Annuity Dreams Sold That Will Never Happen

Not a sales message you'd expect from an annuity agent. Right? It is too obviously not possible. Watch out for these other empty promises.
Not a sales message you'd expect from an annuity agent. Right? It is too obviously not possible. Watch out for these other empty promises. Valerie Loiseleux / E+ / Getty Images

Annuity sales pitches are not always realistic

I blame annuity agents for the need to write this article.  “Too good to be true”, “have your cake and eat it too”, and “better than sliced bread” sales pitches seem to be sucking all of the oxygen out of the annuity room.

Not every annuity works as portrayed in a sales pitch

Every month I receive hundreds of calls from consumers who have heard a pitch that raises red flags, or unfortunately led them to buy the dream that was being sold.

  For those people, they are hoping that I will validate their annuity mistake, and tell them that it will actually work the way it was pitched.  To their dismay and chagrin, I am the grim reaper of annuity truth.  I have to tell them that they have, in essence, wrecked their annuity car. It is time consumers understand that the following annuity dreams being bought and sold do not always reflect actual annuity contractual realities.

Sales Pitch 1: “This annuity captures market upside with no downside”

This is your typical indexed annuity sales pitch.  It sounds perfect, but of course, it is not.  Indexed annuities were designed to compete with CD returns (not the stock market), and any limited upside potential can only be locked in one day per year.  In addition, the annuity company can change the rules (at their discretion) on how any future index gains are calculated.  You have no say in the matter.

 Talk about handcuffing yourself!

Sales Pitch 2: “This annuity provides long term care coverage with no underwriting”

As they say in the south, “This dog won’t hunt!”  Pure long term (non-annuity) care is the best coverage available because it involves a full underwriting with blood tests, medical records, etc.


Indexed annuity agents are once again the culprits of selling fictitious guaranteed issue “long-term care.”  The truth behind the pitch is that they are referring to an income rider that gives your own money back quicker if you need confinement care.  That is NOT long term care.

Never let an annuity agent convince you to cancel your real long-term care coverage for their annuity income rider with confinement care coverage.  In my opinion, any agent proposing this should immediately lose their license.

Sales Pitch 3: “This annuity perfectly adjusts for inflation”

No product perfectly adjusts or increases for inflation, and that definitely includes annuities.  Some annuity types allow you to contractually attach COLA (Cost of Living Adjustment) and CPI (Consumer Price Index) increases to income payments which can help annuities address inflation.  However, when these riders (i.e. attached benefits) are added to a policy, the annuity company drastically lowers the initial payout when compared to the same annuity without a COLA or CPI rider.

Once again, indexed annuity agents also sell the dream of increased income with index growth.  Predictably, the annuity company lowers those initial payouts as well.

Sales Pitch 4: “The annuity company is giving me a free money bonus with my annuity purchase”

Buying an annuity for the upfront bonus is like buying a car for the stereo system.  It makes no sense!  Upfront bonuses are nothing more than agent candy that helps them sell to the uninformed consumer.

Upfront bonuses are just a part of the overall contract, and do NOT guarantee that the annuity is better than a non-bonus product.  Trust me that there are no philanthropists giving away money at an annuity company.  Common sense would tell you that if an upfront bonus is offered, then something is being taken away in the policy.  There are only 100 pennies in a dollar, right?

Sales Pitch 5: “The annuity that offers mutual fund potential with guarantees is your best bet”

This is the dream sold by the variable annuity salespeople in a veiled effort to buy themselves a nice car with the big commissions earned.

  The brutal fact about variable annuities is that the average annual fees (for the life of the policy) are around 3%.  In addition, with the majority of variable annuities, once you add any type of guaranteed rider to the policy, your mutual fund choices are limited. 

I always tell people, if you want to buy mutual funds, then go buy mutual funds.  You don’t need a high fee variable annuity to do this.

So let me be the first to say….Annuity Caveat Emptor! 

Be careful.  Be smart.  Be prudent. Buyer Beware!