Is Annuity Something That You Need?

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Hey, it's Mark Pelosi, the land geek with your favorite niche real estate website, www.thelandgeek.com. and on today's podcast, we, we have a really interesting guest. But before we talk to our guest about his exciting niche, which I think he makes it sound exciting, even though I think most people have a stereotype about it, I'd be remiss if I didn't properly introduce my co host, Scott Todd, the brain, the professor, your flight school sherpa from scotttodd.net landmodo.com if you're not automating your Craigslist, your Facebook postings, posting domination.com thelandgeek Learn anything about anything. Investor ninjas.com Scott Todd how are you? Mark?

I'm great. How are you?

I'm pumped about our guest. He's kind of a. It's kind of a big deal.

Scott Todd yeah, I mean, like, just, just Google him and you'll see like, he's, he's a power hitter, man.

Yeah, I'm a little intimidated by. Stan the Annuity Man, AKA Stan Ha is a nationally recognized expert on, of all things, annuities. Known for his transparency, honesty, and endless research. He has spoken at every major financial trade show in the United States and is a featured annuity expert on national TV and radio. The Annuity man is rigorously independent, representing all major carriers that meet his uncompromisingly high standards to for safety and quality. Stan the Annuity man, welcome to the show. How are you?

I'm glad to be here. I mean, no one chooses to be in the annuity industry because annuity is the financial curse word. So the question is, why am I here? But I think I have a pretty good answer for most people out there because most people have a misconception about annuities, that they hate all annuities or all annuities are bad, or all annuities are expensive, or everyone selling an annuity is a sociopath. I hope to rip through all of that and factually dismantle those misunderstood things and tell people where annuities fit and where they don't fit.

All right, well, great. Well, let's just rewind the Stan the Annuity man tape for a bit and let us know how you got started and how you became the Annuity Man.

Like, I Said no one chooses to do that. I worked for the large firms on the street, Morgan, Stanley Dean, Witter, Paine, Weber, UBS for a very, very long time. I got disillusioned with where that business was headed and I was obviously right, in my opinion. Took some time off and was not thinking about annuities. But I had some people locally where I live asked me to look at their annuities and see if I could help. What I found was annuities were being sold improperly. Just with that over 10 years ago, I started Stan the Annuity Man. I was named after Stan Musial the baseball player. So it kind of fit. And I stay in my lane. I do one thing, I do annuities. I only don't do life insurance. I don't do long term care, no other investments. Even though I have an extensive investment background, used to manage money for a living. I look at annuities differently than most. I see them as contractual guarantees because they are contracts. I only look at the contractual guarantees and I represent all carriers licensed in all 50 states. But I've broken the annuity business down into some very simplistic ways to find out whether you need an annuity or you do not need an annuity. The first thing is two questions. What do you want the money to contractually do and when do you want those contractual guarantees to happen? And then from there, I have an acronym called pill. P stands for principal protection, I for income for life, L for legacy, and L for long term care. I know I just threw a lot at you, but that's how simple it is to determine whether you need an annuity. And if so, I can then point you at the right type.

So I'm curious, Dan, why do people typically dislike annuities? What is the stereotype? And then who is an annuity really ideal for? How are you different?

Well, I'm different because most annuity salespeople are trying to sell hypotheticals and theoreticals back tested return scenarios. And I'm all about the contractual guarantees because once you buy an annuity, you own a contract. So I always tell people, don't buy the dream because you're going to own a contractual reality. So the annuity industry has earned its bad reputation. It's a wild, wild west of sales pitches out there. There's a lot of sociopaths out there, just like in any sales industry. But the annuity industry seems to attract those people because, say, for instance, in the indexed annuity world, you only need a state life insurance license. Pass the test. I guess you get a 70, and then you can go advise people on their retirement, which is kind of crazy. And we're all familiar with the bad chicken dinner seminar, where you get the invitation in the mail. You go eat the bad chicken dinner seminar, the expensive steak seminar, steak dinner. And then somebody pitches you this too good to be true product. It's not the carrier's fault. It's just the wild, wild west of sales pitches. And what I'm trying to do out here is tell people they should only own an annuity for what it will do, not what it might do. So I'm pounding that contractual guarantees message to the public.

