How to Calculate an Annuity and Run the Right Quotes

How do you calculate an annuity and get the right quotes? First things first, you need to figure out if you need an annuity at all. And then, if you do, what type works best? By the way, spoiler alert—no type is perfect. I know that there are people out there, and if you said, "I’ve got a sprained ankle," well, this is the annuity. Or if you said, "I need income," well, this is the annuity, or "I need this," this is the annuity. No, that’s called agenda selling. You might not need an annuity. There are two questions that you ask to even determine if we get to the calculator standpoint.

The Annuity Man has the best calculators on the planet, with quotes from all carriers. You can use it at your leisure, etc. But here’s the question:

1. What do you want the money to contractually do? (Keyword: contractual.)
2. When do you want those contractual guarantees to start?

The reason I emphasize the word contractual is because annuities are contracts. You only buy them for what they will do, not what they might do. “Might do” is the hypothetical, theoretical, backtested, projected, hopeful agent return scenario. Don’t ever do that. Don’t buy the dream. Don’t be the rube at the table. As they say in Vegas, if you don’t know who the rube at the table is, it’s you. Don’t buy the dream. Don’t trust what that agent’s telling you. That includes me. Don’t trust the agent. Trust the policy. Trust the contract.

Trust the Policy, Not the Agent

You might ask, "How will I know what’s in the policy until I buy it?" Great question. I’m glad you asked that. If you want to see the policy, I’ll send you a specimen policy—the exact same verbiage, the exact same wording—before you even buy it. And if there’s an agent that you want to work with other than Stan The Annuity Man, which I can’t imagine why, but let’s just say it’s your brother or something—have them give you a specimen policy. Have them send you the application to read before you even fill it out. Ask for the information. These are contracts. I’m assuming you scanned the contract for your home if you’re a homeowner or scanned any other contract you signed. You can do the same with annuities. And the best thing about annuities is that there’s a free look time period.

So, let’s say you got issued a policy and were pressured into something. You can get your money back within a specific timeframe that your state has. Each state has a specific free look policy timeframe. You can get your money back after buying it.

Running the Right Annuity Quote

But let’s get back to the topic: calculating the right quote using annuity calculators. How do you even do that? If you need lifetime income to start within 30 days up to a year, that’s an Immediate Annuity quote—a Single Premium Immediate Annuity quote. If anyone else tries to sell you anything else, they’re trying to go on a trip to some faraway land if they sell enough of that product. And I see that too much. “Well, he told me this was better than an annuity than a Single Premium Immediate Annuity, Stan.” No. If your contractual guarantee is income you want and want it to start now, that’s an Immediate Annuity.

If you want it to start later, it’s either a Deferred Income Annuity, a Qualified Longevity Annuity Contract, or an Income Rider. We’ll quote them all. The bottom line is, when you ask, "What’s the best annuity?" I don’t know that until you give me the parameters to run that quote. Then I’ll run the quote with all carriers for the highest contractual guarantees available, and then I’ll show them to you, and we’ll get on the phone and talk about it.

So, when you’re running quotes for lifetime income, I’m going to need your date of birth, or if it’s joint with someone else, both dates of birth, your state of residence, what type of account it is, how much money you want to put in, or how much money you want to solve for. We can reverse-engineer that quote. Those are really the basics.

The Basics of Running Annuity Quotes

From there, we’ll start digging in and I’ll try to understand from you how you want to customize that quote. When you run quotes on our annuity calculators, I mean, there are so many ways to structure it. And you really don’t know what you don’t know, right producer? I mean, that’s beautiful. That should be a love song. "You really don’t know what you don’t know." And with annuities, it really comes down to that. So, it’s not one of those industries where buying without talking to an expert is easy. And I’ll tell you this: if you’re not talking to someone who’s been doing this for decades and decades and decades, like moi—number one agent in the country, America’s Annuity Agent—and just getting the next person that picks up the phone, some 27-year-old who knows nothing of which I have cowboy boots older than them, then you get what you pay for.

Don’t Settle for Less Than the Best

Do not accept advice from people who haven’t been in the war, who haven’t been in the business, who don’t understand it, and who haven’t written books and done all these videos and podcasts and written articles. I totally understand it. And with my background at Morgan Stanley, Dean Witter, Paine Webber, and UBS, I understand markets. I also understand how annuities can and cannot fit into a portfolio. I have no problem telling you that it won’t fit if it’s putting a square peg into a round hole. But I also understand allocation and proportion, with my background managing money at those other places. Annuities fit in some cases.

What Do You Want to Solve For?

But before you run those quotes, we need to know what you want to solve for. And again, what do you want the money to contractually do? When do you want those contractual guarantees to start? And I have one more thing that I use called PILL.

It’s an acronym:

• P stands for Principal Protection.
• I stands for Income for Life.
• L stands for Legacy.
• The other L stands for Long-Term Care or Confinement Care.

If you don’t need to solve for one or more of those things contractually, you do not need an annuity of any type—period. End of story. If someone’s trying to sell you an annuity for market growth, don’t buy it for market growth. Buy it for contractual guarantees. I don’t sell Variable Annuities. They’re fine, but even my guys out there and gals out there that sell Variable Annuities, you have to admit there are limitations on the choices. And in my world, coming from those firms, if you want true market growth, there should be no limitations on your choices on how you invest the money.

Conclusion: Simplified Annuity Solutions

Now, Variable Annuities do have their place. There are some no-load Variable Annuities that work for tax-deferred growth, which they were put on the planet for in the 1950s. But in my opinion, in my world, in my contractual guarantees-only world—remember, will do. You own an annuity for what it will do, not what it might do. You only buy it for the contractual guarantees.

I represent pretty much every single carrier out there, and we are a professional organization licensed in all 50 states. And the key is me. And that’s not being egotistical, but that’s what sets us apart: my team and you talking on the phone, one-on-one, no pressure, no sales pitches. Just The Annuity Man and you talking and getting an understanding of what you’re trying to achieve, and then putting together a customized plan for you, using our calculators and running quotes that fit your specific situation and goals.

It’s really that simple, and I encourage you to do that. Thank you for joining me today, I’ll see you on the following Stan The Annuity Man blog.