Annuity Tips: The Annuity Man’s Index Annuity Strategies: Shootin’ It Straight With Stan

Welcome to Shootin' It Straight With Stan. I'm your host, Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is annuity tips, The Annuity Man's strategies for Indexed Annuities/Fixed Indexed Annuities. I know you're saying, "Wait a minute, Stan. I thought you didn't like Indexed Annuities." That's not true. We sell a boat load, a yacht load, a cruise ship load of them, but differently than most.

Brief History

Let me talk about Indexed Annuities from the standpoint of history. They were put on the planet in 1995 to compete with CD returns. The guarantees, the upside is not guaranteed. They are determined by three levers that the annuity company controls and sets, typically on an annual basis. Some are different. They're called caps, spreads, and participation rates.

Now, these can get very, very complicated and sound very, very, too good to be true because they are. But in essence, the goal of Indexed Annuities when they were put on the planet in 1995 was to hopefully give you the potential, not the guarantee, but the potential to outperform CDs a little bit, maybe by 100, 200 basis points if the planets align themselves.

What you need to know about Indexed Annuities is that they are fixed products. They're issued at the state level. They're issued by life insurance companies, which issue all Fixed Annuities. They're issued at the state level. They are not securities. They are not market products. You cannot use the word "market" when you talk about Indexed Annuities unless you have that proper licensure. And even then, you shouldn't, because they're not market products. They historically have not performed like that, even though you're going to go to the expensive steak dinner seminar locally, and they're going to talk about 7%, 8%, 9%, and 10% returns that are not guaranteed. Those are hypotheticals, theoreticals, projections, agent hopeful return scenarios, and unicorns chasing the butterflies.

What It Will Do, Not Might Do

You should never buy any annuity type for what it might do. You always own it for what it will do. The will do of an Indexed Annuity is principal protection, and they do have a separate ledger that if everything went in the toilet, you're going to get a small, small, small, small percentage growth for the duration of the contract. We can go into that at a future day, but I've done myriads of videos on Indexed Annuities that you can look up. Go to The Annuity Man and type in the search bar "Indexed Annuities." They all pop up.

Annuity Google

We have a pretty cool site where the search bar is like an annuity Google. Love Google. My son-in-law works for Google. But we've done it to where it's just annuity driven, and the content that I put out, which is thousands of videos and seven books, and I've also written a book on Indexed Annuities, which you can get for free as well.

Income Riders

Now, The Annuity Man and my team use Indexed Annuities primarily as an efficient and cost-effective delivery system for Income Riders. Income Riders are contractually guaranteed attachments you attach at the time of the policy, i.e., rider, rides on top of the policy, for lifetime income.

If you draw a line down a blank sheet of paper, the left-hand side is the index side, the accumulation value of which we don't know what that will be. That's where the hopes and dreams lie, which we don't do. Then, on the right-hand side of the ledger is the Income Rider amount, which is a guaranteed lifetime income amount depending on how long you defer. Remember, the older you are, the higher the payment. The younger you are, the lower the payment. It's really simple. It's based on life expectancy. Interest rates play a secondary role. Once again, interest rates play a secondary role.

Our strategies at The Annuity Man, if you go to The Annuity Man, you can run Income Rider quotes, and those Income Rider quotes are attached to Indexed Annuities. Do we provide Indexed Annuity quotes on the accumulation value side? No, because that's not guaranteed. That's pie-in-the-sky, unicorns chasing the butterflies. We don't know what that will be, nor do you. And because of that, you should not be making your decision on that.

If you buy an Indexed Annuity simply for the accumulation value, go into that contract with a CD-type return approach. Please do not go into an Indexed Annuity contract thinking you're going to get market upside with no downside or market participation with principal protection. Those are sales pitches and total nonsense and something that the annuity industry I wish would clean up, but it's like herding cats. You can't.

