In a recent Marketwatch article, Stan “The Annuity Man” Haithcock takes a cue from Donald Trump’s campaign slogan and says that “It’s time to make annuities great again.” Some in the industry would argue that they have always been great while there are those anti-annuities folks who would argue just the opposite, that they never have been. While Haithcock doesn’t believe that the recent decades of changes made to annuity products are best, he supports the innate benefits of annuities and would like to steer the industry way back to Roman times when the products were simpler. He says that the changes to the industry would be simple and really just follow common sense guidelines.
The only purpose of annuities back in Roman times was to pay guaranteed lifetime income. Soldiers received this pension annuity for the rest of their life after serving their country. It’s really not different from the Social Security or company pension income that many are guaranteed today. Until the mid-1950’s, guaranteed income annuity products were the only type of annuities available. This pension style annuity has been around in America for well over one hundred years. Haithcock thinks that this is the kind of annuity that we should get back to as a country. He says that the change to annuity products that offer market growth is just a dream and has really given the annuity industry a bad reputation. Variable annuities were first introduced in the 1950’s, while indexed annuity products didn’t come around until the mid-1990’s. Although variable annuity products were around long before, they really started getting attention in 2008. These types of annuities are sold as products that offer stock market growth potential along with guarantees. With multiple benefits and uses for these annuities, you also get increased complexity and fees. While we certainly see benefits to some consumers with variable and indexed annuity products, we can appreciate the simple type of annuity that Haithcock is promoting for its consumer benefit.
The three things that this article deems necessary to “make annuities great again” are simplicity, transparency, and making them easy to understand. There are many types of annuities that are simple, have no annual fees or market links, and really no extra moving parts to them. Single premium immediate annuities (SPIAs), deferred income annuities (DIAs), Qualified Longevity Annuity Contracts (QLACs), and multi-year guarantee annuities (MYGAs) are four important products to consider for their simplicity. All commissions are built into annuities, so make sure that your agent offers transparency about how much you are paying. Since commissions are higher with longer surrender periods and more complex products, it’s important that you can see exactly how much you are paying with each type of annuity. Annuities have got to be easy to understand. You should not buy a product that doesn’t make any sense to you, especially if it doesn’t make sense to your annuity agent either. The simplest forms of annuities are certainly the easiest to understand. If you can follow the complexities of a variable or indexed annuity product, then by all means consider purchasing one. But if it’s over your head or seems too good to be true, stick with something easy for you to understand.
Haithcock’s motto is “got guarantees?” because he understands that annuity guarantees are what make these products valuable. The annuity contract between you and your insurance company transfers your risk of outliving your income to them. Nearly every American needs a lifetime income guarantee, whether they are ready for it now or at some point in the future. Choose an annuity that is simple, transparent and easy to understand to create a guaranteed lifetime income stream. Annuities are the only products that allow you to do just that.
Written by Rachel Summit