We're talking today about how to buy an annuity. Don't get all crazy out there that I'm not just pinching and selling. What we're going to talk about today are the questions that you need to answer when considering if an annuity of any type is valid. Should you buy an annuity? Remember, there are many types of annuities, but should you buy one? We will go over the questions that you need to ask and answer to determine if an annuity is suitable and appropriate for your specific situation.
What are some of the questions that you need to ask and answer to determine if you need an annuity of any type? I've come up with two straightforward questions that I ask every person who schedules a call; What do you want the money to do contractually, and when do you want those contractual guarantees to start?
From those two answers, I can determine if you do not need an annuity or need an annuity, then I'll know what type to quote. If a person wants market growth, then they don't need an annuity. Do you need market growth? If the answer is yes, then do not buy an annuity of any type. Now, I understand that's not what you're going to hear at the bad chicken dinner seminars and some web pages. When an agent is pitching you an annuity for market growth, then there are limitations to that annuity growth.
In my opinion, having worked with Dean Winter, Morgan Stanley, Paine Webber, and UBS, when you want actual market growth, you do not need to buy an annuity. The two types that are typically pitched under the market growth platform of hopes and dreams are valuable annuities; disclaimer, I do not sell them. I just don't sell anything that has the potential to go down. Nothing against variable annuities. They were put on the planet in 1955 by TIAA. It's TIAA for tax-deferred growth using mutual funds; they Call them Separate accounts, but in my opinion, there are limitations to the mutual funds that you can place inside the variable annuity.
Typically, variable annuities have pretty high fees that are taken out of that accumulation value, so no market growth there. On the indexed annuity side, and that's the one you're going to hear—the market upside with no downside or market participation with principle protection. Just understand, if it sounds too good to be true, it is every single time with annuities without exception. Fixed index annuities were put on the planet in 1995 to compete with average CD-type growth. In this case, MIGA, multi-year guarantee annuity fix rate, annuity growth, not market growth.
That's one of the questions. Do you want market growth? The answer is yes, do not buy an annuity, see you later, but I'm the only person who's going to say that. You've got to say to yourself, wait a minute, why is Stan The Annuity Man, America's annuity agent, top agent in the country, why is he not saying that when I'm at the bad chicken dinner seminar or when I went to the banker advisor the other day, and they're talking about market growth? It's because I'm telling the truth. They're selling hopes and dreams and unicorns chasing the butterflies and back to us in numbers, non-guaranteed.
Never buy non-guaranteed proposals by the contractual guarantee. Another question you need to ask yourself is, do I want to transfer risk? Annuities, all types are the transfer of risk products. You're transferring risk and, in most cases, with at least four types single premium immediate annuities, deferred income annuity, qualified longevity annuity, contracts, and income riders. You are transferring the risk so that the annuity company will pay you for the rest of your life.
You're creating your pension, your lifetime income stream. They're going to pay as long as you're breathing, and we can structure it so that when your Lear jet hits the mountain, whatever is left in the account goes to the beneficiaries. The evil annuity company doesn't keep a penny. That's transferring the risk for income. Do you need to transfer risk? Maybe you need to transfer the risk for principal protection. Principal protection products, two of them, multi-year guaranteed annuities, which is the annuity and the industries version of a CD, and fixed index annuities which spoiler alert, those are CD products too.
They're not market products, but both of those are fixed annuities. Both of those are life insurance products that are issued and regulated at the state level in the state that you're at and know, by the way, I'm licensed in all 50 states so that we can take care of that, but that's the other question. Do you want to transfer risk?
Finally, I've come up With one more thing. I guess this isn't a question, but it's an acronym that you can turn into a question. The acronym is PILL. P stands for principal protection, I stands for income for life, L stands for legacy, and the other L stands for long-term care/confinement care, nursing home type care. Principal protection, income for life, legacy, long-term care, confinement care, whatever you want to call that. If you do not need to solve for one or more of those items in the PILL acronym, you do not need an annuity.
Going back to your stock market growth, there's no G in the pill; there isn't for growth, there is no S in the pill for stocks, there's no M in the pill for the market. This principal protection, income for life, legacy and long-term care, and confinement care, that's it. That's what annuities solve for in the perfect world that Stan The Annuity Man is trying to create for annuity buyers out here that just want the fact and just want the highest contractual guarantees looking at all carriers. Not everyone needs an annuity, not everyone needs to transfer risk.
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.