Okay, great. So let's unpack it with Scott Todd as our example. So let's get Scott Todd and an annuity and kind of explain to us what he's getting with this contract, why it would be a good or a bad idea for Scott to invest.

Let's talk about annuities in general. When you say the word annuity, it's not all encompassing. It's like saying the word restaurant. There's many different types. There's many different types of annuities. So the first thing I'd ask Scott is, what do you want the money to contractually do? And when do you want those contractual guarantees to happen? So first question, what do you want the money to contractually do? Give me a hypothetical answer.

I want to make sure that during retirement, I have money coming in the door.

Okay, so you want income. So you want income to start at a future date. So those were the two answers that he gave me. So now we're down to two products. A deferred income annuity and. And an income rider attached to an annuity. Both provide contractual guaranteed lifetime income at a future date that Scott chooses, and both will not be affected by the market in any way. Both are a pure transfer of risk. And the benefit proposition that sets annuities apart from all other financial products is that annuities are the only product type that provide a lifetime income stream, regardless of how long you live. So if Scott lives to 150, it's going to pay. It's a pension. And in a pensionless world, and I'm assuming that most people listening do not have a pension. Annuities are a way to create that pension, and that's the fit that I see. In addition, there's 10,000 baby boomers retiring every single day, and most of them want guarantees. They don't want stock market risk and retirement. They want to see guaranteed income stream flowing in Just like Scott does.

Interesting. So why not buy, say, a stock with a high dividend or buy a bond? How does an annuity differ? What's the risk reward ratio with these contracts?

Good question. Again, it depends on the contract that you're looking at from the standpoint of bonds and stocks, obviously there's underlying risk with the value when you're talking about fixed annuities, and that's where my lane is. That's what I specialize in. Fixed annuities are not affected by markets. You are going to protect your principal. You are going to transfer risk. Can you peel off interest from a bond or get a dividend from a stock? Absolutely. Are you at the mercy of the market risk or geopolitical events? Absolutely. With an annuity, you can buy an annuity type that peels off interest, like a fixed rate annuity, or you can have what Scott wanted, which is a future lifetime income pension stream, and you can set that up as well. Annuities were put on the planet in the Roman times. The Roman soldiers were awarded annuities, annua. Annua is the Latin word for payment. That's where annuities came from. The dutiful Roman soldiers and their families got lifetime income streams from the Roman Empire. And that's where annuities started. They've been sold in this country for a couple hundred years. And I always laugh when people say, hey, I hate annuities. I always go, do you hate your Social Security payment? Do you hate your pension? Because if you do, then you're a hypocrite because those are annuity structures.

Interesting. Scott Todd.

Yeah. So, like, so, Stan, like, what are the, you know, like what are the downsides of me, like, getting the annuity? Is there a downside as long as I kind of know what the contractual obligation is? Is there other downsides beyond that?

Once again, it depends on the type of annuity. But each type of annuity has specific benefits and limitations unique to that annuity type. With annuities, you are transferring risk to the annuity company to solve for a specific goal, which is whether it be principal protection or income, legacy or long term care. But in your case, it's income. So you're transferring the risk for income. I guess the limitation would be loss of opportunity. You could always call me back and say, hey, I should have bought Apple instead of buying this annuity. My comment to you is you have a lifetime income stream because most people need what I call an income floor, which is a guaranteed income stream coming in every single day, every single month. To your account regardless of what happens. Social Security, it could be dividends from stocks. And then the gap fill could be an annuity income stream that you can never outlive. I always tell people there's no return on investment until you die. There's no ROI until you die with an income annuity because I don't know how long you're going to live. And they the annuity companies on the hook to pay regardless of how long you live.

So just as a follow up, let's just say that I was going with the scenario that I gave you, the hypothetical that I gave you. And I said, you know What, I want $8,000 a month in my retirement to come in. How large of an annuity would I need to buy to get that? And then two, the second piece of that is, what happens if I die like two years or a year after I started the income stream? Is there a guaranteed payout to my estate?

