Retirement Expert Rants: Annuities and the Markets
The Annuity Man
Annuities are contracts. They are issued and backed by life insurance companies and are transfer of risk strategies that primarily solve for lifetime income. In fact, annuities have a monopoly on lifetime income. No other financial product, except annuities, can contractually guarantee an income stream that you can never outlive.
Comparing annuities to the stock market is the ultimate "apples to oranges" comparison. Annuities are "Will do" contractual guaranteed products. The stock market is one big "might do." Unfortunately, annuity salesmen (and the annuity industry) for that matter seems fixed on stock market returns as well. Over-hyped sales pitches surrounding Variable Annuities (VAs) and Fixed Index Annuities (FIAs) dominate the annuity sales landscape. In addition to the agent's commissions being high with these 2 product types, "the dream" can easily be pushed to eager retirees hoping that a "too good to be true" product exists. Spoiler alert, it does not!
In my opinion as "America's Annuity Agent," if you want stock market returns...then never buy an annuity of any type. FIAs are actually CD products and a life insurance product, and VAs have limited choices with their mutual funds (i.e. separate accounts). In other words, don't buy the dream, because you are going to own the contractual realities.
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