Best Type of Annuity for Retirement

Hi, it's Stan The Annuity Man. Today's topic is what's the best annuity type for retirement? Good question, and we're going to go through each type of annuity out there that's available to you and give you an overview of what they do, benefits, limitations, so you can understand, based on your specific situation, which one fits.

We're going to cover a lot today. I'm going to go over what an annuity is, all the types, and the brief history of annuities. I'm going to tell you the two questions that you need to ask to find out the right annuity type for you. I'm going to tell you an acronym I came up with that is foolproof for finding out whether you either need an annuity or not and, if so, what type. Then, we're going to go through every single annuity type for retirement, and what it solves contractually so you'll understand which one might fit or might not fit.

Heck, if at the end of the day, you might get to the end of the blog and say, "All of these, I totally understand that they don't fit my situation," then I've done my job. I've educated you. Speaking of education, if you hang in there with me at the end of this blog, I'm going to tell you how you can download my annuity books for free, with no obligation, no cost, and no little asterisks. You'll be able to download all seven of my published books, so let's get started.

What is an Annuity?

What is an annuity? I'll tell you what it's not. It's not a hated annuity category. Somehow, the word annuity is the cussword in the financial services industry. I blame the annuity industry because they've done a poor job framing the product because annuities were put on the planet for lifetime income.

Annuities are the only product category that solves for lifetime income, meaning you can never outlive it. If you are in the annuity industry, wouldn't that be what you talk about? Wouldn't you have T-shirts that say Got Guarantees in front of it, like Got Milk? At the end of the day, it's a transfer risk guarantee that solves the problem of lifetime income.

Brief History

Where did they start? What's the genesis of the annuity? The word annua, A-N-N-U-A, means payment in Latin. In Roman times, the dutiful Roman soldiers were laying it on the line for the emperor, and the emperor said, "You know what, I'm going to create a lifetime income stream for those dutiful Roman soldiers and their families." What's that called? It's called a Single Premium Immediate Annuity. What's that called? That's called a pension. What's that called? That's called Social Security.

Can you hate all annuities? No. Do you hate Social Security? Do you hate pensions? Do you hate lifetime income streams? Of course you don't, but that's what an annuity is. That's the history of annuities, and they've been sold in this country for hundreds of years. Now, do they get a bad rap because of how they're pitched? Yes, absolutely. At the end of the day, the benefit proposition is this: Lifetime income. Nobody does that. There are other things that annuities do, such as principal protection and long-term care, but what separates them from everything else is the lifetime income guarantee.

Primary Types

What are the primary types that we're getting ready to cover? Let's go through them quickly, and I'll tell you what they solve for. Then, we'll dig a little bit deeper. Single Premium Immediate Annuities, solve for income now. Deferred Income Annuities, solve for income later. Qualified Longevity Annuity Contracts, solve for income later. Income Riders, attached to either Variable or Fixed Index Annuities, solve for income later. Variable Annuities solve for market growth. Fixed Index Annuities solve for principal protection, and Multi-Year Guarantee Annuities solve for principal protection. In essence, that's the world of annuities that you have to choose from. The question is, which one fits? Let's dig further.

The Two Questions

I made this really, really simple and effective, and it works. You need to ask two questions to find out if you need an annuity, and if you do, what type, because there's not one size fits all. Here are the two questions.

Number one, what do you want the money to contractually do? In my world, you buy an annuity for what it will do, not what it might do. The will do is the contractual guarantees. The might do is the hypothetical, theoretical, back-tested, projected, hopeful non-guaranteed agent return scenarios, the unicorns chasing the butterflies. You'd never buy it for that. You buy for the will do, the contractual guarantees.

Second question, when do I want those contractual guarantees to start? Let's do it again because I got diverted a little bit. Number one, what do I want the money to contractually do, and when do I want those contractual guarantees to start?

