The Annuity Man's Honest Reaction to Dave Ramsey

Hi, I'm Stan The Annuity Man, America's Annuity Agent, licensed in all 50 states. Today's video is a little different. A client of mine sent me a Dave Ramsey video and asked for my commentary. I thought, "Why not?"

Before we dive in, just a quick disclaimer: Dave Ramsey has done fantastic work in helping people get out of debt. Years ago, I attended one of his presentations in Orlando, Florida. He literally packed an arena, and it was an impressive event. He had people stand up and share their stories about becoming debt-free. I've also listened to his radio show, so I certainly know who he is—everyone does.

This blog provides an opportunity for me to add some clarifications and commentary.

Offering My Expertise

I think Dave Ramsey and his daughter have done great work, and I'm a fan. That said, I'm offering them my services as a Fixed Annuity expert moving forward because I believe I can bring value to their audience.

This is my first time doing something like this—commenting on another video—but I hope to do more in the future. In this blog, I'll mention a quote from this Dave Ramsey clip, stop at key points, and offer my insights.

I think you'll find this valuable, and if Dave or his team reads this, I believe they'll appreciate the additional clarification I provide for their listeners. As the top independent annuity agent in the country, licensed in all 50 states, I bring expertise to the table.

Reviewing the Dave Ramsey Video

The video we’re discussing is titled What is an Annuity and How Does it Work?, published on November 21, 2019. In it, Tanya from Illinois calls Dave Ramsey to discuss an annuity she was sold inside her retirement plan. Let’s go through the first section.

Addressing the Surrender Charge

Dave:

"I’ll contact them and see if they can reverse that and put it back into mutual funds."

Tanya:

"Because they said it would be like a 10-year process of taking a tenth out each year."

Dave:

"Oh, so they put you in something inside of a retirement account with a surrender charge."

Tanya’s Response:

I don't know.

Dave:

Oh, these guys are absolute screwballs.

Dave calls the people who sold her the annuity "screwballs." They might be. From the description, Tanya purchased what sounds like a 10-year Deferred Index Annuity inside a retirement plan.

Dave suggests cashing it out and buying mutual funds. Tanya could cash it out if she’s within the free-look period, which allows annuity buyers to get a full refund. However, if that period has passed, she might be stuck unless the company makes an exception.

While Dave dislikes annuities in retirement accounts, I’d argue that you buy an annuity for its contractual guarantees, not what it might do. If Tanya needs those guarantees, then an annuity in her IRA could make sense. That said, I don’t think she fully understands what she purchased, which is a problem.

Surrender Charges and Returns

Dave:

"The other thing you’ve got to weigh is you’re probably making 2% on this thing instead of 10 or 12."

Tanya:

Exactly.

Dave:

And so, if your surrender charge is 10%, take it and move it.

Tanya:

Really?

Dave:

Put it into something that makes 10% more the first year you recoup.

Tanya:

Okay, gotcha. That makes sense.

Dave assumes Tanya’s annuity is earning only 2%, but not all fixed annuities earn that little. For example, Multi-Year Guarantee Annuities (MYGAs)—the annuity industry’s version of a CD—currently offer rates higher than 2%.

Dave’s advice to take the surrender charge hit and move to mutual funds assumes she’ll earn 10% annually. While mutual funds have historically performed well, there are no guarantees. Without knowing the specific annuity product, I’d caution against rushing into that decision.

Double Tax Deferral

Dave:

They put you in a surrender charge product inside of a retirement account, which is absolutely screwed up. That's ridiculous. I mean, you got two sets of penalties on this money now if you need to get to it.

Dave dislikes the idea of tax-deferred annuities inside tax-deferred accounts, and I understand his concern. You don’t get double tax deferral. However, if Tanya’s goal is contractual guarantees—like lifetime income or principal protection—then using her IRA funds might still make sense.

Defining Annuities

Dave:

"An annuity is a life insurance company product. It’s a savings account with a life insurance company."

Dave simplifies annuities as savings accounts, but that’s only true for certain types, like MYGAs. Fixed Annuities also include Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts (QLACs). Each serves a specific purpose.

Types of Fixed Annuities

Dave:

"There are two types of savings accounts with life insurance companies, fixed and variable. Fixed pays you basically a CD rate, 1 or 2% right now, which is what she's in."

Dave only refers to MYGAs, ignoring other Fixed Annuities like Immediate Annuities or Fixed Index Annuities (FIAs). At the time of this blog, MYGAs offered rates closer to 3-5%, not 1-2%.

Addressing Fees

Dave’s:

"And you pay extra fees for the annuity."

This isn’t true for most Fixed Annuities. Products like Immediate Annuities, Deferred Income Annuities, and MYGAs typically have no fees. Indexed Annuities may include fees only if optional Income Riders are added.

Final Thoughts

Dave Ramsey’s advice often focuses on avoiding debt and maximizing market growth, which works for many people. However, when it comes to annuities, the details matter. Fixed Annuities provide contractual guarantees that serve specific purposes, like lifetime income or principal protection.

Tanya’s situation highlights the importance of understanding what you’re buying. If she doesn’t fully understand her annuity, she should revisit her decision while considering surrender charges and her long-term goals.

I hope this commentary helps clarify annuities and adds value for Dave’s audience. Let’s keep the conversation going!

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.