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April 5, 2026 • 10 minutes
Suze Orman has been talking about annuities for decades. People assume she hates them, but she doesn’t. She has a problem with how they’re often sold: at high cost, inside the wrong account, to people who don’t understand what they’re signing up for.
Annuities are complicated enough that it’s reasonable to want a second opinion before signing anything. Where one fits in your plan depends on your situation. Orman’s take is worth understanding before you buy.
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An annuity is a contract between you and an insurance company. You pay a lump sum (or a series of payments), and the company guarantees you income, either right away or at a set date in the future. The terms depend on the type you buy and what the contract says.
The appeal is simple: an annuity can guarantee that you won’t outlive your money. For someone who retires at 62 and might live to 90, that guarantee has real value. Social Security doesn’t cover everything.
There are five types of annuities, and the differences between them matter.
Here’s how the core trade-offs break down:
The tax point is worth sitting with. The deferred growth sounds like a pure win until you factor in what you give up: when a taxable brokerage account generates long-term gains, you pay 0, 15, or 20 percent depending on your bracket. Annuity withdrawals get taxed as ordinary income, which runs higher for most retirees. The deferral benefit has to outpace that gap over the life of the contract, and for many investors it doesn’t
It’s also worth exploring options that can be smarter for your situation.
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Orman’s read on annuities has been consistent: the products can work. The selling of them is where the problems tend to start.
Two positions in particular are worth understanding.
Myth: You want to own annuities in your retirement accounts.
Reality: Orman doesn’t buy this strategy. Annuities can be funded with pre- or post-tax dollars, which means they offer the same tax-deferring benefit as the retirement account itself. Wrapping a tax-sheltered product inside an already tax-sheltered account means paying for something you’re already getting. There are exceptions (certain guaranteed income riders can justify it), but the default logic holds. If tax deferral is the pitch, ask whether the annuity adds anything the account doesn’t already give you.
Myth: When you have money outside a retirement account, a variable annuity is a smart move because you won’t pay taxes when you buy or sell.
Reality: Orman’s point is that the tax advantage is a short-term story. You skip taxes when trading within the subaccounts, and there are no year-end distributions to manage. But when you withdraw, gains get taxed as ordinary income, not at capital gains rates. For investments held long enough to generate real returns, that difference can cost you substantial money. The tax deferral has to be worth the higher rate you’ll pay at withdrawal. That’s often not the case for investors in higher brackets.
The deeper issue, in Orman’s view, is the fee structure on variable products. The total annual cost (expense ratios, mortality charges, rider fees) makes them hard to justify compared to a low-cost index fund in a taxable account.
She views immediate and deferred income annuities differently. For retirees without pensions who need a guaranteed income floor, she’s been supportive of products that convert a lump sum into dependable monthly income.
The searches people run when looking into annuities (“annuity companies to avoid,” “annuities disadvantages”) come from somewhere real. A few things to scrutinize before signing.
How long is the surrender period, and what’s the year-one penalty? Some products run 10 years with a 10 percent first-year charge. That’s a long time to be locked out of your own money.
For variable annuities, add up the mortality and expense charge, the administrative fee, and the subaccount fees. If the total clears 1.5 percent, you need a compelling reason to go forward. Many products run closer to 2.5 to 3 percent.
Insurance companies can adjust these at renewal. A 100 percent participation rate with a 10 percent cap sounds fine until the cap drops to 6 percent in year three.
Annuities pay some of the highest commissions in financial products, as much as 6 to 8 percent on variable products. High commissions don’t make a product bad by definition. They do mean the advisor’s incentive to sell doesn’t always line up with what’s best for you. Ask about compensation before you decide.
Guaranteed income riders, death benefit riders, and long-term care riders can each add 0.5 to 1 percent per year. Understand what you’re buying and whether those needs could be covered at lower cost another way.
Fixed annuity rates have been more competitive as interest rates climbed from where they were in 2021 and 2022. Multi-year guaranteed annuities have at times outpaced comparable-term bank CDs, with tax-deferred growth on top.
