If at first you don’t succeed, get it right the second time!

annuityWhat if you discover you bought the wrong annuity? What if the projected income falls short of the estimates? Can you get out of the contract?

The response to our special report, Miller On The Money Annuity Guide was terrific. The most common response was readers wishing they had read the report years ago – before they bought their first annuity.

Many didn’t understand what they were buying. Some looked at annuities as investments, with monthly payouts based on stock market or index performance – and the hypothetical projections were never met. Regardless of the reason, what they bought was not living up to their expectations.

The underlying issue is keeping your retirement plan up to date. What happens when the best laid plan goes astray? How do you make adjustments to get back on track?

I contacted good friend, and annuity expert Stan The Annuity Man. His website accurately says: “Stan The Annuity Man has been referred to as the “walking middle finger of annuity truth” and has been called the nation’s “annuity consumer advocate” for all things annuity.” As a consumer advocate, he is contacted regularly by people asking about annuities they bought from other agents.

DENNIS: Stan, once again thanks for taking the time for an interview. Our readers love your honest, candid approach.

The feedback to our special report from annuity owners fell into two groups. The first bought an annuity and are satisfied with the results.

The second group bought an annuity they either did not understand or it did not perform up to their expectations. Their retirement plan probably has to be adjusted because of an income shortfall.

What do you say to those who call you realizing their annuity is not living up to expectations?

STAN: Thank you for inviting me. Before answering your question I need to add another group.

Dennis…there are people out there that I call the “statement drawer stuffers.” These folks never open their annuity statement and simply throw it in the drawer with all of the other unopened statements.

I encourage them to look at these statements to see exactly what they own. It might be terrific news or it might be bad news…but you need to know what you own and possibly turn a “dead asset” into a positive addition to your overall portfolio. Unlike the first two groups you mentioned, they don’t know what they have.

DENNIS: Stan, I never thought of #3. Should they contact the agent who sold it to them to find out the particulars?

STAN: Forget that agent, most will just revert back to their “sales pitch” mode if you call them. Call the issuing annuity company instead, their 800# is on the statement.

The people answering the phone at the company will NOT be trying to sell you anything. Their job is to fully explain the policy that you own, and answer any questions you may have. The question you must answer is, “Will this annuity contract live up to the expectations?” You might find out that you own a pretty good annuity contract. That happens a lot. The bottom line is you need to know what you own so you can extract as much value out of that policy as possible – and/or make necessary adjustments.

DENNIS: Back to my original question. What about those who wrote me saying they bought the wrong annuity? They may have not understood what they bought; but their current annuity is not what they hoped for. What can they do?

STAN: If you don’t make your decision solely on the contractual guarantees when buying an annuity, you will be disappointed every single time.

This happens a lot with variable or indexed annuities. Many agents push hypothetical, theoretical, back tested, or dream market return scenarios that never seem to pan out…and then you are stuck with the policy, and in most cases forced to “make lemonade.”

Once you find out the contractual guarantees from the policy, compare those guarantees to the current “annuity street” to see if any other carriers can beat those #’s. If they can, then you might consider a transfer to another annuity. If they can’t beat the #’s, then you have found out that what you own is pretty good – for a variable annuity.

Once you know your guarantees, you may have to make other adjustments in your retirement portfolio.

DENNIS: If it’s coming up short, are most people better off trying to terminate their existing contract and start over, or are they better served trying to pick up the income slack elsewhere?

STAN: There’s no good answers here. Unfortunately, most policies are designed to “handcuff” you so that you will never be able to get your money out.

This happens, especially when you attach a rider (contractual benefit), to a variable or indexed annuity. You must stay in the policy to access the benefit. That’s what I mean by being “handcuffed.” Contact the carrier directly to see what all of your options are…and then make that transfer or risk choice.

After calling the annuity company to determine what you have, do the math yourself, without your agent. Many clients use financial advisors, with no stake in the outcome, to help.

The choice is keeping the annuity and making adjustments, or terminating the contract (with appropriate penalties and fees) and building a new retirement plan.

Remember annuities are NOT investments – they are contracts. Regardless of the type of annuity you own, it is a contract between you and the issuing annuity company.

