More Dumb Things Annuity Agents Say

You Don't Need an Agent Running After Your Money; You Need Someone Putting Your Money to Work!
You Don't Need an Agent Running After Your Money; You Need Someone Putting Your Money to Work!. Grafissimo / Vetta / Getty Images

My recent article about the top 5 dumb things annuity agents say was so popular, that I thought it might be a service to the annuity buying public to add 5 more idiotic agent pitches you need to be aware of.  There are way more than the 10 I’ve addressed, so annuity buyer beware when someone tries to sell you their chosen annuity product.

“I can get you 7% or 8% yield”

Sure you can Sparky.  With the U.S. 10 Year Treasury rate currently hovering around 2%, there is not some genius at an annuity company that can get you 7% or 8% true yield.

The 7% or 8% the annuity agent huckster is referring to is called an “income rider.”  That is a benefit that you can attach to a policy for future income needs.  It is NOT yield!  You can NOT peel off the interest.  You can NOT get to the lump sum.  You can only use it to calculate a lifetime income stream.  If you don’t use it for income, it’s monopoly money pure and simple.

“Don’t worry about the low rating on this company”

This is a scary one when you understand that annuity guarantees are only as good as the company backing them up.  In most states, it’s illegal to mention that annuities are “backed” by a State Guaranty Fund, and that coverage should never be a part of the decision-making process to buy an annuity.

“This annuity solves for inflation”

Sure it does, and I’ve got some beachfront property in Wyoming that I would like to sell you.  No product perfectly addresses the moving target of inflation, and that definitely includes any type of annuity.

  Some annuities allow you to contractually attach an annual COLA (Cost of Living Adjustment) or CPI (Consumer Price Index) increase at the time of application. 

Attach a COLA or CPI increase, then the initial payments are lowered when compared to the exact same annuity without these contractual increases.

 Annuity companies have the big buildings for a reason, which is due to the fact that they don’t give anything away. 

By the way, when the indexed annuity gunslinger pitches a “potential” income increase with any gains, be aware enough to know that the company is ratcheting down that initial payment as well.

“I can get you guaranteed long-term care coverage”

Part of the too good to be true (because it is) indexed annuity sales pitch is that you can get real long term care coverage without any medical test or going through the typical underwriting process.  This is an IQ test. Obviously, this is not true long-term care; it is just a provision to get more of your money back quicker when/if you get really sick.  Doesn’t sound so appealing anymore, does it?

In a perfect world, annuities that offer confinement care coverage should only be used as supplemental coverage, not primary coverage.  This is a fact that most agents need to come to terms with.

“Indexed Annuities are better than Immediate Annuities for income now needs”

This is a great example of jamming an annuity square peg into a round hole.  The real translation is “this indexed annuity pays 4 to 5 times more in commission than immediate annuities.”  This is the truth, and the ONLY reason that an annuity agent would ever say this.

  It’s not only dumb, but borderline criminal in my opinion.

If “income now” is the goal, then a Single Premium Immediate Annuity (SPIA) is the only suitable and appropriate choice.  More importantly, SPIAs provide the highest contractually guaranteed payout for immediate income needs.

So the next “bad chicken dinner annuity seminar” you attend, just swallow the food….not the pitch.  The next annuity internet video should not sway you at all.  The TV annuity ad that seems like the greatest thing since sliced bread won’t mean a thing.  You are strong!  You know better!  You are smarter than that!  You are an informed annuity consumer!