Can You Lose Money in an Annuity?

Can you lose money in an annuity? Good question. Today, I'm wearing a shirt that says Cult leader. Now, this coincides because someone just told me like, "You're talking too loud, Stan The Annuity Man; you're projecting too loud." My question to you and everyone out there is, do cult leaders not talk loud? I mean, when cult leaders are on the stage, they're not talking like this. Or are they? Do you listen closer when I speak like this? So, what I'm going to try to do is calm down a little bit. This will be hard, but let's discuss whether you can lose money in an annuity. Now, I'm not a cult leader. There are cult leaders in the annuity business that only sell one product. They're like, "This is the one you need. It's a one-size-fits-all. It's perfect." Wrong, there is no such thing. So, this is a shout-out, a non-shout out to all the cult leader annuity people who shouldn't be cult leaders. They should be looking at all annuity types, which leads to what we're talking about today: can you lose money in an annuity? It depends on the type of annuity, so let's dive in.

Annuity Types‌

Let's talk about the types. Why are you reading this blog? Why'd you stay around? Because you're going to know after this blog, can you lose money in an annuity? How could you lose money in an annuity? How could you structure the policy so you could lose money? You might want to structure it that way. Let's talk about that for a second. How can you lose money in an annuity? Well, suppose you're buying a Deferred Annuity like a Fixed Index Annuity or a Multi-Year Guarantee Annuity, which most people call Fixed Rate Annuities. In that case, you're not going to lose money. Those are fixed products. I mean, the market gyrations and global events will not affect it. You're not going to lose money. Now, if you have a Variable Annuity, that could lose money because keyword, variable, right? Variable means the mutual funds, i.e., separate accounts.

I say separate accounts because the annuity business calls the mutual funds separate accounts, which is why I have to say that. I don't sell Variable Annuities because I don't like things going down. But that could go down in value, and you could lose some money. Now, let's get to the more popular income products out there. If you didn't know this by now, back in the day, in the Roman times when there really was a cult leader, Siza, hail Siza, right? That's the southern version of Caesar. That's Siza, okay? Siza. So, hail Siza, they created annuities. They were called annuas, which in Latin means payment. And by the way, that is the only word in Latin that I know for the dutiful Roman soldiers and their families. That's where annuities came from. Annua, annuity. See the correlation? See that?

I mean, that's how it works. That was a life to the main income stream you could never outlive. So, let's talk about Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts. All three of those are what's called annuitized products. Think of annuitization as ripping the knob off of a water faucet and water just flowing. With those types of annuitized products, once the income starts, that income's going to hit your bank account. Period. I mean, it's just going to happen. You can't stop it. The only way you can stop it is to die. And that's not a good strategy. Dying is never a good strategy ever. I think I can say that as a cult leader. I'm a good cult leader, though. I am like the cult leader of truth. The cult leader of brutal truth, the walking middle finger cult leader of annuity truth, that's who I am.

Structuring

But with those types of products, SPIAs, DIAs, and QLACs, that's acronyms for Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts, can you lose money? If you structured them life only or 'joint life only', what that means is when you die, when your Learjet hits that mountain, money goes poof. And if you haven't outlived your life expectancy, you can look upon that as if you lost money, but you can't look upon it because you're dead, but I digress. The point is it doesn't have to happen like that. You can structure it so that 100% of any unused money goes to your listed beneficiaries on the policy, which you can change at will. If somebody makes you mad, you can change that. The only way, I guess, is life only. It's not a guess; I know it is life only if you don't outlive your life expectancy.‌

But most people, when they structure a lifetime income stream, they've worked hard for their money. I should do that. I should do the Donna Summer song, but I'm not going to do that. "Work hard for the money." Come on, sing it. "Hard for it, honey." Okay, so when you're doing an Immediate Annuity or Qualified Longevity Annuity Contract or Deferred Income Annuity, sing that song: you've worked hard for the money and will structure it so that no money goes to the annuity company.

Annuities Are Contracts

In most cases, people structure it so there's never a penny lost. Now, let's get in the weeds a little bit because I like getting into the weeds because I'm the brutal truth cult leader. If you have an Index Annuity with an attached Income Rider, draw a line down the middle of a page. I'm drawing visually, index side income rider side, two separate calculations. The Income Rider side has a fee that comes out of the accumulation value side. Suppose the accumulation value side never earned any money, and the fee was coming out of that Income Rider, and you never used the Income Rider. Technically, you could say you lost money, but that is really, really threading the needle. The bottom line, annuities are contracts. They're transfer risk policies that are customizable to do exactly what you want them to do.

Once again, if you tell us you don't want to lose money, we can structure it so that you will not lose money, even though you're dead, even though you're six feet under, or you burnt to a crisp in a crematorium.

My father recently passed a couple of years ago, and my mom keeps his ashes in some really cool wooden box. They call them pie safes where I'm from in the South. And I always tell her that when she does something that he wouldn't agree with, which is a lot, I'm like, "Those ashes are smoldering. I see smoke coming from them."

Shoot It Straight

Back to what I was talking about. Sometimes, you can structure a Qualified Longevity Annuity Contract, a Deferred Income Annuity, or a Single Premium Immediate Annuity to start later. In other words, I want to buy that lifetime income stream standing annuity man, America's annuity agent, number one agent in the country, hello. I want to structure that so that the income starts in one year, two, three, or 40 years.

But if you die before the income stream starts, you want to ensure that 100% of the money you put into the annuity goes to the beneficiary. All you have to do is tell me that. I'm going to do that anyway. When you talk to us, and yes, you can set an appointment with us at The Annuity Man. Wouldn't you want to do that if you're thinking about annuities? If you have a knee problem or surgery, or you have a hip replacement, you have to find the best hip surgeon or the best knee surgeon. Annuities, you come to us because we'll shoot it straight. We're going to tell you if you don't need one. We will tell you if you're putting too much money into one. We'll let you know if you're making a mistake. We'll tell you if you're crazy. We'll let you know if you're not crazy.

But the bottom line is, even when you're deferring an annuity for a start date down the road, the contract, key point, keyword, the contract can be structured so that if you die before the income stream starts, 100% of the money is the money going to your beneficiaries. You can structure it so that happens every single time.‌

Thank you for joining me today. I hope you learned a thing or two. Remember, there's never an urgency to buy an annuity. The only urgency is to learn about the annuity before signing that application. 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.