The five reasons not to buy an annuity. Really? Yeah. Not everybody needs an annuity. Every single video/ article out there has "five reasons to buy an annuity," "five reasons you should own an annuity," "the reason you have to have an annuity." How about the five reasons that you shouldn't have an annuity? How about that?
The first reason not to buy an annuity is if you are too young. So let me define what young is in the annuity world. For a lot of products, they don't even issue them until your age 40. So if you're in your forties and fifties and you're still looking for market growth, then don't buy an annuity. So really, at about age 50, 55 ish, if you're looking to transfer risk and transition to that second part of your life, then we can look at it. But anything before that, stay in the stock market.
The second reason not to buy an annuity is if you don't have enough money. And let me define what having enough money is in the annuity world. When you submit the application, the annuity company receiving that will look at your income will look at your investible net worth. So if you're making $20,000 a year and have $80,000 invested, they're not going to approve you for an annuity. So when you talk to me, I'm going to be very honest about how you can qualify, and I’m also going to tell you my opinion on if you don't have enough money and you need to accumulate more.
The third reason that you should not buy an annuity is if the annuity is not suitable or appropriate. Let me give you a couple of examples. Number one, if you're taking too much money and putting it into an annuity. The biggest thing that I see is people put too much money into an annuity. So that's the first thing that we're going to cover. And the second thing is what you're trying to achieve. Remember my two questions. What do you want the annuity to do contractually? And when do you want those contractual guarantees to start? From those two answers, I can determine if it's appropriate and suitable that we need to look at annuities and maybe run some quotes, or from those two answers, I can tell you that you do not need an annuity.
The fourth reason you should not buy an annuity is when your expectations are not in line with the contractual realities. Remember, annuities are contracts. You buy them for the contractual guarantees of what they will do, not what they might do. Now, for a single premium, immediate annuities, deferred income annuities, qualified longevity annuity contracts, and multi-year guarantee annuities, what you see is what you get. Those are contractual guarantee products. We see the expectations, not in line with contractual realities, inthat indexed annuity world, where they're talking about market returns and all that stuff. Remember, fixed index annuities are CD products. You’re going to buy a contract so if you want to know what you're buying, ask the agent for a specimen policy. I'll send you one, and any good agent will send you one as well.
The fifth reason not to buy an annuity is if you don't need a PILL. Now, what's a PILL in the annuity world? It's an acronym that I came up with that describes if you need an annuity. P stands for principal protection. I stand for income for life. L stands for legacy, and the other L stands for long-term care/confinement care. If you do not need to contractually solve for one or more of those items in the PILL, principal protection, income for life, legacy long-term care, confinement care, then you do not need an annuity.
Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.