Can a 9-Year-Old Understand Your Annuity?

I am your host, Stan The Annuity Man, America's annuity agent, licensed in all 50 states because I like paying all of those fees to each specific state. Not really, but I do.

Today's topic is a very good one. It's called "Can a 9-Year-Old Understand Your Annuity?" Now, I made my PR team leave that topic and title in place because I know there are grandfathers and people out there going, "Well, I've got a nine-year-old. I'm going to check that out, that Stan The Annuity Man, and see if there's something for my nine-year-old grandson, Jayrod."

Misconceptions About Annuities

Anyway, it’s not about that. It can be about that, and we can talk about buying annuities for youngsters as a legacy in a future podcast. But that's not what we're talking about here. What we're addressing today is how the annuity industry suffocates people with complex products without explaining them properly. They’re just given the 30,000-foot view at a really nice seminar with great food, and then suddenly, you’re being pressured into an appointment to discuss the "greatest thing ever." And as I've always said, if it sounds too good to be true, it is every single time without exception when it comes to annuities.

There are two or three types of annuities that are so complex and convoluted, with so many rules and mathematical formulas, you’d need to go to MIT or Caltech to understand them. And yet, some agents who send those postcards inviting you to seminars about the economy and interest rates somehow manage to sell them. Then, they jam these complex annuities down your throat. That needs to stop.

The Real Issue

This problem would stop immediately if all annuity product types, and yes, there’s more than just one, had the same commission level. If all products had a low, built-in commission, it would almost force agents and advisors to recommend what is actually right for the client, rather than selling the product that sends them on a free trip to Bora Bora with their spouse, girlfriend, boyfriend, or all three.

Currently, it’s a one-size-fits-all approach: learn one product, sell it aggressively, and ignore what the client truly needs. If you’ve experienced this, you know what I’m talking about. It’s like throwing chum in the water—bloody fish—and the sharks show up. Don’t let this happen to you. If it has, book a call with us, and we’ll look at what you bought.

Simplify to Explain

Many people tell me, "Stan, I bought this, but I really don’t know what I own." That’s why I say, if you can’t explain it to a nine-year-old, don’t buy it. Every single annuity type you’re considering should be understandable by a second-grade class. Imagine walking into that class and explaining:

"I’m buying a lifetime income stream, meaning that this annuity company will pay me as long as I’m alive." A little kid might ask, "Even if you’re in the hospital?" "Yes, even then," you’d reply. "As long as I’m breathing, they’ll pay me." Another kid might ask, "But how do they decide how much to pay?" You’d answer, "The older I am, the more they’ll pay because they think I won’t live as long."

If you can’t explain this to a classroom of nine-year-olds and have them nod in understanding, you shouldn’t buy the product.

Fixed Rate Annuities Explained

Now, let’s talk about a Fixed Rate Annuity, also known as a Multi-Year Guarantee Annuity. Explain it like this: "I give money to the annuity company, and because they’re holding onto it, they reward me by giving me back a little more money." If a kid asks, "How long do they do that for?" you’d say, "For a specific period of time, like one, two, five, or seven years."

Of course, a sharp kid might ask, "What if rates go up after you bought it?" You’d reply, "That could happen, but I’ve locked in my rate for that specific period of time."

Question the Sales Pitch

When you hear pitches about upfront bonuses and market upside with no downside, try explaining those to a group of second-graders. They’d be skeptical. Eloise and Phoebe, the sharp kids in the front row, would raise their hands and say, "That doesn’t make any sense. How can they just give you 20%?" They’re right to question it, and so should you.

Final Thoughts

If you can’t explain the product in simple terms, don’t buy it. Consider this: could you explain it to your spouse, family, or friends? If the shiny features of the product sound good but can’t be logically explained, walk away.

So, are annuities for a nine-year-old? Not really. There are specific scenarios, like legacy income policies, where they might make sense. But the point here is that you need to understand what you’re buying—and be able to explain it—before making any decisions.

Wasn’t that fun? That was Shootin' It Straight With Stan. I am Stan The Annuity Man. 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.