Why Some People Say "Run From Annuities" or "Just Say No To Annuities" and Why Their Conclusion is Misguided

If you’ve been researching retirement options, you’ve probably come across the advice to “run from annuities.”

This warning is often repeated with strong conviction, and it can be tempting to take it at face value. But, in reality, this objection is based on outdated perceptions and isolated negative experiences with certain types of annuities that are not reflective of modern, well-designed products.
 

Let’s take a closer look at why some people say “run from annuities” and how their conclusion is rooted in misconceptions about how annuities work today.

 

The Isolated Bad Experience
 

The phrase “run from annuities” often originates from people who’ve had negative experiences with older annuity products, particularly variable annuities or those with excessive fees. These types of annuities were common in the past and certainly earned the skepticism that still lingers today. Variable annuities, for example, often had high fees, complex structures, and poor performance in many cases, leading to disappointing results for some investors.
 

However, these historical experiences don’t represent the full picture. In fact, most of the objections people have about annuities are based on isolated instances or outdated products that have since evolved. As with any industry, financial products are constantly evolving, and modern annuities—particularly income annuities—are vastly different from the ones that caused such controversy in the past.

 

The Common Misunderstanding: All Annuities Are the Same
 

One of the main reasons people dismiss annuities altogether is because they assume that all annuities are the same, and that they all operate the same way as variable annuities. This is a crucial mistake.
 

Variable annuities are indeed complex and can carry high fees and risks due to their market exposure. However, income annuities, the type of annuity we recommend for retirement, are designed with a completely different purpose in mind: guaranteed, predictable income for life. These annuities have minimal fees, and in many cases, no fees at all, compared to their variable counterparts.
 

Income annuities are a powerful tool because they generate guaranteed income that can last a lifetime, regardless of market conditions. With modern income annuities, retirees are no longer at the mercy of fluctuating markets or high fees. This misconception about all annuities being alike stems from a lack of understanding about the different types of annuities and their purposes.

 

Modern Income Annuities: Low Fees, Higher Income, and Principal Preservation
 

Contrary to the old objections, today’s properly designed income annuities come with significant advantages that can’t be matched by conventional methods like CDs, bonds, or dividend strategies. Here’s why:
 

1. Low Fees: Most income annuities are fee-friendly products. Unlike variable annuities, which can charge fees for things like investment management and rider guarantees, income annuities typically have little to no fees. The primary cost of an income annuity is the price you pay for the guaranteed income it provides. This simple structure allows you to receive more value from your investment.
    

2. Higher Income: One of the most compelling reasons to consider income annuities is that they can produce significantly higher income than traditional methods of retirement investing. In fact, income annuities often provide 20-40% more income than a comparable CD, bond, or dividend strategy, even with the same amount of principal. This is due to the way annuities leverage actuarial calculations to generate predictable income, which allows them to maximize the income derived from your initial investment.
    

3. Principal Preservation Through Portfolio Diversification: When used correctly, income annuities can actually help preserve your overall principal. The key here is diversification. By locking in a portion of your portfolio for guaranteed income, you free up the rest of your assets to grow or be invested more aggressively. This allows you to take on greater growth potential while ensuring that you still have a guaranteed, predictable income stream. Essentially, the income annuity allows you to leverage less of your overall capital to generate a larger income, which preserves more of your assets for growth elsewhere.
    

4. Full Survivor Benefits: Income annuities often come with survivor benefits, meaning your spouse or beneficiary will continue to receive income after you pass away. This adds another layer of security, ensuring that your loved ones are taken care of, even after you’re gone. Many people are unaware of this feature, which is why they may wrongly assume that annuities are simply a “one-way street” where the money disappears after death. Modern annuities can offer a secure, lifetime income for both you and your spouse, which can be a critical factor in retirement planning.
   
    

Outdated Objections: Worn-out Platitudes from the 80s and 90s
 

The objections to annuities that many people parrot today often stem from outdated ideas and platitudes that were popular in the 1980s and 1990s. Back then, the financial world was very different. Interest rates were higher, and stock market returns were strong. Annuities weren’t as widely used, and the products available at the time did have some flaws, such as high fees and complex structures.
 

However, these old criticisms of annuities are simply no longer relevant to the modern landscape of retirement planning. The annuity industry has undergone major reforms and innovations, addressing many of the issues that gave annuities a bad reputation. Today’s annuities are transparent, cost-efficient, and designed specifically for those seeking guaranteed income without market exposure or high fees.

 

The Bottom Line: A Modern Solution to Retirement Security
 

When someone says, “Run from annuities,” what they’re really saying is, “I had a bad experience with an outdated product and assume that all annuities are the same.” This argument is based on outdated knowledge and a lack of understanding of how modern annuities have evolved.
 

In reality, properly designed income annuities are one of the most powerful tools available for retirement planning, providing higher income, greater security, and preserved capital. They allow retirees to enjoy guaranteed, predictable income for life, while also allowing them to grow their remaining assets for future needs.
 

So, while the old objections to annuities might sound convincing, they are largely rooted in outdated experiences and misunderstandings. If you’re serious about securing your retirement, it’s important to separate the facts from the myths—and recognize that modern income annuities offer solutions that were simply unavailable in the past.