Retirement Expert Rants: Annuities in the News

Hi, I'm Stan The Annuity Man, America's Annuity Agent, licensed in all 50 states—including yours. Let’s talk about annuities in the news. I’m pretty upset about what’s going on with that, and I want you to understand that you'll see many articles. You can call it "fake annuity news." Maybe that’s the name of it. I don’t like the term “fake news,” but this is definitely fake annuity news.

Real Annuity News

The real news is the SECURE Act 2.0, signed into law on December 29, 2022. That’s some real stuff because that was legislation that was passed. It does involve annuities, etc.

The other annuity news that drives me crazy is increased fear-based selling and misinformation about annuities. Individuals write many articles without proper expertise to promote sales rather than provide accurate information. It's essential to be cautious and seek information from credible sources to make informed decisions about annuities.

The Problem with Annuity Writing

Now, you’re talking to someone here who’s written seven books on annuities and has over 500 published articles on annuities. We’re talking about it here because what people are doing is they’re writing about annuities without any oversight. They’re saying whatever they want to say to get the sale. They’re pushing the envelope. Shame on the platforms for not editing what’s going on out there.

Why Annuity Information Matters

I write for a lot of platforms, and fortunately, those platforms are legit. They do edit things and always come back to me saying, “Okay, Stan, give me the fact check on this one.” We have to provide that. But I’m telling you right now, in the annuity industry, what’s happening is people are either getting things ghost-written, robo-written or whatever. There’s some of the most big-time garbage in the annuity industry because why? People are scared. People are fearful.

Fear and Annuities in the Current Climate

We have chaotic times in the economy and globally, riots in the U.S., and then throw COVID on top of that. In addition, 10,000 baby boomers retire every single day or reach the retirement age of 65—ten thousand of them. A lot of them are scared. A lot of them don’t want volatility anymore. They don’t want to deal with the markets anymore. Good or bad, there are arguments on both sides, but it’s ripe for people to come in, prey on them, and pick those people off. And a lot of people are buying annuity products that don’t fit them.

Annuities: Not for Everyone

Not everybody needs an annuity. An annuity is a contract. It’s a transfer of risk contract that primarily solves for four things: principal protection, income for life, legacy, and long-term care. The acronym is PILL. If you need market growth, do not buy an annuity. Those are the articles I’m seeing: “Buy an annuity for market growth.” Garbage. Complete garbage.

The Issue with Variable Annuities

Now, the Variable Annuity people have an argument because those are mutual funds; I get it. But you’re still limited with your choices, and the average annual fee for a low-cost Variable Annuity is anywhere from 2% to 3% for the life of the policy. That’s tough. It means you start at minus two or minus three every year. Disclaimer: I don’t sell Variable Annuities. I only sell Fixed Annuities. Why? Because you should own an annuity for what it will do, not for what it might do.

The Media’s Role in Annuity Marketing

So, when you’re looking at the news coming out about annuities, some of the stuff seems newsy, but it’s an infomercial. Some of it looks newsy, but it’s a commercial. Some of it seems like an editorial, but it’s an advertisement. Be careful. Get all the information. Read the policy. Read the application. Read the books. You can download them for freeat The Annuity Man. But do not buy what’s being pitched out there. There are no “too good to be true” products. Annuities are contracts. Ask the agent what commission they’re getting paid.

Commissions and Transparency

Remember, commissions are built into and hidden from the consumer with all annuity types, whether it’s an Immediate Annuity, Qualified Longevity Annuity Contract, Deferred Income Annuity, Multi-Year Guarantee Annuity, Variable Annuity, Fixed Index Annuity—it doesn’t matter. You’ll never see the commission; it’s built in. But you should ask, “Hey, what’s the commission on that? What’s the soft money arrangement you have with that? Do you go on a trip if you sell enough? Do you get a car if you sell enough? Do you get extra money if you sell enough?”

The Pitfalls of Sales Pressure

If someone’s pitching you one product and says, “Well, you read my article and you called me. I think this is the best product for you. This one product is the best one,” walk away. Hang up the phone, shut the internet off—whatever you’re doing. Because annuities are commodities, you shop all carriers for the highest contractual guarantees and buy them for the contractual guarantees only. You don’t buy the hypothetical, theoretical, backtested, projected hopeful agent return scenario.

The Reality of Annuities in the Market

What I’m seeing in these articles is: “Well, if you’d have owned this product 10 years ago, you’d have made this.” Well, if you’d done 100 sit-ups every day for the last 10 years, you’d have a six-pack, but you didn’t do that. And the other thing I’m seeing are promotions and ads that look like news, talking about indexes you’ve never heard of. Why haven’t you heard of them? Because they’re making them up out of midair. I’m talking about Indexed Annuities, unfortunately. By the way, spoiler alert, I like Indexed Annuities. I sell Indexed Annuities, but they’re CD products. They’re not market products.

The Real Nature of Indexed Annuities

Indexed Annuities were developed in 1995 to compete with CD returns. But unfortunately, because they have pretty high commissions that are built in and hidden, everybody’s pitching them because they have a good story. But as we’ve learned over the past few years, just because a story’s published and you see it in the news doesn’t mean it’s true. And that certainly holds true for the annuity industry.

The Bottom Line: Be Careful

Be careful out there. Buyer beware. Consumer beware. Do your homework. Take your time. Fully understand what you own. If you can’t explain it to a nine-year-old, no offense to nine-year-olds, you shouldn’t buy it.

Warren Buffett's Wisdom

What did Warren Buffett say a long time ago? Somebody asked him, “Warren, why don’t you buy derivatives?” And his comment was, “I don’t understand them. I don’t buy anything I don’t understand.” Now, is he perfect? No. But that’s a pretty good mantra to stick by. If you don’t understand it, don’t buy it. Don’t buy the 30,000-foot view of the product. Get down in the weeds, learn about it, and understand its limitations and benefits. Ask about the limitations and the benefits. Call the carrier if the agent or advisor won’t give you that. Call someone like me, who’s going to be brutally honest. I’m the walking middle finger of annuity truth.

Final Thoughts on Annuities

I’m not going to be your friend. I will be the best advisor you’ve ever had because I will tell you the truth. What you’re seeing in the news now is half-truths and semi-truths. Some of it’s really true, and some people are writing good stuff. But how can you tell? You can’t. I wish the annuity industry would regulate this more, call these people out, and contact the platforms to pull those who are just pitching and selling.

Annuities are not for everyone, but they do have their place as contractual guaranteed transfer-of-risk strategies. They’re not too good to be true. Be careful out there and do your homework.