You Only Get One Shot
The Truth About Annuities: A Retirement Reality Check
I've spent decades working with retirees, and if there's one thing I've learned, it's that retirement planning requires a comprehensive approach. Not the cookie-cutter nonsense you get from most financial "experts," but real-world solutions that address what happens when life doesn't follow the perfect spreadsheet projection.
let me repeat that: 'real world solutions that address what happens when life doesn't follow the perfect spreadsheet projection."
Let me be unequivocally clear: if you encounter "anyone" who makes blanket statements like "annuities are always bad," you're dealing with someone who either doesn't understand basic mathematics or is selling you something else. These financial talking heads who climb their media mountains to denounce annuities are essentially saying pensions and Social Security are terrible too—which is absurd since they all operate on the same mortality-based calculations.
Mountain top critics are often idiots. Blunt? Yes. Why? It needs to be blunt because Americans are being bamboozled.
The fiasco of modern financial advice has created an environment where income streams—the lifeblood of retirement—are undervalued in favor of complex accumulation and distribution strategies that look impressive on paper but fail to address longevity risks. This is particularly dangerous as we age and potentially face cognitive decline.
Cognitive impairment is a "huge" problem and best solved with those of us who understand the importance of income protection.
Consider this: Do you truly believe Gene Hackman at 94 was actively managing his investment portfolio? Of course not! we all know from all of the news accounts that he has been suffering from heart disease and was cognitively, impaired, meaning he had Alzheimer's by all accounts. Regardless of the size of one's portfolio, what may take many decades to accumulate can evaporate in a fraction of the time it took to become financially independent. Even the most financially savvy individuals eventually face challenges in managing distributions. The immense responsibility of making decades of retirement savings last through unpredictable market cycles and healthcare costs requires more than just a growth-oriented portfolio and the hubris that one will be competent until that final moment of death.
I encourage everyone to have an honest brainstorming session about what retirement actually entails. I also encourage the engagement of highly experienced individual like myself and members of my team. Individually and collectively, we've been there and done it. You see, the bottom line is this, incompetency does not just appear overnight—it creeps in through physical limitations, emotional challenges, and cognitive decline. And let's not forget the relationship factors. Family members can be wonderful support systems, but they can also become liabilities. I've seen adult children with addiction issues drain parents' accounts, or new "friends" in retirement communities who target vulnerable seniors. and believe you may it happens. The lonely widower befriended by the "oh so friendly" southern Bell barfly, looking for a sugar, daddy.
It's more about "Income Protection" during retirement than anything else for a very large segment of retirees.
This is where guaranteed income streams provide value beyond just the dollars. They create protection—not just asset protection but income protection. When advisors dismiss annuities outright, they're essentially saying, "You don't need disability insurance because Social Security will cover you," or "Just buy term insurance because permanent is a waste." These simplistic views ignore the complexities of real-life financial planning.
What happens when one spouse dies and Social Security benefits get reduced? What if the market tanks 50% like in 2008 right when you need a major medical procedure? What if cognitive decline sets in and you become vulnerable to financial exploitation?
Sidebar
Tarzan walks into a bar. He lost Jane a few years ago.
"Tarzan!" exclaims the bartender who lives to see the heavy tipping Tarzan. "How are you buddy boy, but before you answer, come over here and meet LuLu Mae."
Yes, heavy pancaked LuLu Mae, sister to the bartender and she's looking for a sugar daddy.
"Well my oh my, hello Tarzan! Rocky (the bartender) was just talking about you and how you're quite the swinger." LuLu Mae giggles.
The "never buy annuities" crowd rarely addresses these scenarios. They're too busy selling books, managing assets for fees, or building their personal brands by creating manufactured outrage about financial products they barely understand.
Let's continue.
Look, I'm not saying all annuities are perfect—far from it. I've been hired a few times to serve as an expert witness for plaintiffs in litigation involving suitability and product design. And yes, there are some expensive, complicated, and questionable value products pushed by some commission-hungry agents that deserve criticism. But dismissing an entire category of financial tools shows a fundamental misunderstanding of retirement risks. Only an immature idiot or mischievous advisor, agent, banker, broker, dealer, financial planner, or advertising hungry mountain preacher would say such a thing.
The next time you hear someone like Suze Orman or Ken Fisher ranting about how terrible annuities are, remember they're not the ones who will be sitting across the kitchen table helping you figure out how to maintain your lifestyle when the market crashes or how to protect your surviving spouse when you're gone.