Both very good questions. Let's cover the first part. All lifetime income streams with annuities is based primarily on your life expectancy at the time you take the payment. So the older you are, the higher the payment. Interest rates play a secondary role. Another misconception about annuity income streams is that when you die, when Scott's Learjet hits the mountain, money goes poof. And the evil annuity company keeps the money. That doesn't happen unless you want to structure it that way. 99% of the lifetime income guarantees that I put together for people, it covers Scott's life or Scott and Scott's spouse life for as long as they live. But when their Learjet hits that mountain and they die, 100% of that money goes to the list of beneficiaries. So you can transfer risk and you can make sure that 100% of that money goes to somebody in your family. The other thing that's important too, and Scott brought it up, is the customization of annuities. If Scott said, you know what, Stan? I have this wondering ambiguity of a 21 year old that doesn't know what they're doing in life. I'd like to get a joint lifetime income stream annuity or one on just them so that they're going to get a lifetime income stream, you can do that as well. Once again, the income stream is based on life expectancies at the time you take the payment. So the initial question Scott has, how much money would it take? We can do quotes two ways. You can say, hey, Stan, I have $200,000. How much income would that Create at this start date. Or you can say, I need $1,500 a month starting in a year. How much money would it take so we can reverse engineer it? Annuities are math, okay? It's very, very simple. There's no moving parts to these lifetime income streams. All other than your life expectancy and current interest rates.

Interesting. So what is the worst advice you see or hear given in the annuity.

World when agents say, here's the best product for you. I've chosen the best product for you. Annuities are commodity products. In other words, all annuities should be shopped. Annuities should be shopped. With all carriers solving for your specific situation. Meaning that there is not just one good annuity or the best annuity. If any agent says they have the best annuities, the best for them. The other thing we see in the annuity industry is what I call commission steering, meaning that annuity agents typically push people or steer people toward the higher commission products instead of listening to them and trying to point them into an annuity that actually fits. And it might be a simple product. Commissions are built into all annuities. You never see them as a consumer, which I don't think is a good thing. But, but just to understand this, for all the listeners and viewers out there, the more complex the annuity, the higher the commission, the longer the sales surrender charge, the higher the commission, and it's the reverse, the simpler, the lower the commission. So you have to understand that there could be some agendas on the agent side on pushing you to their specific type of annuity. But with that being said, I would say 30% of my calls end up with me saying to someone right now, I don't think you need an annuity or you don't need an annuity at all. They don't fit everybody. They're transfer risk solutions, but they're not for everyone.

So how do we determine whom they're for? If we break down the three buckets that you had mentioned, which is income, legacy, and long term care.

Well, considering modern protection, there's four buckets.

And principal protection for four buckets. So if we just. We're going to stereotype your typical client avatar, because I can imagine that, you know, we can all get behind long term care. Number one, we can all get behind income, we can all get behind legacy, we can all get behind principal protection. But then how do we, how do we sort of, you know, make a good educated decision based on our personal financial situation? So if we took a bucket, let's just say somebody with a W2 job, let's say. Where would you sort of steer them first?

Well, first of all, I'm one of the people out here and there's not many agents that say this. I don't think young people really need to look at annuities. I think people that are either pre retirees or retirees need to look at annuities. And that ranges in that 50 year old range up to in the 70s. I don't think the 30s and 40s need annuities. So they need growth. One of the things that sets me apart from everyone else out here is I do not think annuities should be used for market growth. Even though a lot of agents try to sell them for that. They are not market growth products, they are contracts. If you want true stock market growth, then do not buy an annuity. Most people use annuities for lifetime income streams or principal protection, one of those two. Those are the two primary ones. People that use them for legacy are the people that cannot qualify for traditional life insurance or people that use them for long term care, or people that can't qualify for traditional long term care. So the two main categories are principal protection and lifetime income. And in a pensionless world, lifetime income seems to be where everyone wants annuities to fit within their portfolio. Most people are looking to build that income floor. And what that means is that monthly amount that's coming in every single month to your bank account that covers basic expenses so you can go live your life. That's truly where annuities fit.

I see. Scott, Ty, what are your thoughts?

