Thinking about buying an annuity for retirement? It might seem like a safe and easy way to make sure you have money for the rest of your life.
But many people who buy annuities later wish they had made a different choice — often because they didn’t fully understand the long-term trade-offs or didn’t work with knowledgeable annuity financial planners beforehand.
Here are five common regrets people have 15 years after buying an annuity:
1. It Didn’t Grow As Much As Other Investments
Annuities can feel secure, but they often don’t earn as much as other types of investments, like stocks. For example, a fixed annuity might give you a guaranteed 3% return. But if you had kept your money in a well-balanced investment plan, you might have earned more — and still had access to your original savings.
Over time, that difference can really add up.
2. Wrong Assumptions About the Future
Sometimes people buy annuities based on incorrect guesses. They might think:
- Their other retirement investments are too risky
- Inflation won’t be a big deal
- They won’t need much flexibility
Later on, they may find that inflation has eaten away at their annuity payments or that the fixed income doesn’t meet their real-life needs. Even inflation-protected annuities can be expensive and hard to adjust over time.
3. Too Many Hidden Fees
Annuities often come with lots of fees, especially if you add optional features (called riders) for extra protection. Each rider can cost 0.25% to 1% of your annuity value every year. Over time, those fees can take a big chunk out of your retirement income.
You’ll also find fees with regular investments, but those can often be kept lower, especially if you work with annuity advisors who focus on low-cost investing.
4. Not Enough Flexibility
Once you buy an annuity, your money is tied up in that plan. If your life changes — for example, you want to start a small business or help a family member financially — you may not have access to the money you need.
With an investment portfolio, it’s usually easier to sell off some stocks or bonds to get cash. With an annuity, you may face penalties or fees if you try to take money out early.
5. Can’t Leave Much Behind for Family
Some people regret buying annuities because they can’t pass the money on to their children or grandchildren. If you didn’t choose an annuity with death benefits, the payments usually stop when you die.
With traditional investments or retirement accounts, you can pass along whatever money is left. You also have more control, like setting up college funds or helping loved ones while you’re still alive — not just after you’re gone.
Bottom Line
Annuities can seem like a good way to make retirement simple and worry-free. But 15 years later, many people realize they gave up too much control and possibly lost out on money they could have earned in other ways.
Before you decide, talk to a trusted financial advisor — preferably someone who doesn’t make commissions (a fee-only advisor).
They can help you figure out if an annuity is right for you, or if there’s a better, more flexible option for your retirement plan.