As of May 2026, 3-year MYGAs from highly rated insurers are offering rates in the range of 5.25% to 5.65%, according to Blueprint Income. The top of that range comes from Farmers Life (B++ rated) at 5.65%. For context, the best 5-year MYGA rate is running at 6.30%, and the best 7-year is at 6.50%, according to InsuranceGeek. Compare those to the current best 5-year CD rate of approximately 4.15%, a spread of more than 2 percentage points in favor of the MYGA, before accounting for tax deferral. (Rates vary by state, minimum premium, and insurer, and can change frequently.)
The way to evaluate a fixed annuity rate is to compare the after-tax equivalent to a comparable-term CD or Treasury, then factor in the surrender period. If the spread is narrow and you don’t need the tax deferral, giving up liquidity may not be worth it. If the spread is real and you have non-qualified money you won’t touch for the full term, the math can make sense.
Rates shift often and vary by insurer, term, and state. Blueprint Income and CANNEX both publish current rate tables worth checking before you make any decision.
A retiree without a pension who worries about covering fixed expenses beyond Social Security has a problem that guaranteed income can solve. Someone with non-qualified savings sitting in low-yield accounts (money they won’t need for five-plus years) may find a MYGA or fixed indexed annuity competitive on both rate and tax treatment. And for someone in their late 50s or 60s who’s maxed tax-advantaged accounts and wants more tax deferral, an annuity can be a fit.
The picture changes in other situations. For someone decades from retirement, a low-cost index fund tends to produce better results after fees. For someone who needs liquidity, a product with a seven-year surrender period is a poor fit regardless of the rate. And if you’re being sold a variable annuity on a tax deferral story inside a retirement account that’s already tax-deferred, the pitch deserves a second opinion.
The Boldin Planner, featuring Boldin AI, lets you model annuity income alongside everything else in your plan, running a guaranteed income stream against your spending, tax situation, and longevity assumptions to see how it changes the numbers. Annuity modeling is built directly into it, so you can see how a guaranteed income floor fits your full retirement picture.
The main advantage is guaranteed lifetime income. An annuity can ensure you don’t outlive your savings regardless of market conditions. The main disadvantages are fees (substantial on variable and indexed products), limited liquidity during surrender periods that can run a decade, and ordinary income tax treatment on gains, which tends to be less favorable than capital gains rates on other long-term investments.
She isn’t opposed to all annuities. She’s critical of variable annuities held inside retirement accounts, where the tax deferral benefit duplicates what the account already provides. She warns about the long-run tax disadvantage of gains being taxed as ordinary income. For retirees without pensions who need guaranteed income to cover fixed expenses, she’s been supportive of immediate and deferred income annuities.
Avoid specific annuity practices: surrender periods longer than seven years, total annual fees above 2 percent, cap rates on indexed annuities that reset without guarantees, and advisors who can’t clearly explain their compensation. Your state insurance department’s website and NAIC’s consumer resources can surface regulatory actions against specific insurers.
Variable annuities carry the highest fees of any annuity type. Gains get taxed as ordinary income at withdrawal (not at capital gains rates), and returns depend on how the underlying subaccounts perform. Put those together and it’s hard to make the case over a low-cost index fund in a taxable account.
It depends on what problem you’re trying to solve. If you need guaranteed income to cover fixed expenses and don’t have a pension, an immediate or deferred income annuity can be a strong fit. If you’re looking for growth, a low-cost index fund tends to produce better results after fees. Annuities are income guarantees, not growth vehicles. The question is whether you need the guarantee enough to accept the trade-offs.
For a 65-year-old buying a single-premium immediate annuity, $100,000 generates roughly $590 to $625 per month for a single-life payout, depending on gender and insurer; joint-life options run lower, closer to $530. Rates change, so get quotes from multiple insurers and model the income stream in your plan before you commit.
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