Let's talk about Hell.
Traditional Judaism generally doesn't have a concept of "hell" that matches the Christian understanding of eternal damnation or punishment. Instead, Judaism has the concept of "Gehinnom" (sometimes spelled Gehenna), which is typically understood as a temporary place of purification or cleansing for the soul after death, lasting no more than 12 months for most individuals.
In Jewish thought, Gehinnom is not a place of eternal punishment but rather a spiritual process where the soul confronts its actions and is purified. After this purification period, most souls ascend to Gan Eden (the Garden of Eden or Paradise). Only the most wicked souls might face complete spiritual extinction rather than eternal suffering.
This understanding varies somewhat across different Jewish denominations and traditions, with Reform Judaism often placing less emphasis on afterlife concepts in general, while some Orthodox traditions maintain a more developed understanding of post-death purification.
So it's rich of Ken Fisher, who is Jewish, to say: "I would die and go to hell before I would sell an annuity."
Ken Fisher's often-quoted and used phrase is "I would die and go to hell before I would sell an annuity." I know it's mean but the man is Jewish and when I heard him say that for the first time, I squinted my eyes, furrowed my brow, and tightened my grin. "Really."
This provocative statement has become his signature anti-annuity stance that he's used in marketing materials, presentations, and interviews as part of his firm's positioning against insurance products.
Thank goodness Neil Cavuto retired. The departure of Neil Cavuto from his regular FOXBusiness schedule marks the end of what many viewed as an excessive promotion platform for Ken Fisher and his provocative investment philosophies. For years, viewers had to endure Cavuto's apparent fascination with Fisher, regularly featuring him as though his anti-annuity rhetoric represented unquestionable financial gospel rather than simply one perspective among many. With Cavuto stepping back to address health concerns, the FOX Business may finally achieve better balance, potentially reducing the outsized visibility of Fisher's divisive messaging that has confused countless retirees about legitimate income protection strategies. This shift away from personality-driven financial entertainment toward more substantive coverage would be a welcome development for viewers seeking genuine retirement planning insights rather than inflammatory soundbites designed primarily to build Fisher's brand.
Fisher's dramatic declaration has become well-known in the financial industry, particularly among those debating the merits of annuities versus other retirement income strategies. After years of hearing the drone on both sides, I'm bored to tears.
Kill Social Security and pensions?
Social Security, pensions, and annuities are all fundamentally the same financial instrument from a mathematical perspective, despite being marketed and perceived differently. Each relies on sophisticated actuarial tables and mortality calculations to determine payment amounts over an individual's remaining lifetime. However, when it comes to Social Security, Congress is running a Ponzi scheme. But I digress.
Hey Ken, maybe you should change your tune to: "I would die and go to hell before I would support Social Security, employer-based pensions, charitable remainder annuity trusts, private annuities, or commercial corporate annuities that are insured by the state insurance pools." Dumbass.
Let's get a tad in the weeds. The law of large numbers forms the fundamental backbone of insurance company profitability, enabling actuaries to make remarkably precise predictions about mortality patterns across vast populations. While individual deaths remain unpredictable, these mathematical principles allow insurers to calculate premiums that will generate sufficient reserves to pay claims while maintaining profitability. Even with sound actuarial calculations, insurance companies don't shoulder this immense responsibility alone—they implement sophisticated reinsurance strategies to further distribute risk across multiple carriers, creating additional layers of protection against both isolated mortality spikes and widespread catastrophic events.
This same mathematical framework applies equally to annuities, though the risk being managed flips from premature death to extreme longevity and market volatility. When an individual purchases an annuity, they're unequivocally transferring the uncertainty of outliving their savings and weathering market downturns to an institution specifically designed to absorb these risks. The comprehensive risk-pooling mechanism allows insurance companies to provide guarantees no individual could create independently. This transfer of risk represents one of the most significant financial responsibilities in our economic system, demanding robust regulatory oversight and prudent carrier selection. While critics may focus on fees or surrender charges, they often overlook this fundamental value proposition—the mathematically sound transfer of risks that individuals are ill-equipped to manage themselves, especially as cognitive capabilities naturally decline with age.
