Are annuities good investments?

Not regulated by the SEC, instead regulated by state insurance offices. Insurance lobby wants it that way, not transparent on fees, complicated contract by design, salesmen with a Series 6 sell them instead of fiduciary money managers, limited liquidity and control. I have been in insurance and investment business for 25 years and the insurance company and guy selling annuities make off way better than the scared of markets people that buy them.

No

I don't like them.
The costs are too high.
In the long run you are usually better off just putting your money in an index fund.

The salesmen love them because the commissions are high.

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Whether they're "good" investments depends on what you value.

Typically they're going to be more protected against sequence risk than investing straight into the market. Basically when you buy an annuity, you're paying an insurance premium to a middleman who absorbs the sequence risk for you.

That can be a "good" investment depending on your age and financial needs - e.g. if you're in retirement and can't afford to wait out market losses or can't recover from sequence risk if there's a series of down years. But it's going to be a bad investment if you need your money to grow over time and are able to self-insure against sequence risk in some capacity (live off less during down market years, generate other income sources during those years, etc.)

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I ask this utterly open handed, not knowing the answer: what, if anything, does an annuity give me that simply diversifying into something like bonds wouldn't? I complete get protecting against sequence risk, but annuities seem like the equivalent of using (and paying for) a canon to kill a mosquito, but that just makes me think I might be missing something.

That’s the whole point of the annuity. It was traditionally sold as the alternative to a defined benefits plan. But now that you have index funds, covered call ETFs, etc., they only make sense for the uninformed.

Annuity as a 100% guaranteed safe pay out is an misnomer. Annuity guaranteed returns are only as good as the company issuing them (similar to bonds.)
Annuity providers have gone insolvent. Federal govt doesn't back them (like FDIC) and state's provide varying degrees of protection. In past, Annuity holders haven't always been made while if insurance company goes insolvent.

I’ve been seriously considering a deferred joint annuity as a way to provide lifetime income for both my spouse and me. The structure is simple: after a 5-year deferral period, it would pay out approximately 10% annually of the initial deposit—so for every $100,000 invested, it would generate about $10,000 per year, guaranteed, for as long as either of us is alive.

What appeals to me most is the guaranteed lifetime income, regardless of market performance. That kind of stability is hard to find elsewhere.

However, there are a couple of drawbacks that give me pause:

No inflation protection, which means the purchasing power of those payments could erode over time.

No meaningful death benefit if both of us pass away after the first 10 years—so there's a risk of the insurer keeping the remainder.

I still think allocating 10–20% of our portfolio to something like this can make sense as part of a broader retirement strategy, especially for income stability.

That said, I’ve been going back and forth on this for months and still haven’t been able to fully commit. I’m weighing the long-term security against the opportunity cost and lack of flexibility.

Good investment depends upon what you are using it for. Annuities can be useful as tools to solve for risks - you transfer the risk to the insurance company. Can be market risk or downside risk. Risk of running out of money etc.

There is a trade off. Thr insurance company isn’t in the business of losing money. And usually there is a lock up period where you pay a penalty for access.

Finally - they have high commissions. Be wary of anyone pushing them hard or anyone throwing steak luncheons to pitch them to a group. And especially anyone who thinks your whole 401k etc should go into one.


Overall I’m not a fan but I understand how they could be a small part of the allocation and tool for others.

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Are annuities good investments?

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F no!