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Should I Own An Annuity For Potential Growth Or Contractual Guarantees?

Stan The Annuity Man

Question: I’m thinking about buying an annuity and want to know if I should base my decision on the potential market growth or the contractual guarantees? Don from Iowa.

Answer: Fantastic question, and this is where I differentiate myself from most agents and advisors that recommend annuity solutions.  Most sales pitches you are going to hear involve variable annuities or fixed index annuities, with the agent pushing the dream of phenomenal hypothetical or projected market returns.

With variable annuities, the market growth dream is pitched using the separate account (aka: mutual fund) choices.  With fixed index annuities, the pitch is getting market returns using an option on an index (usually the S&P 500) with full downside protection.  Upside with no downside sounds pretty good in a sales bullet point, but a recent 5 year study showed annual returns of 3.27%.  That’s reality.

Let me stop right here, and introduce you to the saying I came up with that I tell all everyone to remember before purchasing an annuity:  “Own an annuity for what it WILL DO, not what it MIGHT DO.”  Will Do means the contractual guarantees and Might Do refers to hypothetical or projected returns that an agent shows you and seems too good to be true.  For the record, those agent return projections are too good to be true in most cases.

Annuities, in my opinion, should not be considered as investments.  Instead, you should look at these products as transfer of risk strategies that solve for specific things like income for life, legacy, or principal protection.  Notice that I did not mention the word growth.  Annuities should not be considered as growth products in the world of Stan The Annuity Man.  That’s the antithesis of what you will hear from most annuity agents, but I sell contractually guaranteed realities…….not dreams.

If you make your annuity buying decision based solely on the contractual guarantees (or worst case scenario), you will be very happy with these transfer of risk solutions.  If you buy the dream, the only satisfied party will be the agent.  To sum it up, don’t buy the sizzle, buy the steak.  Buy the contractual guarantees.

*If you have a question for Stan The Annuity Man, please send your question to  He will answer all questions directly, and might include yours in his next Annuity123 “Ask Stan The Annuity Man” blog.

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About the Author:

Stan The Annuity Man is a nationally recognized annuity expert and annuity critic, and has been called the national consumer advocate for annuities… and a walking middle finger of annuity truth.  He is a weekly RetireMentor columnist for The Wall Street Journal’s, and is the exclusive annuity contributor for  His highly acclaimed book, The Annuity Stanifesto, is a top seller in its category, and is known as the go to resource for all things annuity.

Stan The Annuity Man has clients nationwide, and is considered one of the top independent annuity agents in the country.  You can learn more at


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  • Jeff Jones says:

    I really appreciate you clarifying this, because there's so much noise in the marketplace that states otherwise.

  • Stan Haithcock says:

    Thanks Jeff. Too many agents are trying to frame annuities from a growth standpoint, which I feel is a mistake. Annuities are contracts. Make your decision on what's in the contract. It's really that simple.

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