The Cost of Waiting to Purchase an Annuity: 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 the cost of waiting to purchase an annuity. Now, I know what you're thinking, “Wait a minute, Stan. That sounds like a sales pitch. Are you pushing me to buy now? Is this one of those ploys where I need to buy now to get an upfront bonus, like the bad chicken dinner seminars?” No, it’s not. There is, however, a real cost to waiting. Let me explain. The bell doesn't ring at the top or bottom. You can't time it. There's no sweet spot or magical moment to buy an annuity.

The Types of Annuities and What They Solve For

Let’s talk about that for a second. There are many types of annuities. There are annuities for lifetime income, annuities for principal protection, annuities for legacy, and annuities for long-term care or confinement care. I’ve come up with an easy acronym called PILL that covers all of these things that annuities contractually solve.

• P stands for principal protection.
• I stands for income for life.
• L stands for legacy.
• The second L stands for long-term care and confinement care.

To determine if you need an annuity, ask two simple questions: What do you want the money to contractually do, and when do you want those guarantees to start? Never buy an annuity for what it might do. Always buy an annuity for what it will do. The "might dos" are based on hypotheticals and back-tested numbers that can easily be manipulated.

Now, I’m seeing the industry catching up to me with articles and studies pointing out how misleading these back-tested, non-guaranteed numbers can be. But let’s get back on track: there is a cost to waiting.

The Cost of Waiting: A Real-Life Example

Here’s a real-life example that applies to everyone watching this: every single one of us owns the best inflation annuity on the planet—Social Security. The big decision we all face is: Should I take that lifetime income stream at age 65 or wait until 70? We’re all familiar with the advice: “Wait until 70 to get the highest benefit.”

Of course, payments are higher at 70 because you're older and have a shorter projected life expectancy. So, the payments are higher to make up for the fewer years you’ll collect. That’s simple math. But here’s the catch: if you wait until 70, you miss out on payments for five years (60 months). How long will it take to make up for those missed payments, even with the higher payment at 70? It typically takes six, seven, or even eight years to make up for it. You can run those numbers yourself, but you get the point.

In southern speak, “A bird in the hand is worth two in the bush.” It’s worth considering that you might want to spend the money now.

A Conversation with My Sister

I was talking to my older sister recently, who’s about to turn 63. She asked me if she should start her Social Security at 63 because she wants to travel and enjoy life, but all of her advisors say to wait until 66 or 70. They pound the table with the mathematical argument. But after discussing it with her, I told her, “Take it now.” She said, “You’re the only one who’s told me to do that.” And I told her, "Spend the money. You’ve earned it. Enjoy it now while you’re healthy and in good shape."

I know all the financial planners are probably yelling at the screen right now, saying, "That’s the dumbest thing ever! You’re leaving money on the table." I get it, but I want you to understand that there is a real cost of waiting. If you really don’t need the income and want to maximize it, waiting may make sense, but you must factor in the payments you miss.

The Three Phases of Retirement

There are three phases of retirement: go-go, slow-go, and no-go. I’ll even add a fourth phase for those between 95 and 100: the "hell no go" phase. I came up with that on my Fun With Annuities podcast, and it makes sense. If you’re still healthy and enjoying life, take the money now. If you’re waiting to maximize your Social Security benefits, understand the trade-off of missing payments and how long it will take to catch up.

Why You Can't Time It

Here’s the bottom line: when looking at the annuity category, remember PILL: principal protection, income for life, legacy, and long-term care. Annuities solve for these things contractually. Do not buy annuities for market growth. If you want market growth, buy stocks, bonds, or other investments.

You cannot time it when you're buying annuities for contractual guarantees. You can’t. No matter how smart you are or where you went to school—these are contracts and commodity products. You shop all carriers for the highest contractual guarantee.

Lock It in and Live Your Life

If the contractual guarantee looks fair to you for your situation, lock it in. "Lock and load," as we say in the South. Go live your life. But understand that there is a cost to waiting. If you’re waiting for the perfect moment, it may or may not pay off, especially for lifetime income.

Annuity companies have the big buildings for a reason. They know when we’re going to die. Life insurance companies are in the same business—they know when we’ll die and are okay with it. But you can’t time it. There’s no sweet spot, no arbitrage moment, and the cost of waiting is real.

Conclusion: Stop Waiting and Take Action

Don’t try to be the Gordon Gekko of annuities. Go to The Annuity Man and run quotes using our proprietary calculators—the best in the business, no argument. You can run them 24/7, 365, and no one will call or bug you. It’s a service for consumers, not agents or advisors. We are the top direct-to-consumer annuity salespeople in the world.

Thanks for tuning in to Shooting It Straight With Stan. My name is Stan The Annuity Man. Yes, I am America's annuity agent, and yes, I am licensed in all 50 states. See you next time!