Hands down, the annuity has got to be one of the most confusing financial products on the planet. There are so many different types of annuities that it's hard to keep track of all of them. Annuities come with different terms, benefits, transfer rules and ways of earning money. From market-index annuities to fixed-rate annuities and from immediate annuities to deferred annuities, there is a lot to take in.
Financial industry jargon used to explain and sell annuities doesn't help much, either.
If you are looking for a little illumination into the world of annuities — and if you are trying to figure out whether an annuity (and which type) is right for you — look no further than The Annuity Stanifesto by Stan G. Haithcock.
Who Is Stan Haithcock?
Haithcock calls himself “Stan The Annuity Man.” He has a long history in the financial industry and has worked at Dean Witter, Morgan Stanley, Paine Webber and UBS. Haithcock loves annuities — when they are done right.
He's made a name for himself as an independent seller of annuities, and he is known for his transparency. He appears grumpy in most of his press photos, but that's probably comforting; it means he's serious about protecting your money.
Haithcock comes with a long financial background and an intimate knowledge of annuities. He's taken that knowledge and included it in his book, The Annuity Stanifesto, creating a reading experience that will answer just about any question you have about annuities.
What Are Annuities?
Haithcock has arranged The Annuity Stanifesto in a way that takes you naturally through the world of annuities. He offers a brief history of annuities (with an amusing tongue-in-cheek reference to his birth) and a little commentary on some of the problems he sees in the annuity industry. That out of the way, he dives right in to where annuities belong in the grand scheme of things for your portfolio.
What I like about The Annuity Stanifesto is that it is straightforward and that it can be digested in bite-sized chunks. Haithcock breaks it down for you in a way that makes sense, and that allows you to fully understand a concept. He breaks up the information naturally so that you can digest each bit before moving on to the next. This is a rather big book, as financial books go, so it's nice to have it organized in this manner.
The book takes pains to start out by clearly indicating that an annuity in your portfolio isn't about growth. Even market-indexed annuities shouldn't be used in an effort to provide growth. Haithcock says that annuities should be considered by the acronym PILL:
- Principal protection
- Income for life
- Long-term/confinement care
Throughout the book, Haithcock will hammer these points home, and make it very clear that you shouldn't believe an annuity salesperson who tries to sell you on the idea that you will earn money and grow your nest egg with an annuity.
No, the point of annuity is to properly make use of the nest egg you've already pretty much built (the exception is certain types of deferred annuity, but even then you shouldn't try to use the annuity to build your entire retirement fund). He makes it a point to look at what annuities actually guarantee, and not what a salesperson says they could do. This is good advice for just about any contract purchase. He talks about looking “at the steak, not the sizzle.”
From there, Haithcock takes you on a journey through the different types of annuities available. He talks about premiums, rates, indexed annuities, charitable annuities, guaranteed investment contracts and more.
Next, Haithcock tackles the different ways that annuities can be used in your portfolio and your investment plan. He does address growth strategies, but he prefaces with this line: “Let me go on record right here and say that in my opinion, annuities should not be considered as pure growth products.”
Haithcock is clear that you can achieve tax-deferred growth, and that there is a place for a growth annuity strategy in some portfolios, but that you should consider it as part of an overall strategy for your nest egg. He also looks at different options for using annuities to protect against inflation. There is a whole range of annuity strategies addressed in this book, and all of it written in a way that most novices can understand.
While I like the straightforward, no-bull writing in this book, there were some off-putting moments. Haithcock does kind of sell his services throughout the book, mentioning his web sites and talking up his credentials and pointing out how he serves his clients.
It gets a little wearying at times, since it does seem like there are some heavy-handed sales pitches, but that doesn't diminish the valuable information in this book.
If you have any questions about annuities, and you are looking for the right annuity for you, this The Annuity Stanifesto is a great resource.