Fixed Annuities Explained: Which One Is Right for You?: Shootin’ It Straight With Stan

Welcome to Shooting 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 Fixed Annuities explained, which one is right for you. That's assuming you need an annuity, and that's where we're going to start. You might not need a Fixed Annuity, even though you already own the best inflation income annuity on the planet, Social Security. And if you're fortunate to have an employer, whether in the private or public sector, that provides a lifetime income stream pension, that's a second annuity.

But Fixed Annuities is a broad topic. Most people think Fixed Annuities are one type, a Single Premium Immediate Annuity. And they're under the false assumption, unfortunately, that when you die, an evil annuity company keeps the money even though you're getting a lifetime income stream, but that's only one of 40 ways to structure it.

Most people structure it as lifetime income, but when you pass away, 100% of any unused money goes to the beneficiaries listed on the policy, and the annuity company doesn't keep a penny. So, let's go over the primary types of Fixed Annuities.

Who Issues Annuities?

First of all, life insurance companies issue Fixed Annuities. They are regulated at the state level. If you go to a site called nolhga.com, it will list all of the state's websites for your specific state that regulates and oversees Fixed Annuity sales. So, they're not securities, NASD, FINRA, or anything else that's not involved. These are Fixed Annuities, which are life insurance products.

Lifetime Income Products

Let's go through the main ones that you'll probably hear about. Let's talk about the four lifetime income-producing products. Annuities are the only category that provides a lifetime income for as long as you're breathing, or if it's set up joint with your spouse, as long as one of you is breathing, there's no ROI until you die; it's a pure transfer of risk.

If you live forever, they're going to pay forever. Like Social Security, you're transferring that longevity risk to the life insurance company issuing that income annuity to provide that pension payment. So, there are four types of lifetime income products: Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Income Riders attached to, say, Indexed Annuities, which is also a Fixed Annuity.

Now, you might not need income. We always ask people two questions. What do you want the money to contractually do, and when do you want those contractual guarantees to start? And that falls under the guise of what I've always preached: you own an annuity for what it will do, not what it might do. Never buy hypotheticals, theoreticals, or back-tested numbers. You buy the contract because you're going to get a policy in the mail that's a contract between you and the life insurance company that issued that annuity.

Let's go over just the basics of these lifetime income products. You can go to The Annuity Man and quote 24/7 365 using the best calculators on the planet, SPIAs, DIAs, QLACs, and Income Riders. You can also download books on each of those product types and strategies I've written for free. And you can also watch specific videos on those products. In my site's search bar, type in what you want, and it'll pop up with the content I've created, thousands and thousands of videos.

The Grandfather of All Annuities

Immediate Annuities are the grandfather of all annuities and were invented in Roman times. It's a straight transfer of risk. All you need to know is this product is when you need income to start as soon as 30 days out to one year. Once it goes past a year of deferral, it turns into a Deferred Income Annuity. Same structure, no market attachment, no annual fees, no moving parts, just a straight transfer risk. And remember, you can structure these 40-plus different ways. You can structure it life with cash refund, joint life with cash refund, life with installment refund, life with certain period.

Qualified Longevity Annuity Contracts

There's a myriad of ways. My team can certainly walk you through that, and you can use our calculators to look at it before you talk to us. You can do that all day long. After the Deferred Income Annuity, there's one that's a Deferred Income Annuity that's used inside of an IRA, a qualified account, called a Qualified Longevity Annuity Contract. So, for everyone who says you should never buy an annuity inside of an IRA, there's one. Qualified Longevity Annuity Contracts were developed by the IRS and the Department of the Treasury teaming up to offer this QLAC so that you could do some income planning in addition to Social Security. It was never put on the planet as the primary source of income, even though it is for far too many people.

Income Riders

The last type of income product is an Income Rider that rides on top of the policy attached to an Index Annuity. Again, lifetime income. Starting past the two-year time point, we quote all carriers for the highest contractual guarantee. And again, SPIAs, DIAs, QLACs, and Income Riders are the acronyms for the first three. You can quote those to your desire as many times as you want at The Annuity Man.

Multi-Year Guarantee Annuities

From a Fixed Annuity standpoint, there's four types of lifetime income products. So, let's go to the principal protection side. There are two primary ones. Multi-Year Guarantee Annuities, which is the annuity industry version of a CD. If you know how CDs work, that's how MYGAs work. The difference is in a non-IRA account, the interest grows tax-deferred if you don't want to take the money out, but it's a guaranteed interest rate for a specific period of time that you choose. On my site is a live feed showing your specific state, what's approved there, the highest yields, etc.

Indexed Annuities

The other CD product out there is an Indexed Annuity. It's not sold as a CD; it's over-hyped and sold as a market product. It is not. It was put on the planet in 1995 to produce CD returns, and we primarily use Indexed Annuities at the time of this blog until things change with that product. We use it as an efficient and cost-effective delivery system for the Income Rider guarantee for lifetime income.

Those are the primary Fixed Annuities out there. There are some peripheral products out there that may make up 1% of the total, but those are the primary ones out there. Just remember that Fixed Annuities are commodity products, meaning there's not one that's better than the other. The way that we filter it on our site is obviously contractual guarantees first and highest payout first, and then from there, you work with my team to choose what's best for you.

The PILL

If a rating is specific to what you want to achieve with the carrier, we can find that for you. We can provide specimen policies, et cetera. But annuities in the fixed world solve for four primary things, and the acronym is PILL. P stands for principal protection; remember MYGAs and Indexed Annuities. I stands for income for life, which is SPIAs, DIAs, QLACs, and Income Riders. L stands for legacy, which can be a Fixed Annuity with a death benefit rider. Then, the other L stands for long-term care. So, principal protection, income for life, legacy, and long-term care.

In the Fixed Annuity world, those are the four things they contractually solve for, and you transfer the risk to the life insurance company issuing that annuity. Notice there's no M for market. There's no G for growth. If you want market growth, do not buy an annuity. Do not buy a fixed annuity or any annuity. Buy stocks, ETFs, and all that you do or have done. Annuities are contractual guarantees.

Chapter 2

Now, if you're moving into the second phase of your life, chapter two is what I call it, you might want a few more guarantees. You might want to establish that income floor that combines with Social Security, a pension if you're so fortunate. Dividend stocks, if you have income-producing property, that income floor will hit every month regardless of what happens or who's in office.

That's the key in chapter two of your life, in my opinion, and what you should be focusing on, and I think a gap that Fixed Annuities can pay. Again, I encourage you to go to The Annuity Man. We are not a high-pressure group, even though we're the top sales organization in the annuity industry. We let you decide on your terms and timeframe for providing information.

I've done thousands of videos. I've written seven books of which you can get for free. We are a treasure trove of annuity information. Understand that they're not for everybody. Understand that you might not need one, which is okay. We want to make sure you look under that rock, that annuity rock, and get good information. With good information, you can make good decisions.

Can you nod your head on that one? Absolutely. So, that's the fixed annuity world. Very, very simple. Remember, if someone pitches you something and you can't explain it to a nine-year-old, don't buy it, no offense to nine-year-olds. When you strip it down, this category to the contractual guarantees, then everything is commoditized and it's very easy to filter and make a decision and put those guarantees in place. Got it? Good.

My name is Stan The Annuity Man. This is Shooting 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.