When the guys in Des Moines, Iowa, or wherever, or gal, is giving the good steak dinner seminar pitch, they can say anything they want, and that's unfortunate. Indexed Annuities are CD products. And when you shop like we do, if you go to our site, with Income Riders, we're shopping all carriers for the highest contractual guarantee.

Commodity Products

Remember, annuities, including Indexed Annuities, are commodity products. There's not one that's better than the other. Yes, some can be rated higher from a Claims-Paying Ability than the other, but not one's better than the other.

Upfront Bonuses

And the key, if you walk away with one thing from this blog, is that upfront bonuses are candy for the stupid. Truly, there's a hundred pennies in the dollar. There's not a philanthropist waking up at an Indexed Annuity carrier that wants to give away money. No, it's a shiny thing to attract you.

When we run quotes on the Income Rider calculator on our site, we include companies that have bonuses and those that don't. And spoiler alert: the vast majority of the time, the products, the Indexed Annuities with bonuses, and Income Riders don't finish higher than the ones without the bonuses.

So, bonuses are just a shiny thing, candy for the stupid. You should never buy an Indexed Annuity for the bonus, even though it sounds great. And I know a lot of agents, unfortunately, lead with that because it sounds too good to be true because it is.

Contractual Guarantees Only

Our strategy at The Annuity Man is like our strategy with every single annuity type. Contractual guarantees only. That's all we look at. We look at annuities for what they will do, not what they might do, not those hypotheticals and theoreticals.

And the agent says, "Mr. Jones, Mr. Jones, if you'd owned it 10 years ago, you'd average about 9.5%." Garbage. Absolute nonsense. And we need to stop that. In some states, they're actually not allowing agents to do those back-tested numbers on indexed products, which I think should be across the country, because it's misleading.

Indexed Annuities are CD products. They're principal protection products. There's another product called a Multi-Year Guarantee Annuity, which is the annuity industry version of a CD. The difference between that and an Indexed Annuity is that the annual percentage you earn with the MYGA is contractual. You don't know what the return will be on the indexed annuity. You just don't, period. I don't care what the person says. I don't care if they show, "Well, this is my mom's statement. This is my brother Bob's statement. This is my Uncle Buck's statement." That's garbage, too.

First of all, they shouldn't be selling the family. You don't do business with the family. You go to the family reunion so you can eat all the mac and cheese without somebody getting mad at you. And you know what I'm talking about, that good mac and cheese.

The Two Questions

We have no problem with Indexed Annuities. We're going to quote all types. For instance, if you say, "I need lifetime income," two questions. What do you want the money to contractually do? And when do you want those contractual guarantees to start? If you said, "I need income in two years, three years, seven years," whatever, we're going to quote Deferred Income Annuities and Income Riders and see which one finishes first, and then explain to you the good, the bad, the limitations and the benefits of both products because they both have good and bad. Then, you can decide on your terms and timeframe, knowing that we're quoting all carriers because these are commodity products.

Don't fall for the Indexed Annuity hype. Don't fall for the high percentages and the too-good-to-be-true stuff. Don't fall for that. Go to the seminar, eat the food, swallow the food, and don't swallow the pitch. That's all I can tell you.

But we are waiting for a carrier to show us an accumulation value story that we really, really, really, really like as a stand-alone accumulation value story. At the time of this blog, we have not yet been approached by that carrier, and we're approached by everybody because we're The Annuity Man. We're licensed in all 50 states, and the gorilla in the annuity room from a sales standpoint. But we just use them now; 99% of the time, we're using them as an efficient and cost-effective delivery system for that income rider guarantee for lifetime income, for as long as you're breathing.

That's Stan's current take and annuity tips on the Indexed Annuity product. We hope that you go to The Annuity Man and peruse around. I can't spell peruse, but it's a good word. You can get my Indexed Annuity book. You can get my Income Rider book. All that's for free. You can watch my videos. Again, you can Google anything you want on our site, and it'll pull it up so you can do your own research and decide on your terms and timeframe.

My name is Stan The Annuity Man. That's Shootin' It Straight With Stan, I'll see you next time.

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.