I think that annuities could play a part in someone's portfolio, their long term plan. I think it's just like Stan said, depends on the person and depends on how much risk you think. Like, I look at things and Mark, anytime I see like this interest rate of like you know, 2, 3, 4, 5%, I kind of cringe, right? Like, because I know that there's better opportunities out there and I know where they are and I feel very good that I can go get them at the same time. That's me, right? Like not everybody can do that. And beyond that, like my wife, literally right before this call, my wife and I were talking about like she's like, well if something happened to you, I'm not sure, like, see, she does know where the big yield is, right? So like she would be dependent on somebody else. She might be somebody that would be a good candidate to buy this annuity for so that she would have that guaranteed income stream should something happen to me? Like, that's the other way I think about this.

Yeah. I mean, Stan, you're not going to believe this, but, you know, Scott and I are in our late 40s, even though we, you know, obviously we look like we're in our late 20s.

Yeah, you're chiseled out of steel. So who would have known? I mean, unbelievable.

Yeah. Yeah. So, you know, people are always shocked when I say that, but I mean, at what age would you recommend we really start looking at this? Seriously?

Pre retiree, when you're in your 50s. I'm 55. When you start going into those 50s and you're thinking about the future and you're also thinking about taking care of your spouse or partner and making sure that there's an income stream for them, that's kind of the time to look at it. But there's never a perfect age. It all really comes down to. To when you want to transfer risk. There's a lot of people right now that just want to buy fixed rate annuities because they think the market's going to go down. Nobody knows, but it really is a customizable type product. I think it's important to say when you say the word annuity, you have to understand that there's six to seven products underneath that category that are all unique and do different things. When people say I hate all annuities, I apologize for that. I hate all annuities. It's like saying I hate all restaurants. It just doesn't make any sense whatsoever. You have to look at it from a broad standpoint. So the whole ad campaign of I hate annuities is nothing more than just diverting people to money management or something like that. You can't hate all annuities and love your Social Security payment.

I see. What would you say to a guy like Scott Todd that's just wealthy? I mean, he's got more cash flow than he knows what to do with. The risk being he doesn't know how long he's going to live and what would happen to that cash flow should he, God forbid, die?

He just told me. And what I would tell Scott is this. Your spouse could give a rip about what you do in the markets, could care about any of that. Doesn't know what the volatility index is, doesn't care about price to earnings ratio. All they care about is going to see the kids and the grandkids and the family. So what I would tell him is if he has an income floor in place, that's fine. But with an annuity you can set it up joint life with the spouse and so that there's a continuation, uninterrupted and unchanged of that income stream. When Scott's Learjet hits that mountain that his wife or partner is going to have lifetime income stream, I think that kind of peace of mind planning for rich people like Scott, big hitters, the Gordon Gekkos of the world happened. I have a client right now who's one of the biggest corn futures traders in the world and every year peels off a lot of his profits, holds his nose and buys an annuity for his wife because he knows when his Learjet hits the mountain, she could give a rip about the futures market. So for people like that, a lot of my clients are extremely wealthy and they're buying annuities for their family to make sure that their families are taken care of. I do the same thing with my wandering ambiguity. Daughters in their 20s that don't look like they're ever hirable, they have annuities that are going to pay them for the rest of their life just so that I know that they're going to get a lifetime income stream.

Stan, I gotta tell you, I don't like your analogy of my Learjet because I have a Learjet and I'm a pilot and I'm afraid I'm gonna hit a mountain.

Seriously.

Okay, when your family hits the tree. How about that?

I don't have a Learjet, but I do have a plane. But like, I get the analogy. It's pretty good.

Yeah, that stand. Like we both are cringing when you said that, did you know Scott was a pilot with a plane?

No, but it doesn't surprise me. But from here on in, I'll just say, when your Ferrari hits the tree. How about that?

How about winning my Tesla?

No, I can't.

You can't do that to Mark when your Tesla explodes. How about that? There you go. There you go with the Tesla, huh?

Fair enough. Fair enough. So, you know, despite the morbid analogies, what do you believe is normal or wise or cool that other people think is crazy in the annuity world?

