. 10 years ago, come on.

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Potential hypothetical theoretical

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unicorns chasing the butterflies don't

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pay the bills.

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If you're looking for principal

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protection and a good return that's

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contractual, then do a multi-year

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guarantee annuity. Migga, it's the

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annuity industry's version of a CD.

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Annuity industry put out two CD type

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products. Indexed annuities in 1995 and

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MAS forever. They've been here forever.

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One's a CD product that has a guaranteed

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interest rate return. Mas. The other is

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a CD product without a guaranteed

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return. Which one do you want? Listen,

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if you're still in dream world and

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upside world and let's hit a home run

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world, then don't buy an annuity of any

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type. That's including variables and

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RIAS, which I don't sell and never will,

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and index annuities, which I sell, but

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not like you think I do. Attached income

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writers attached for lifetime income.

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What's the participation rate of an

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annuity? If you're asking that question,

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you're probably thinking market returns.

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If you're thinking market returns, then

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don't buy annuities. Annuities solve for

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four things. The acronym that I came up

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with that works and that is the truth is

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pill. P stands for principal protection.

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I stands for income for life. L stands

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for legacy. The other L stands for

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long-term care.

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There's no G for growth. There's no M

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for market. There's no B for Bitcoin.

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There's no N for Nvidia.

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Okay? You don't buy dreams

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with annuities because you're going to

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own the contractual realities.

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So, participation rates are part of that

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dream sales pitch. Caps and spreads,

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upfront bonuses, which is candy for the

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stupid

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100 pennies in the dollar. There's not

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an additional 20 cents over here for the

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bonus. 100 pennies in the dollar player.

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So, I know what you're you that that

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jack wagon didn't even go into the

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details of a participation rate. It's

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because it's a waste of time.

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If you're buying it for that, you're

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buying the wrong product.

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In fact, if you're buying it for that,

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you shouldn't even buy be buying a

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product. You should be buying the

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markets

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where you have unlimited upside.

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Unlimited.

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I know there's people, well, this one

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says a 104% participation rate. That's

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what he said right here, son. Again, one

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day per year, get to lock it in. The

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other three 364, you're an annuity unic.

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I had a guy call me the other day and

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with with index annuities, those in

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indices indexes, okay? And I think

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there's 50 to 60 they're using. You're

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thinking, Stan, wait a minute. There's I

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don't think there's that many indexes

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out there. There's not. They make them

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up out of thin air. Okay. So, my

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favorite is they'll make up like the XYZ

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duplicator index. You know, I've never

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heard of that. Well, that's because it

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hadn't existed until three months ago.

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And then Johnny Apples Seed agent says,

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"Well, if you owned it 10 years ago,

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hey, wait a minute, Johnny. It's only

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been on the planet for three months. How

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do we do a 10 10 year back testing? How

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do we do that? Should be illegal."

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What I was saying is all of these

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indexes, indices do not include

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dividends. And you're saying, "Wait a

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minute, Stan. What's what's that got to

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do with the price of eggs in Texas?"

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Well, I'll tell you what it has to do

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with Ernie S&P 500. Over 50% of the

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returns are dividendbased.

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If you want S&P returns, go buy the S&P

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500 at Vanguard. That nothing or

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Fidelity or Schwab or whoever. I I don't

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I don't have any skin in the game with

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these people. The point is go buy the

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S&P 500.

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You don't need an index annuity to limit

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your returns on the S&P 500. Well, I

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could lose money on the S&P 500. Yeah,

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but you also gain. If you if you're

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thinking like that, then your portfolio

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is not in proportion and allocated

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properly.

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If an index annuity is in your portfolio

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for market growth, you've made a

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mistake.

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If an index annuity is in your portfolio

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with the participation rate for CD type

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returns that are not guaranteed, then

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great. My question to you then is why

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wouldn't you just buy the CD with a

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guaranteed return? Stop hoping and

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dreaming. Stop trying to thread the

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needle. Stop trying to throw the dart at

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it.

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Stop trying to be smarter than your

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neighbor because you're not. I had a guy

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call me the other day and he goes,

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"Stan, I need you to really, you know, I

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watch your videos. I need you to really

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explain this index annuity. It's new to

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me. It's new to me, son. It sounds

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great. I'm like, Fred, it's been around

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since 1995. What rock have you been

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under? Because if you go to into any

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bank or any brokerage firm or eat at any

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steakhouse, someone's going to try to

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sell you indexed annuity. And there's

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actually index annuity companies out

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there now that are multi-level marketing

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companies that sell index annuities.

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Spoiler alert.

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All annuity commissions are built in and

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hidden from the client. Guess which

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one's the highest.

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Huh? Yeah. Don't make it bad. Don't make

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it bad because we sell them for the

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income writer guarantee as a delivery

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system. Someone says, "Why do you do

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that if you if you don't like them all

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the all the time?" I'm like, "Because we

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can't just buy an income writer as a

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standalone product. It has to ride

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on top of the policy." And with index

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annuities, you can attach writers to to

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RIA's um RIAS and variable annuities and

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index annuities. And we've historically

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found that indexed annuity income writer

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guarantees are the highest contractual

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because what I always say, A+ or the

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number, A+ in the number, A+ in the

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number, quote all carriers, A+ or better

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or and the highest number. That's it.

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Not or and A+ and the highest

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contractual guaranteed number. So, I

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would encourage you go to my site,

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download the indexed annuity owners

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manual. I go through all of this

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participation rate cap spread crap that

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you're wasting time on.

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Okay, run quotes, watch the videos, etc.

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And above my head spinning clock is

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about a video I did called Why People

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Still Hate Annuities. and why people

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still hate annuities. A lot of it

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revolves around this product's sales

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pitch. It needs to be cleaned up. It

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needs I'm not going to say regulated

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because boy, that's scary. But it needs

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to be cleaned up. I'm just going to tell

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you if it sounds too good to be true, it

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is every single time. If you nudge your

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spouse at the at the steak dinner and

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say, "That sounds fantastic. I cannot

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believe that product exists." It

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doesn't. You're getting ready to be the

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sucker at the table. All right. Be

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careful out there. Get in contact with

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me, stand theanuityman.com. Let me tell

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you the truth about this stuff so you

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can make a good decision on your terms

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and on your time frame. All right,

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thanks for hanging in there with me. See

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you next time.