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    Annuity Reality Check

    Honest take. Skip the sales hype.

    The honest take

    90%+ of annuities sold to seniors are bad deals. High commissions (5-10% paid to salesman). Surrender charges 7-10 years. Complex riders that don't deliver. Few annuities make sense for most retirees.

    Annuity types

    • SPIA (Single Premium Immediate Annuity) — give insurance company $X, get $Y/month for life. Simple. Sometimes useful.
    • Deferred Income Annuity (DIA) — buy now, payments start later. Inflation hedge.
    • Fixed annuity — like CD with insurance company. OK if rates are good.
    • Variable annuity — invests in market with insurance wrapper. Usually high fees, AVOID.
    • Indexed annuity — capped market exposure. Marketed heavily. AVOID — too complex.

    When SPIA makes sense

    • You worry about outliving money.
    • You don't have pension.
    • You want guaranteed income beyond Social Security.
    • You're 70+ and want to lock-in lifetime check.
    • Buy from low-cost provider (Fidelity, Vanguard, USAA).
    • Compare quotes at immediateannuities.com.
    • Don't put more than 25-50% of nest egg in annuity.

    Annuity sales red flags

    • "Free dinner seminar" — high-pressure sales.
    • "Guaranteed 7%" — usually has caveats.
    • "You can't lose money" — true but inflation eats real return.
    • "Tax-deferred" — IRA already does this. Don't pay 5% commission for it.
    • Salesman won't reveal commission — RUN.
    • "Limited-time offer" — annuities aren't time-sensitive.
    • Multi-page contract with 4-point font.

    If you already bought an annuity

    • Read the contract — know surrender period + charges.
    • Some have 30-day "free look" period — cancel, get money back.
    • Get fee-only advisor opinion before doing anything else.
    • Sometimes makes sense to "1035 exchange" to lower-cost annuity (no tax hit).
    • NAILBA + State Insurance Commissioner can help with complaints.

    When to walk away

    If annuity has 7+ year surrender period, 5%+ commission, or M&E (mortality expense) over 1.5% — walk away. Talk to fee-only fiduciary (NAPFA.org). They sell ZERO annuities + give honest advice. Pay $200-500 for unbiased opinion.