Podcast Title: Jill on Money with Jill Schlesinger
Episode: Any Reason Not to Buy the Annuity?
Release Date: July 16, 2025
Host: Jill Schlesinger, CFP®
Source: Audacy

Introduction

In the episode titled "Any Reason Not to Buy the Annuity?", Jill Schlesinger delves into the complexities of annuities, addressing common misconceptions and providing actionable advice for listeners considering this financial product. Through a detailed conversation with Eric from Washington State, Jill examines the pros and cons of annuities within the broader context of retirement planning.

Guest Introduction: Eric's Financial Landscape

[02:25]
Jill Schlesinger: "Welcome to the Jill on Money show... Let's talk to Eric, who joins us from the state of Washington."

Eric: "Hi. I'm doing good. Thank you for sharing your expertise with me."

Eric, a 65-year-old retiree from Washington State, presents his financial scenario to discuss the viability of purchasing an annuity using his pre-tax deferred compensation funds. He has a lump sum of $590,000 available and is weighing the options between managing this sum independently or securing a steady income through an annuity.

Understanding Annuities: Pros and Cons

[02:55]
Jill Schlesinger: "The reason why people are skeptical about annuities, including me, is usually they're very expensive. There are fees that are embedded in them... the money you put into that annuity, you lose access to it in the same way as if it were in say a brokerage account."

Jill outlines the general skepticism surrounding annuities, primarily due to high fees and reduced liquidity. She explains that while annuities can provide a guaranteed income stream, they often come at the cost of higher fees and limited access to the invested capital.

Evaluating Eric's Financial Situation

[04:04] - [07:29]

Details of Eric’s Financial Portfolio:

• Age & Marital Status: 65, married to a 61.5-year-old spouse.
• Current Income Streams:
  • Defined Contribution Account: $2,200/month.
  • Defined Benefit Annuity: $2,500/month starting this month.
• Assets:
  • Lump Sum: $590,000.
  • Homes: Primary residence worth $400,000 (paid off) and a recreational property worth $200,000 (also paid off).
  • Retirement Accounts: Roth IRAs totaling $160,000, HSA funds amounting to $85,000, and a traditional IRA from his wife’s former employer with $400,000.
• Dependents: Four sons, three financially independent and one returning home, along with a 91-year-old mother.

Discussion Highlights:

• Jill: "What other assets have you guys squirreled away?... So that's vacation property."
• Eric: Details various assets, indicating a robust financial standing.
• Jill: "You've been very good savers. Very good savers."

Jill assesses Eric's comprehensive financial portfolio, noting his substantial savings, paid-off properties, and multiple income streams. This places Eric in a strong position to make informed decisions regarding his retirement funds.

Analyzing the Annuity Offer

[09:24] - [15:19]

Annuity Details Discussed:

• Amount: $590,000.
• Type: Offered through the State of Washington (public sector annuity).
• Features:
  • Cost of Living Adjustments (COLA): Based on the Consumer Price Index (CPI) for Seattle.
  • Beneficiary Provision: If Eric dies before three years, the remaining funds go to his wife.
  • Tax Treatment: Pre-tax funds, meaning taxes are deferred until funds are withdrawn.
  • Payment Structure: Lifetime income of approximately $3,400/month with COLA.
  • No Partial Annuity Option: It's a lifetime annuity; partial annuitization isn't available.

Key Points from Jill:

• Tax Implications: "None of the 590,000 has been taxed yet... start paying tax on it so that you don't have one of those ticking time bombs that has to start coming out at age 75."
• Security and Simplicity: "If you feel like, almost like constitutionally this makes you feel secure, then I think there's no problem doing it."
• Estate Planning: Emphasizes the importance of having estate documents in place, especially with dependents who may require support.

Notable Quotes:

• Jill Schlesinger [12:30]: "So straight life. What's the dollar amount that it looks like when you... it'd be 3,400 per month for life with a COLA."
• Jill Schlesinger [14:20]: "Make sure you've got the estate documents done... think about those issues."

Jill provides a thorough analysis of the annuity offer, highlighting its benefits in providing a stable, inflation-adjusted income stream while also addressing potential concerns related to liquidity and estate planning.

Jill's Guidance and Conclusion

[15:00] - [16:56]

Jill’s Final Thoughts:

• No Bad Decisions: "There is no bad decision you're going to make. Literally no bad decision that you can make."
• Customization and Flexibility: Suggests partial annuitization if Eric desires more liquidity.
• Comprehensive Planning: Encourages considering all assets and future needs, including dependents and estate planning.
• Encouragement to Seek Advice: "If you've been pitched an annuity and you want to get an opinion, don't do it. But come to us first."

Eric's Response:

• Feeling Reassured: "That's good to hear. Thank you. I appreciate that."
• Decision: "Going the annuity route... I don't have to worry about RMDs down the road."

Jill concludes that, given Eric's strong financial position, purchasing the annuity is a sound decision. It simplifies his retirement planning by providing guaranteed income, eliminating concerns about Required Minimum Distributions (RMDs), and reducing the need to actively manage investment accounts.

Key Takeaways & Insights

1. Annuities as Income Solutions:
   Annuities can offer a reliable, inflation-adjusted income stream, which is particularly beneficial for retirees seeking financial stability without the need to manage investments actively.

2. Cost and Fees Consideration:
   Traditional annuities may come with high fees and reduced liquidity. It's crucial to evaluate the expense ratios and understand the long-term implications on your wealth.

3. Tax Implications:
   Utilizing pre-tax funds for annuitization can help manage future tax liabilities, preventing large, mandatory withdrawals at an older age.

4. Estate Planning:
   Ensuring that beneficiaries are well-considered and estate documents are in place is essential, especially when products like annuities are involved.

5. No One-Size-Fits-All:
   While Jill emphasizes that there's no bad decision in Eric's situation, it's important to tailor financial decisions to individual circumstances, considering all assets, dependents, and long-term goals.

6. Professional Consultation Advised:
   Before committing to complex financial products like annuities, seeking advice from financial experts can provide clarity and ensure decisions align with personal financial strategies.

Conclusion

In this episode, Jill Schlesinger effectively demystifies annuities by dissecting their benefits and potential drawbacks through a real-life example. Eric's case illustrates how a well-rounded financial portfolio can integrate annuities to secure a comfortable and worry-free retirement. Jill's balanced approach offers listeners valuable insights into making informed decisions about annuitization within their own financial planning.

Notable Quotes with Timestamps:

• Jill Schlesinger [02:55]: "The idea of putting money into a contract with someone who takes on the risk of then spitting out the money down the line and creating an income stream, it's a good idea."
• Jill Schlesinger [12:58]: "If you put 590, you... it'd be 3,400 per month for life with a COLA."
• Jill Schlesinger [15:00]: "There is no bad decision you're going to make. Literally no bad decision that you can make."