Retirement Expert Rants: People Don't Even Know What They Are Buying

Hi, I'm Stan, The Annuity Man, America's annuity agent, licensed in all 50 states. That includes yours, wherever you're sitting. I appreciate you joining me for this rant. Why am I ranting? Because I'm encountering too many people who don't even know what they've bought. And it's not just Index Annuities; that's an easy one. For most people who purchase Index Annuities, if I asked them to explain the index option strategy, they couldn't. They'd give me some 30,000-foot view, but they have no idea what they're talking about, and probably the agent doesn't either. Most agents don’t understand it. Of course, I’ve written a book on it. You can go to The Annuity Man and download them for free. I’m trying to educate. That’s why I’m the top agent in the country, but the annuity industry is hurting itself by failing to educate appropriately.

The Role of Annuities

In my opinion, if I were the annuity czar, which I should be, the next president should appoint me. The first thing I’d tell people is that annuities solve for lifetime income. It’s the only product on the planet that does. If you’re going to buy an annuity, you should primarily be looking at it for lifetime income. But unfortunately, that's not what's being sold. What’s being sold is market growth, pie-in-the-sky promises, and unrealistic pitches, which is garbage. Remember this: Whatever you’re buying, if you can’t explain it to a nine-year-old, don’t buy it. That applies to all products—Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, Multi-Year Guarantee Annuities, Indexed Annuities, etc.

Understanding Simple Products

You might say, “Well, wait a minute, Stan. Aren’t those first ones simple?” Yes, the Immediate Annuities, Deferred Income Annuities, QLACs, and Multi-Year Guarantee Annuities are simple. But they’re also customizable, meaning you have to understand exactly how the contract works. You need to explain it to me. In fact, if you become a client of mine, you better understand what you’re buying, or I won’t let you buy it. Don’t believe me? Try me. The Annuity Man is the only place on the planet where annuities are bought, not sold.

Why I'm the Top Agent

Yes, I’m the top agent out here, and the reason is simple: I don’t shove it down people's throats. I don’t tell you what you want to hear. I tell you the truth. That’s what my grandfather taught me. He wasn’t highly educated and very smart. He told me, “If you tell the truth, you don’t have to remember anything.” That’s true in the annuity world as well—benefits, limitations, the good and the bad of every product. If you buy a simple product like an Immediate Annuity, QLAC, or Deferred Income Annuity, you have to understand that you’re getting your money back with interest. That’s what lifetime income is.

Key Considerations When Buying Annuities

You must understand how the product works and how you’ve structured it. You need to know if it's life-only, meaning the money goes poof when your Learjet hits the mountain. You need to know if it’s life with installment refund, meaning when you die, the payments go to the beneficiaries until the money runs out. With a QLAC, you need to understand that you use it inside of an IRA. You also need to know that you must turn it on by age 85, but you can turn it on sooner. Additionally, you need to understand that you can attach a spouse as a lifetime income stream person to that policy. You should also know that the QLAC money is not used in the RMD (Required Minimum Distribution) calculations.

With Multi-Year Guarantee Annuities, which are simple fixed-rate annuities, like a CD, you have to understand that some carriers don’t allow you to take interest out. Some carriers have high surrender charges, and some don’t allow you to peel off the interest. You must understand the product fully. If you’re working with me, you’re going to understand it.

Understanding Index Annuities

And here’s the deal: If you buy an index annuity, you need to understand what you own. You need to know that the carrier can change the way the index calculations are credited at their discretion. You must understand that the Income Rider is essentially monopoly money in a phantom account that you can only use for income. It’s not actual interest. You have to understand that if there’s an upfront signing bonus, that’s not free money. There’s no philanthropist at an annuity company giving away money. That’s not happening.

The Realities of Annuity Sales Pitches

If it sounds too good to be true, it is—every single time with annuities. You have to understand that annuities are contracts, and you need to fully understand the contract. I will send you the contract to read. You have to understand that there are people out there who will tell you what you want to hear. They’ll tell you that the perfect product exists, that it does this and that, and that it is just how you want it. But that’s not true. You need to understand the policy.

How to Understand the Policy

How do you understand the policy before you buy it? Ask for a specimen policy. I’ll send it to you. We’ll send you the application, and we’ll send you whatever you need to understand what you're purchasing. You have to know that annuities are backed by the Claims-Paying Ability of the carrier. You have to understand the state guarantee fund and the limitations per policy for your specific state.

Conclusion

Don’t buy dreams. If you’re buying an annuity, you’re going to own the contractual realities. Don’t buy the sizzle because you’re going to own the steak. If you want to buy your agent a car, go ahead—but make sure you understand what you own. Be able to explain it to your spouse, and have your spouse explain it to you. If you have beneficiaries who are adults, they should understand what you own and what happens to it. Don’t let anyone pressure you into signing. Don’t let them say, "You have to sign now because after this, it’s going to go away." That’s garbage. You have to understand what you’re buying.