When critics begin their predictable complaints about annuity surrender charges, they fundamentally misunderstand the illiquidity premium that drives higher potential returns. And yes, the term is illiquidity premium. This economic principle isn't unique to insurance products—it's present in virtually every higher-performing asset class. Real estate investments, private equity, and even certain corporate bonds all compensate investors specifically for their willingness to commit capital for extended periods. The breakeven point for these illiquid investments to the companies offering them, often stretches years, possibly a decade, into the future, and with market fluctuations potentially extending this timeline further. The equity premium exists precisely because investors receive additional compensation in exchange for reduced liquidity—it's a mathematical relationship, not a marketing gimmick. But rest assured, Uncle Joe Knowitall knows otherwise.
Insurance carriers approach annuity contracts as long-term financial engagements, pricing them based on the comprehensive understanding that funds will remain invested for extended periods. This stability allows carriers to pursue investment strategies that would be impossible (impossible) with constantly fluctuating assets, ultimately benefiting policyholders through enhanced crediting potential and stronger guarantees. Unfortunately, we live in an era where financial comprehension has been replaced by unequivocally unrealistic expectations—consumers influenced by financial pinheads who preach the impossible: 100% liquidity, tax-free growth, guaranteed double-digit returns, complete creditor protection simultaneously, and never a down day. And if we have a down week: "You're fired. If we have a down quarter I'm suing. And god forbid, a down year, I'll kill you." This financial fantasy land resembles the investment impossibly of the ambitious projects of Neom in Saudi Arabia, that promise everything while delivering nothing substantive—all flash, no foundation, and ultimately, an immense disappointment for those who fail to recognize basic economic realities.
When financial talking heads unequivocally condemn annuities, they're criticizing the same mathematical principles that underpin Social Security and traditional pensions. These calculations aren't marketing gimmicks but rather the comprehensive application of statistical modeling that insurance companies, pension funds, and government programs have refined over centuries to create predictable income streams that cannot be outlived—a protection that becomes immensely valuable as cognitive abilities decline or when faced with the fiasco of unexpected market downturns during critical distribution phases.
Just because Gnaeus Domitius Annius Ulpianus was born around 170 AD and died in 223 or 228 AD, doesn't mean one plus one then and now, equals anything other than two. Ulpianus was considered one of the great legal authorities of his time, is responsible for a third of the Justinian Digest (a compendium of Roman law and writings), and created the first life (mortality, actuarial, longevity) table in history. But Kenny-Boy, you're going to fictional hell and Ulpianus (who didn't inherit a fortune from daddy) was as dumb as a box of rocks. Yeah? No.
An Income Floor
Annuities offer a unique leverage opportunity that most consumers and many, if not most, advisors fail to appreciate. By pooling mortality risk across tens of thousands of contract holders, insurance companies can provide higher guaranteed income than individuals could safely generate through traditional withdrawal strategies. This mortality credit—essentially benefiting from those who don't live as long as expected—creates a mathematical advantage that cannot be replicated through traditional investments alone. When properly structured within a retirement portfolio, annuities can effectively leverage a portion of assets to create an income floor that persists regardless of market conditions, health challenges, or cognitive decline, freeing remaining investments to focus on growth and legacy goals without the pressure of providing 100% of retirement income needs.
Retirement planning isn't about maximizing returns—it's about creating security, predictability, and protection against the unknown. For many retirees, incorporating some form of annuity floor alongside Social Security, a pension, and other investments creates a stronger foundation than either approach alone.
Understanding Before One Can't Understand
The gray zone is a real thing—not a theoretical concept but a lived reality for millions of aging Americans. Cognitive decline doesn't arrive with dramatic fanfare; it creeps in gradually, progressing from light gray moments of occasional forgetfulness to the darker gray of persistent confusion about financial matters. This progressive diminishment of financial decision-making capacity represents one of retirement's most unacknowledged risks, threatening even the most carefully constructed portfolios. An income floor isn't merely a nice-to-have feature; it's critical protection against the cognitive vulnerabilities that almost inevitably accompany aging. When complex financial decisions become increasingly challenging, a contractual income floor that streams deposits predictably each month regardless of market conditions or mental clarity provides not just financial security but profound peace of mind for both retirees and their concerned loved ones.
So yes, I'm tired of insurance agents whose only solution is an annuity or life insurance. But I'm equally tired of the financial gurus who oversimplify complex retirement challenges to build their personal brands.
Your retirement deserves better than either extreme.