Annuities are purchased for many reasons, the most common of which should be the guarantees they offer. Stan “The Annuity Man” Haithcock believes that guarantees should be the only reason that you purchase an annuity product. In his Marketwatch article, “The only two annuity questions that matter,” he says to make sure that you have contractual guarantees with your annuity products. There are a lot of different promises made in annuity advertisements. Unfortunately, some of those promises are too good to be true. If you think that any product is too good to be true, then it probably is. Stan likened these false annuity promises to UFO sightings because they are not based on factual proof, but are intriguing and people believe them because they want them to be true.
The questions that Stan says you should ask before buying an annuity are simple to understand and should be simple to answer. What do you actually want your money to do contractually? Any annuity that you buy is a contract between you and the insurance company carrying the annuity product. Your annuity policy details exactly what you will get with your annuity product, including what is guaranteed. Some of the guarantees offered by annuities are principal protection, guaranteed income and death benefits. All of these are rational wants and needs and can be contractually guaranteed by an annuity product. If you are looking for guaranteed market growth, an annuity cannot offer that. No product can. Indexed and variable annuities offer growth benefits that are less concrete than benefits for income and principal protection.
Stan’s second question is in regards to your time frame. When do you want to start these contractual guarantees? The broad time frames are now or later, but you can customize later over a larger window. If you want income guarantees that start right away, you can purchase a single premium immediate annuity (SPIA). For income that is delayed until some point in the future, you can purchase a deferred income annuity (DIA). Income can be deferred from 6 months to many decades in the future. MYGAs and other annuity products can help meet the goal of principal protection for different time frames.
Annuities can solve for many different financial and retirement goals. Stan The Annuity Man says that you only need to ask two things when considering an annuity: what do you want guaranteed in your contract and when do you want that guarantee to start? He advocates for the annuity industry and hopes that there will be a more direct way to purchase annuities in the near future, without having to worry about sifting through advisors that make false promises. You can use an annuity product to guarantee income, principal protection and some other benefits. It’s important to ask questions and sift through the “too good to be true” offers to find the annuity product that contractually meets your needs.
Written by Rachel Summit