Most annuities solve for income right now, or income starting at a future date with the primary pricing mechanism being “life expectancy.” Lifetime income guarantees with annuities is a transfer of risk – the annuity company is “on the hook” to pay regardless of how long you live.

Annuities work perfectly when filling a needed income gap in your “income floor” – coupled with Social Security, pensions (if so lucky) and investment income.

DENNIS: This doesn’t sound so bad when you say it that way. Anyone who has an annuity stuck somewhere in a drawer should look at the statements and understand what they own. Why would anyone put something like this off?

STAN: There is no good reason to not know exactly what you own. Dennis we both know people who are embarrassed to admit to making a financial mistake. The household money manager does not want to let the family down; particularly their spouse.

They may have gone to the proverbial bad chicken dinner seminar and/or were high pressured into signing something they didn’t understand. Confront the problem, don’t ignore it! Once again, you can bypass speaking with an agent and call the annuity company directly to find out the details. Eventually, you, or someone in your family, will have to deal with it.

DENNIS: The old saying, “an ounce of prevention is worth a pound of cure” would surely apply. What advice would you offer to readers to avoid the possibility of a do over down the road?

STAN: My saying about annuities that I created over a decade ago is “Will Do. Not might do.” Always own an annuity for what it will do (i.e. contractual guarantees), and not what it might do (i.e. projections or hypothetical return scenarios). If you buy annuities solely for the contractual guarantees, you will be happy with your purchase.

Here is one tip I strongly recommend. After the agent’s recommendation, write down everything you heard the exact way you interpreted the sales pitch. After doing that, both you and the agent should sign and date your synopsis. In most cases, that agent will not sign…which means that you will not buy.

After the policy is delivered, ALWAYS call the carrier (not the agent) to make sure you own what you think you bought. If the carrier’s answers contradicts the agent’s sales pitch, you have a statement signed by the agent and have been misled – and have grounds to get a full refund.

DENNIS: Once again Stan, you don’t beat around the bush. If they understand what they buy, have periodic financial checkups, and make adjustments as they go along, it’s a huge step toward a comfortable retirement.

I want to remind readers I have no financial arrangement with Stan. He’s a trusted advisor, a highly sought after public speaker, and the best subject matter expert in the country.

Check out his website, he has several free books which are terrific.

Stan, I know you are a very busy guy. On behalf of our readers, thank you for your time and helpful insight.

STAN: My pleasure Dennis.


Dennis here. A properly structured annuity can be a great addition to a retirement portfolio. If at first you don’t succeed, get it right the second time. The sooner you make the necessary adjustments, the easier it is to keep your retirement plan on track.

If you feel you may be an annuity candidate, we are now offering a FREE report, A 7-step questionnaire – Am I a candidate for an annuity?

I am not licensed or qualified to offer individual financial advice, or sell any insurance products. I make my living as an EDUCATOR. You can download the FREE report and go through the questionnaire without worrying about being pressured with follow up calls or emails urging you to get a free quote.

On the Lighter Side

Jo and I are in Indiana spending time watching grandchildren play baseball and connecting with old friends. I’ve forgotten what it’s like trying to catch the games with two sons playing on different teams. It was close to 50 years ago when my boys played youth baseball. Some things have not changed. Just like with my own children, when a grandchild steps into the batter’s box you pay attention.

The good news is I have a much different perspective than I did when they were playing. Winning and losing is not as important as enjoying quality family time together.

All Americans have been affected by the government’s decision to bail out the banks at the expense of seniors and savers. Paul Craig Roberts gets to the core of the issue pretty well in his article, “Without Glass-Steagall America Will Fail.” I felt many readers might enjoy his comments.

And finally…

Good friend Ed W. sent along some clever puns for us this week:

  • Police were called to a day care where a three-year-old was . . . Resisting a rest.
  • Those who get too big for their britches will be . . . Exposed in the end.
  • If you don’t pay your exorcist . . . You can get repossessed.
  • With her marriage, she got a new name . . . And a dress.

This is Jo’s favorite:

  • When she saw her first strands of gray hair . . . She thought she’d dye!

Until next time…