What Dave Ramsey Gets Wrong About Fixed Annuities (2026)

What Dave Ramsey actually says about annuities

Ramsey has spent years telling his radio and podcast audience to steer clear of annuities. A few claims come up again and again:

• Fixed annuities pay too little to bother with.
• Annuities carry fees steep enough to eat your return.
• Surrender charges trap your money for years.
• A growth stock mutual fund, averaging somewhere around 10% to 12% a year by his account, beats an annuity every time.
• The blanket takeaway: avoid annuities altogether.

He leaves himself one narrow opening: a variable annuity, and only for someone who is completely out of debt, owns their home free and clear, and has already maxed out every other retirement account first.

Where that advice breaks down

"Fixed annuities pay too little" no longer matches the market

That claim carried more weight a decade ago, when the best multi-year guaranteed annuity rates hovered around 2.5% to 3%. Rates have moved a long way since.

As a hypothetical illustration, a competitive 5-year MYGA today might credit somewhere in the neighborhood of 5% to 6.5%, well above what a comparable bank CD typically pays, on top of tax-deferred growth. Run the math on $200,000 at a hypothetical 5.5% for five years and the account grows to roughly $261,000, with no annual charge and no tax due until you withdraw. A similarly termed taxable CD paying a hypothetical 4%, after yearly tax on the interest, might land closer to $234,000. That gap, in this example, comes to roughly $27,000 on the same starting deposit. Because both annuity and CD rates shift constantly, confirm current numbers before comparing anything for real, using our MYGA guide or the CD versus annuity calculator.

"Annuities are expensive" mostly describes a different product

This is where Ramsey's criticism misses its target. The fees he describes, mortality and expense charges, subaccount management costs, add-on rider pricing that can climb toward 3% to 4% a year, belong to variable annuities, not fixed ones.

A MYGA charges nothing on top of the rate you agreed to. The carrier earns its margin on the spread between what it makes investing your premium and what it promises to pay you, so there is no visible fee line eating into your statement. Folding variable and fixed annuities into one blanket claim is a bit like judging every car by the fuel economy of the least efficient model on the lot.

Comparing annuities to mutual funds skips the tradeoff

Ramsey's default alternative is a growth stock mutual fund, and he leans on double-digit average returns to make the case. Even setting aside how much that average depends on dividend reinvestment, timing and taxes, the deeper problem is that a MYGA and a growth fund solve different problems.

Pushing a 63-year-old's near-term savings into growth stocks because they average double digits ignores what happens if the market drops 30% or 40% right when that person needs to start drawing income. That forced-selling problem has a name, sequence-of-returns risk, and it is arguably the single biggest threat to a retiree living off savings. A fixed annuity sidesteps it entirely by keeping principal out of the market.

The "your money gets locked up" argument cuts both ways

Ramsey points to surrender charges, commonly starting around 7% to 10% in the first year and tapering to zero somewhere between years five and ten, as proof annuities trap your cash. Worth noting:

• Bank CDs impose their own early-withdrawal penalties, often a few months of interest.
• Most MYGAs let you take out roughly 10% of the value each year with no charge at all, starting in year one.
• Some products waive the surrender charge entirely under a return-of-premium feature.
• Ramsey's own playbook also asks people to stay invested for decades and never sell, which is its own form of locked-up money.

A surrender schedule is disclosed, declining and known in advance. A market downturn hitting a mutual fund the week you need to withdraw has none of those qualities.

He is talking to a different person than the retiree asking

This is the real crux of it. Ramsey's Baby Steps program is aimed at people digging out of consumer debt, starting with a small emergency fund and working toward a paid-off house. A 32-year-old carrying student loan debt has no business locking money into an annuity, and on that point Ramsey is right.

Stretching that same advice to a 63-year-old who just rolled $300,000 out of a 401(k) is a different question entirely. The product is not the problem. Applying one answer to every caller regardless of age, debt load or time horizon is.

Where Dave Ramsey has a fair point

Not everything he says misses. A few of his criticisms hold up:

• Variable annuities really can be expensive, and the fee stack makes them a poor fit for most retirement savers. We seldom recommend one.
• High-pressure annuity sales tactics are a real problem in this industry. Dinner seminars and scare-based pitches on products buyers do not understand give the whole category a bad name.
• Not everyone needs an annuity. A retiree with a pension, Social Security covering the basics, and two decades before touching the money may get more value putting that capital elsewhere.

His error is not being wrong about everything. It is applying one rule to every caller instead of asking who is actually on the line.

What would Ramsey say to a retiree with a MYGA offer in hand?

Picture a caller phrasing it this way: newly retired at 62, holding roughly $250,000 across an IRA, hoping to set aside a $100,000 slice where it cannot lose value over the next five years, with a MYGA quote on the table at a hypothetical 5.5% and no fee attached. She wants to know if that is a smart move.

Telling her to avoid it steers her toward a savings account paying a fraction of that, or into the stock market where a downturn could cost her 30% of the balance overnight. Neither option beats a guaranteed rate with no fees and no exposure to a market drop, for money she has already flagged as safe money.

That MYGA is not competing with a growth mutual fund in the first place. It is competing with a CD, a money market account and a Treasury bond, and on yield, tax treatment and cost, it is frequently the stronger option among those three.

The bottom line

Ramsey has genuinely helped people climb out of debt, and for someone in that position, his advice to avoid annuities and build cash reserves first still holds. What does not hold is applying that same rule to a 60-something protecting a lump sum from market risk in retirement. If you are in his core audience, the debt-payoff advice is worth following. If you are the retiree with savings to protect, run the actual numbers on a MYGA against a CD or Treasury before deciding based on a general rule that was never built with you in mind.