The PILL Acronym

Okay, so I've come up with this unique acronym called PILL to determine if you need an annuity or not. You might not, and that's okay. Here's what the PILL stands for. P, principal protection, I, income for life, L, legacy, the other L, long-term care. If you do not need to solve for one or more of those, you do not need an annuity. It's that simple.

You say, "Well, Stan, this guy told me I can get growth." Okay, I understand that. You're smarter than that. Remember what they say in Vegas. If you don't know who the rube at the table is, it's you. Don't be that person. If it sounds too good to be true, it is every single time with annuities. No exceptions. These are contracts.

Let's go through the PILL again. Principal protection. Those are Fixed Index Annuities and Multi-Year Guarantee Annuities. Principal protection. Income for life, Single Premium Immediate Annuities, Qualified Longevity Annuity Contracts, Deferred Income Annuities, and Income Riders attached to policies.

Legacy. Legacy is leaving money to your heirs. You can get life insurance. Life insurance is the best death benefit on the planet. It's the best return on investment you'll never see because you're dead. I encourage you to get it. I don't sell it, but I encourage you to get it if you qualify. If you can't qualify, you can get a guaranteed-issue Income Rider that also serves as a death benefit.

Then, the other L is long-term care. There are annuities that address long-term care, and there are what's called confinement care riders, which means, in my world, if you get sicker, you get your money back quicker. In essence, they enhance the payout the more your health declines.

Variable Annuities

That's it. P-I-L-L, principal protection, income for life, legacy, and long-term care. To my Variable Annuity brethren out there that's pounding the table and throwing things at the screen, hang in there. I understand that you're going to say market growth, and there's an argument for that. There's an argument for Variable Annuities for market growth. They were put on the planet in 1955 for tax-deferred growth, and there are some very good no-load ones out there.

Stan The Annuity Man, in my opinion the number one agent in the country, here's my take on it. Even with those, there are limitations on your choices. In my world of contractual guarantees, if you're looking for market growth, there should be no limitations on the growth. That's the way I see it, and I think I'm right about it. If you want market growth, you should not be buying an annuity at all. There's no G in PILL, right? It's only P-I-L-L. No G.

Okay, so we've dug down a little bit to determine if you need an annuity. The two questions: What do I want the money to contractually do? When do I want those contractual guarantees to start? The PILL acronym, principal protection, income for life, legacy and long-term care. Those two things right there will filter out whether you need an annuity and, if you do, what type, but let's go through them quickly. We talked about the best types of annuities for retirement, so let's talk about that.

Breaking it Down

Single Premium Immediate Annuities are the best annuities for retirement if you need income right now. Within 30 days to a year, Single Premium Immediate Annuities. The best annuities for retirement and principal protection are Multi-Year Guarantee Annuities and Fixed Index Annuities. Both protect your principal. No market downside. The best annuity for long-term care is an Income Rider that solves for confinement care and is guaranteed issue. There are also long-term care annuities that require a little bit more underwriting, which you can also look at, and then legacy; some Income Riders solve for the legacy.

Now, going through the PILL side, principal protection is MYGAs, Multi-Year Guarantee Annuities, and Fixed Index Annuities. Income for life, that's the primary reason people buy annuities. Single Premium Immediate Annuities, Deferred Income Annuities and QLACs, and Qualified Longevity Annuity Contracts are for income later. Also on the income later side are the Income Riders. That's for income later. Then, there are some specific annuity types that address the L for legacy and L for long-term care. Those are the best annuity types for retirement. The question truly is, with your specific retirement and customizing the quote, what do you need to solve for?

With that, my promise is going to be kept. I've published seven books and written seven books. I'm a busy little man out here. You can download them all for free. Why? Because you need the education. Why? Because you need to be informed before you make a decision. All you have to do is click here to download them. No obligation, no cost. No one's going to call you or bug you. I'm going to treat you like a professional.

Thank you for joining me today, I'll see you on the following Stan The Annuity Man blog.

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.