The annuity industry has a monopoly, and that monopoly is lifetime income. It's the only product on the planet that can pay you for the rest of your life, regardless of how long you live. Now, if you had a monopoly as an industry, wouldn't you just pound that into the table and educate the public on that monopoly so that when someone mentioned the word annuity, they would understand that would equal lifetime income. Of course you would, because you're a marketer. I'm a marketer. We have brains. For whatever reason, in the annuity industry, they take a monopoly and they never talk about it. They only talk about indexed annuities and variable annuities for potential growth and all this stuff where the monopoly is waiting for them to educate the public. And with 10,000 baby boomers retiring every day, they're looking for lifetime income. So I think it's going to go down as one of the biggest marketing blunders and industry marketing horrific choices of all time. Business schools will be studying it forever. Why didn't the annuity industry pound the table and tell people about lifetime income? I have no idea.

All right, Scott, Todd, any final thoughts? Okay. Well, Stan, I think that your education, your mentorship has been phenomenal this podcast. But we're at that point now in the podcast where we're going to ask you for your tip of the week. A website, a resource, a book, something actionable where the art of passive income listeners can go improve their businesses, improve their lives. What have you got?

Well, it's twofold. You're going to tell people about me later, but I will send every single one of your listeners my seven published books on Amazon about annuities I'll send them to for free. They go to the site you're going to give them. I'll do that for free. But I would tell them to go to the Stan the Annuity Man YouTube channel, because every single day I release a brand new video on annuities that's educational and it tells people the truth about these products because there's so much misinformation out there. So Stan The Annuity Man YouTube channel.

I love it. I love it. Scott, before we get to your tip of the week, I just want to remind the listeners today's podcast is sponsored by flight school. In the next 16 weeks, let us start building your passive income in 10,000amonth, completely passively, the next 12 to 18 months, start going up that mountain of land, investing with your Sherpa skatod quickly, efficiently and safely. If you want to learn more, if you're even curious about it, you owe it to yourself, if not yourself, your friends and family. To learn more. Just go to the landgeek.com training, get on a call with Mike Zaino or Scott Bossman and learn more about flight school and see if it's right for you. All right, Scott Todd, what's your tip of the week?

All right, Mark, here I'm also going to put in the chat for you guys so that we can also link to it. But check out gf.dev/word. WordPress Security Scanner. G F Dev WordPress Security Scanner. I know a lot of people are using WordPress to host their, their websites. You punch in your, your URL in here and what it will do is it will scan, it takes a little while, but it will scan your website and it will tell you what all the vulnerabilities are. You know, like this is what the hackers are gonna get into. They're gonna hack your System, hack your WordPress. So this is just an eye out for you and I don't know, check it out.

You know, I feel like this is a really apropos tip of the week given we've got Stan the annuity man protecting us with our retirement income. Now we've got you protecting us with our websites. How much more protection do we need? Well, I tell you what, we need more because my tip of the week is, is really do a deep dive into the world of annuities and really go way deeper with Stan on this topic and start looking at, you know, solutions for your long term pension or protecting your family, protecting your children. Just go to stantheannuityman.com stantheannuityman.Com his site is incredible. There is so much in here, so much education and it's a lot of fun as well. So I'll have the link there. Stantheannuityman.com Stan, are we good?

We're good. I need everybody to get my free books. We'll ship them to you for free and I will not bother you, I promise.

That's phenomenally generous. Stan, I just want to know, is there any question I didn't ask you? I should have asked you.

I don't think so. I think you covered it. You guys were fantastic. I appreciate the platform to educate people on annuities because most people don't have a good education on them. They just have preconceived notions.

All right, well, fantastic. I'm glad we can have people like you getting value. And really, dear listener, the only way we're going to get the quality guests like a Stan the Annuity man is if you do three little things. You got to subscribe, you have to rate, you have to review the podcast, send us a screenshot of that review. To support the Land Geek Calm, we are going to send you for free the $97 passive income launch kit course as well as a new whole tailing course how to double youe money 30 days or less With Land Flipping. All right, Stan, we're good.

We're good. Thanks, guys. Thanks, Scott.

Thank you. We're good.

We're good, Mark.

All right, let's do this. One, two, three. Let freedom ring. Not bad, right? Yeah. Thanks, everybody.

Take care.

Thanks for listening to the Art of Passive Income Podcast. Start your journey at www.thelandgeek.com and www.scotttod.

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