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Dave Says: Annuities for Long-Term Retirement

Dave Ramsey

12-10-2022

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Dear Dave,

Are annuities good for long-term retirement?

Quincy

Dear Quincy,

The short answer is no. There might be a rare exception when I’d use a variable annuity — which is a mutual fund inside of an annuity — but as a rule, I don’t use annuities. And I certainly don’t use fixed annuities for anything, because they’re just crap. Basically, they’re a CD with a huge set of fees. It’s just an insurance agent’s product, really.

The place for variable annuities might be when you’ve got everything else maxed out and your house is paid off. If you’ve reached that point, you can talk to your advisor about some of the possible benefits of a variable annuity. You can leave a beneficiary on it, so that it passes outside of probate, and you’ve got some principle guarantees and return guarantees that are decent. The returns are a little lower, though, because you’ll get hit with both the annuity fee and the mutual fund fee.

So, by and large the answer is no for most people, because they don’t have their house paid off and aren’t maxing out all other retirement options. If you’re doing all that, and you want to do something in this area, then I might think about it.

Dave

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About The Author

Dave
Ramsey

Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, and EntreLeadership. His newest book, written with his daughter Rachel Cruze, is titled Smart Money, Smart Kids. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations.