3 Ways Annuities Create Problems for Women in Retirement

March 23, 2022

By:  Clinton Miller, CFP ®

You probably don’t need an annuity.

Annuities are like housecats.  They stir up a lot of controversy. Love them or hate them, they are complicated creatures, and they don’t always play nice with others.  Your friend may love hers, but that doesn’t mean you should bring one home too.

Some advisors loudly despise annuities and want you to hate them too.  Others haven’t met a client who doesn’t need an annuity, in any situation.

Annuities aren’t good or bad- they’re just one of many ways to plan your finances.  In the context of a comprehensive financial plan, an annuity may be a hand-in-glove solution. But often they are sold, not bought.  And all too often, they end up causing more headache than they’re worth.

Sometimes, annuities don’t play nice with your money.  They can be costly, with fees difficult to decipher. Annuities often lock up your money for years, sometimes permanently.  And very often, they aren’t necessary.  You can create dependable retirement income without using an annuity. 

Here are the top 3 annuity problems we see when we begin working with new clients.


  1. Squirrel Syndrome– Some people are like squirrels- hiding family savings in different annuities with different advisors over several years. Annuities are typically sold to a client without much follow up activity.  Good advisors will review contracts with their clients periodically, but this doesn’t always happen.  If a squirrel in charge of family money dies unexpectedly, they leave their surviving spouse a puzzle to solve: find all the nuts, pull them all together, and figure out what to do next.  It can be overwhelming to connect the dots, especially when going through the loss of a spouse.


  1. Muddy Water – Annuities are often sold on their features and benefits, rather than as part of a comprehensive financial plan. This isn’t necessarily bad, but often family savings end up scattered in several places. This can prevent a client envisioning her money picture with clarity.  Without clarity, she doesn’t feel confident in the connection between her money and her life.


  1. Money Jail- In exchange for the promises an annuity insurer makes, you give up access to your money for years, with a stiff penalty if you withdraw it early. If your life doesn’t change over those years, that probably isn’t a big deal.  But often we see clients with too much of their money “in jail”- with an outlook far different than years earlier when they locked the money up.


Before you buy an annuity, make sure you aren’t making these mistakes.  You should be able to see how the product fits in with your money picture. You should feel comfortable with the trade-offs you’re making, the liquidity you will give up, and the fees you will pay.  If you don’t feel confident, don’t buy it.


It is possible to meet your financial goals, have a consistent income stream, and feel connected to your money without purchasing an annuity.