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We’ve Seen This Before
Over the last 25 years, we’ve seen a lot of market cycles—both the highs and the lows. Some downturns are worse than others, but one pattern always shows up: during tough times in the market, annuity salespeople come out in force.
Annuities Are Sold, Not Bought
Let’s be clear—annuities are rarely something people go out looking for. They’re something that gets sold, often in response to fear. If you tell someone at a bank or brokerage that you’re worried about market volatility, want to protect your principal, and like the idea of guarantees, there’s a good chance you’ll find an annuity proposal on your desk soon after.
These products sound reassuring when markets are shaky, but they often come with a cost.
The Real Costs of Annuities
Annuities can be expensive. Many come with riders—add-ons that promise guaranteed income or death benefits. These features may sound helpful, but they increase the product’s overall cost.
And then there are the surrender charges. Once you put money into an annuity, you often can’t touch it for five, six, or even seven years without paying a penalty. Why? That charge helps the insurance company recover the commission they paid the salesperson. In other words, it’s built to benefit the company—not necessarily you.
Don’t Let Fear Drive Your Decisions
This is when annuity pitches become the most dangerous. If your portfolio is down and you’re feeling uncertain, it’s easy to let fear push you into the arms of the first “guaranteed” product that comes along. But that decision might be taking you out of the frying pan and into the fire.
Before you commit, talk to someone you trust—ideally a fee-based advisor who isn’t getting paid to sell you anything.
When Annuities Might Make Sense
Now, to be fair, we’re not saying all annuities are bad. In some cases—especially for those needing guaranteed income in retirement—immediate annuities can play a role.
But deferred annuities? Often, the same goals can be achieved with a well-diversified portfolio of stocks and bonds—without the layers of complexity and cost.
Be Cautious, Stay Informed
Right now, annuity sales are ramping up again. We’ve seen it before, and we’ll see it again. So be cautious. If someone starts talking to you about guaranteed returns, ask questions. Look under the hood.
And remember: if you want a second opinion or just a clearer understanding of what’s being offered to you, we’re always here to help.
