Suze Orman on Annuities: What She Gets Right What She Skips and How to Decide

Suze Orman is famous for warning people away from annuities—usually citing fees, complexity, and bad “tax” logic. Those cautions help. But a blanket “no” can also ignore situations where tax deferral and guaranteed lifetime income improve a real person’s retirement math—especially for women and for investors holding large taxable balances they won’t need for years.

What Suze Orman warns about (and why it matters)

* **Double-paying for tax deferral.** Buying a tax-deferred annuity *inside* an IRA/401(k) rarely adds value and can add complexity.
* **Costs & riders.** Variable and indexed contracts can layer fees and bells/whistles you may not need.
* **Surrender terms.** Long schedules and limited free withdrawals reduce flexibility.
* **Sales pressure.** Annuities are sold—not just bought—so incentives can shape recommendations.

These are valid red flags. They should shape how you shop and what you avoid—not automatically kill the idea for everyone.

What a blanket “no” leaves out

* **Tax drag is real in taxable accounts.** If you won’t touch the money for years, compounding without yearly 1099s can build a bigger base for future income.
* **Longevity pooling (aka mortality credits) exists.** Lifetime income annuities use risk pooling to create income that’s hard to mirror with a DIY portfolio at similar risk.
* **Women’s longevity.** Women typically live longer and may outlive a spouse—making a joint-life or single-life paycheck that never stops a practical anchor for essential bills.

When an annuity can actually be smart

* **High bracket now, lower later.** Defer taxes while compounding; turn on income in a potentially lower future bracket.
* **Cover the “must-pays.”** Use guaranteed lifetime income for housing, food, and utilities; keep market risk for wants/growth.
* **Behavioral simplicity.** A predictable paycheck can reduce timing mistakes and stress.
* **Longevity for couples.** A joint-life benefit hedges the risk that one partner—often the wife—lives much longer.

The right tool for the right job

Different annuities solve different problems. Name the job first:

* **Immediate Income Annuity (SPIA):** Turn a lump sum into income that starts now.
* **Deferred Income Annuity (DIA):** Lock in income that starts later (often for retirement).
* **Fixed / MYGA:** CD-like yields for a set term, with tax deferral in nonqualified accounts.
* **RILA / Indexed:** Market-linked growth with guardrails; know the caps, spreads, and buffers.
* **Variable:** Market exposure plus optional riders; fees and volatility demand careful comparison.

Five-step, no-hype evaluation

1. **Define the job.** Income now vs. later? Principal protection? Guardrailed market exposure?
2. **Compare apples-to-apples.** Model **after-fee, after-tax** outcomes vs. Treasuries/CD ladders, munis, and a prudent withdrawal plan.
3. **Keep it simple.** Add riders only if they solve a specific need (e.g., lifetime income, inflation features).
4. **Mind liquidity.** Understand surrender schedules, free-withdrawal provisions, and keep a separate cash reserve.
5. **Shop multiple carriers.** Payouts and rates can vary a lot month to month.

Micro-examples (for intuition, not advice)

* **The Saver:** Age 52, high tax bracket, won’t need funds for 12–15 years. A MYGA or deferred income strategy may reduce tax drag and build a larger base for later lifetime income.
* **The Simplifier:** Age 67, wants \$2,200/month to cover essentials. A simple SPIA or DIA layered with Social Security can create a “retirement paycheck” without portfolio anxiety.
* **The Couple:** One spouse is 65, the other 61; family history of longevity. A joint-life income option can hedge outliving assets more efficiently than a DIY drawdown.

Common pitfalls to avoid

* Buying an annuity inside an IRA “for tax reasons.”
* Paying for riders you won’t use.
* Ignoring insurer strength ratings and contract details.
* Putting *all* liquid savings into a long surrender schedule.
* Not comparing real alternatives before you sign.

FAQs

**Are annuities always expensive? **
Not always. Simpler contracts (SPIAs, many MYGAs) can be quite cost-efficient. Complexity tends to add cost.

**What about inflation? **
Some income annuities offer inflation adjustments or step-ups. You can also blend an annuity for essentials with a growth portfolio for inflation risk.

**What if rates change after I buy? **
Payout quotes reflect rates when you purchase. That’s why shopping windows and holding some funds in reserve can help.

**Can I get my money back if I change my mind?**
Most states have a “free-look” period. After that, surrender charges and tax rules apply—read them closely before buying.

Suze Orman’s warning flags (fees, complexity, bad tax logic) are useful. But “never” ignores real cases—especially for women and high-income savers with large taxable balances—where tax deferral plus lifetime income can strengthen a retirement plan. Treat annuities as tools: use the right one, for the right job, at the right time.

Talk with a fiduciary before you buy

We’ll help you compare **after-fee, after-tax** outcomes—annuity vs. Treasuries, CDs, munis, or a conservative withdrawal plan—and decide with confidence.

> **Prefer a quick answer?** Send your questions and we’ll run side-by-side numbers.

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*Disclosure:* Annuities are long-term contracts subject to insurer credit risk, fees, surrender charges, and tax rules. This content is educational; consider professional tax and financial advice for your situation.

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