Demystifying Fixed Annuities

Hi there, Stan The Annuity Man, America's annuity agent, licensed in all 50 states with a topic that is a good one, demystifying Fixed Annuities. There's not just one Fixed Annuity. I love it when journalists and advisors say to the old curmudgeon advisor in the corner office, "Oh, I'll never buy an annuity because the annuity company keeps some money when you die." They're only talking about an Immediate Annuity in one of 40 ways to structure it. So, sit down and grab a cup of coffee. There are many different types of Fixed Annuities. I'm going to go over the primary ones out there.

Annuity Types

There are Fixed Annuities for lifetime income, Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Index Annuities with Income Riders attached. Those are the four ways to get income using Fixed Annuities. Then there are Fixed Annuities for principal protection and Multi-Year Guarantee Annuities, which is the annuity industry's version of a CD. And remember, life insurance companies issue annuities. Life insurance companies have the big buildings because they know when we're going to die. That's the reason property and casualty companies come and go. In the state of Florida, where I have a place where I live, they don't know when the hurricane will hit, or the fire will hit. So, there are many different types of Fixed Annuities. There's not just one Fixed Annuity. I love it when I read articles. They're like, well, let's categorize annuities. They are fixed and variable. Okay, player, will you talk about all the Fixed Annuities? There's also a Fixed Annuity called a traditional Fixed Annuity that you don't find much of anymore.

Traditional Fixed Annuity

I'm going to spend a minute on them now. Please don't call us and say, "I would want the best traditional fix." They don't offer that many of them. What is it, you ask? It's an interest rate locked in, and allegedly, the hope and dream is that when interest rates move, you will get a different interest rate attached to that. It should be called a floating Fixed Annuity. But it doesn't work like that. In my opinion, as Stan The Annuity Man, America's annuity agent, I've written seven books, done thousands of videos, and have the best podcast on the planet called Fun With Annuities. If you're going to do that, do a MYGA, do a Fixed Rate Annuity MYGA, in which you're locking in a guaranteed interest rate that will not change for the duration that you've locked in. You say, look, if you're at X percentage for three years, you will get that X percentage for three years.

If you lock in five or seven years or 10 years at a specific percentage, no games are played. There are no fees; there are no moving parts or gotchas. That's what you're going to get. Just think about it if you're buying CDs. If you love CDs, you'll love MYGAs because they're one and the same. The difference is CDs in a non-IRA account, you have to pay taxes on the interest. MYGAs in a non-IRA account, you can defer those taxes and just let it roll and compound. But Fixed Annuities can be used in all account types: IRA, non-IRA, and Roth IRA. Let's break down the primary income Fixed Annuity categories.

Primary Income Categories

Single Premium Immediate Annuities is the one you've probably heard of, and that's the one if you die, the insurance company keeps the money. Well, that's one of 40 ways to structure it, but most people structure that lifetime income so that when they die, 100% of any unused money would go to the beneficiaries.

If it's joint life, when the second spouse dies, 100% of the money goes to the beneficiaries and the evil annuity company doesn't keep a penny. Immediate Annuities, no annual fees, no moving parts, and the income can start as soon as 30 days from the policy and being issued up to a year. Once you pass that year, that Single Premium Immediate Annuity, SPIA, magically turns into a Deferred Income Annuity, DIA, same thing. No moving parts, no annual fees. These are transfer of risk pension products. The difference is with DIAs, it starts a year or more. You can go and defer it out for 40 years.

The Two Questions

I always ask people two questions. What do you want the money to contractually do? When do you want those contractual guarantees to start? From those two answers, we determine A, if you need an annuity, you might not, and B, which one will provide the highest contractual guarantee solving for the goal you laid out.

Annuities in an IRA

If you said, "Stan, I need income to start within 30 to 60 days," that's an Immediate Annuity. "Stan, I need income to start in two years or three years," that could be a Deferred Income Annuity. That could also be a Qualified Longevity Annuity Contract, which is a Deferred Income Annuity used in an IRA. So, if anyone has doubts about buying annuities in IRAs, you might want to call the IRS and the Department of the Treasury, who put QLACs in place in 2014 to create income streams for life inside of IRAs using qualified money. And then there's the Income Rider, which isn't really a Fixed Annuity, but it's attached to a Fixed Index Annuity. We use the Index Annuity as an efficient, cost-effective delivery system for that guarantee. Remember, we don't sell hypotheticals, theoreticals back-tested unicorns chasing the butterfly dreams, hopes, and nightmares. We sell contractual guarantees. You know what you're going to get.

Synopsizing Fixed Annuities

Those are the four ways Fixed Annuities can solve for income, whether it's income now with Immediate Annuities or income later with Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Income Riders. You can go to The Annuity Man, and run quotes 24/7/365. No one's going to call or bug you to see which one fits. And then you could schedule a call with my team, and they will walk you through the details. If you don't want to schedule a call, you can watch my videos on these specific products and read the books. I've written owner's manuals on all these books, which you can get for free on my site. You can educate yourself before you engage with the team. But remember, Fixed Annuities are broad. Fixed Annuities, synopsizing, Fixed Annuities for income: Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, Income Riders attached to Index Annuities.

They can be attached to variables, but we don't sell variables. And the Index Annuity Income Riders typically provide a higher contractual guarantee. That's the income side of Fixed Annuities, and we're demystifying that. The demystification on the principal protection side is Multi-Year Guarantee Annuities, which is the annuity industry version of a CD. Traditional Fixed Annuities aren't around much anymore, and then Fixed Index Annuities. Those are regulated at the state level and not securities. They're not market products. Do not buy them for growth. They're principal protection products. There's more than that, but those are the primary Fixed Annuities available to you.

Hopefully, I have accomplished my goal here. My goal is for you to understand there's more than one type of Fixed Annuity. Fixed Annuities primarily solve for principal protection or income for life. They can also solve legacy and long-term care problems.

Those are the ones that we didn't even get into. I wanted you to focus on principal protection and income for life because that's what most people use Fixed Annuities for. And remember, as you go into retirement, start spelling retirement, thinking about retirement, or you're one of the 13,000 baby boomers hitting 65 every single day, you need to consider Fixed Annuity strategies so that you have guarantees in place. That guarantee could be for principal protection. You don't want to lose more money, or it might be for income for life to create that income floor in conjunction with the other annuity you own, Social Security. Easy for me to say. It's the best inflation annuity on the planet. Just understand there are many different types of Fixed Annuities. If you really want to dig in, go to The Annuity Man.

The Annuity Man Website Search

We have an interesting thing on our site. I hired someone really smart, and then I took all the credit. You can go to our site, and we have a Google-type search bar. It's just for annuities, and it's just for the stuff that I've put together. So if you said, "I'm really interested in Immediate Annuities," and you type that into our site in the search bar, then it's just going to pull all the stuff I've done on Immediate Annuities, which is a ton, which means which you're going to ask yourself, "Does he have a life?" The answer is yes, but I've been married for 36 years, and my daughters are 27 and 25. So, you understand that I have a lot of free time, but the point is you can educate yourself on your terms and timeframe and decide to either buy or not to buy on your terms and your timeframe.

One thing I'm proud of about The Annuity Man is that it's where you go to buy an annuity. You're not going to be sold and pressured. Yes, we do sell them. We're the top agents in the country here at The Annuity Man. But we're not going to pressure you. We're not going to call and ping you. You are going to get educated. You're going to understand it fully. You're going to be able to explain it to a 9-year-old. No offense to 9-year-olds. But that's demystifying Fixed Annuities as only Stan The Annuity Man can do. 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.