Ramsey Everyday Millionaires

Episode: I Transferred My 401(k) Into an Annuity—What Should I Do Now?

Date: December 15, 2025
Hosts: Dave Ramsey, Chris Hogan
Caller: Sherry from Dallas

Main Theme

This episode features Dave Ramsey and Chris Hogan providing direct, practical advice to Sherry, a listener who recently transferred her husband’s 401(k) into a fixed annuity and is now facing steep surrender charges. The discussion exposes common pitfalls around annuity products—especially for those near retirement—while laying out Ramsey’s investment philosophy and steps to recover from costly financial mistakes.

Key Discussion Points & Insights

1. Sherry’s Situation: The Annuity “Scam” Experience

Timestamps: 00:20–01:58

• Sherry describes rolling $689,000 from her husband’s 401(k) into a fixed annuity.
• The annuity gave a 5% “bonus,” raising her balance to $724,000, but:
  • The insurance company keeps 22% over time.
  • Immediate 13% surrender charge (approx. $94,120 if she withdraws now).
• She’s outside her 20-day rescission window and feeling stuck.

“I fell for the annuity scam and didn't know it was a scam until after I did it.”
— Sherry (00:25)

Notable Quote

“I don't believe the person who sold me something that's bad to start with is a good source of information.”
— Dave Ramsey (01:20)

2. Initial Advice: Get a Second Opinion & Use a Pro

Timestamps: 01:20–01:58

• Dave strongly suggests Sherry contact a SmartVestor Pro (Ramsey-certified investment pro) to assess her options and check if the state insurance commissioner (Texas) can help undo the transaction.
• Stresses skepticism toward the original insurance agent who stands to gain from her loss.

3. What to Do With Retirement Money: Investment Recommendations

Timestamps: 02:09–02:50

• Sherry asks about suitable investments.
• Dave recommends:
  • Rolling the annuity funds into an IRA.
  • Allocating evenly to his four mutual fund categories:
    • Growth
    • Growth & Income
    • Aggressive Growth
    • International (each with strong long-term track records)
• He confirms this is his personal approach, suitable for those in their 60s.

“I recommend a fruit jar before you do this. But the index fund is fine. … I’m probably going to put it in the four types of mutual funds that mine are in.”
— Dave Ramsey (02:13)

4. Addressing RMDs & The Cost of Mistakes

Timestamps: 02:48–03:18

• Dave notes that Required Minimum Distributions (RMDs) will eventually be mandatory, whether in an IRA or annuity, starting at age 73.5.
• Sherry asks what if she can’t get out: Dave advises to take the 13% “stupid tax” now and invest elsewhere, where she can still make up her loss with decent returns.
• Emphasizes it’s better to move now than continue to feel regret daily.

“If I'm you and it's going to cost me 13% in stupid tax to get this moved, you'll make that back up in good investments… I don't want to live like that.”
— Dave Ramsey (03:18)

5. Break Down: How People Get Lured into Annuities

Timestamps: 04:04–05:15

• Dave recaps how consumers, especially in their 60s, are targeted with guarantees of “safe, stable, tax-free growth,” often by agents posing as investment experts.
• Sherry clarifies she actually reached out because of a referral from a trusted church member and was influenced by namedropping.
• Dave demystifies the credential: insurance agents are not securities-licensed investment professionals. They can only sell annuities and insurance, not mutual funds.

“You don’t get your muffler fixed at the transmission store, you don’t do investments with insurance. … We go to qualified people who have securities licenses, not insurance licenses to help you do real investing.”
— Dave Ramsey (07:17)

6. Fixed Annuity vs. Real Returns

Timestamps: 05:15–06:09

• Fixed annuities yield just 4–5% (comparable to high-yield savings), while good mutual funds could return 12-14% per year.
• In two years, you could recoup a 13% loss with appropriate investments.
• Dave’s investment principle: grow wealth in mutual funds for the long-term.

7. How the Industry Works & Why It’s a Trap

Timestamps: 06:09–07:54

• Chris and Dave discuss the structure of annuity products: heavy front-loaded commissions.
• Insurance agents profit regardless of client outcomes.
• Dave mocks the marketing tactics: “retiring in rose gardens,” irrelevant advertising, and emotional manipulation.

“If the name of the company you’re dealing with… has ‘insurance’ in the name, you’re about to get screwed.”
— Dave Ramsey (07:17)

8. The Absurdity of Surrender Fees & Final Thoughts

Timestamps: 07:54–08:09

• Chris is shocked at the size of the penalty (13% of the entire portfolio).
• Dave points out the unfairness of short rescission periods compared to typical consumer-friendly returns elsewhere.

Notable Quotes & Memorable Moments

• On losing money to get out:

  “If you only lose 13%, I would be in good investments versus a fixed annuity… And you ought to make more than that if you watch what you're doing and get some real help.”
  — Dave Ramsey (05:07)

• On insurance agent tactics:

  “These are frustrated life insurance agents… not real good. … It’s stupid butt life insurance stuff.”
  — Dave Ramsey (06:31)

• On industry commissions:

  “Because they're going to get their blankety blank commission no matter what.”
  — Dave Ramsey (06:25)

• On financial wisdom:

  “Everybody makes mistakes. You were hoodwinked.”
  — Dave Ramsey (04:06)

Episode Structure & Timestamps of Key Segments

• 00:20 – 01:58: Sherry describes her annuity situation. Dave provides initial advice: get second opinions and avoid relying on information from self-interested parties.
• 02:09 – 02:50: Dave’s investment philosophy: rollover to IRA, use four types of mutual funds.
• 03:18 – 04:06: Addressing the emotional and financial cost of staying in a bad investment.
• 04:06 – 05:15: Dave explains how insurance agents present as financial planners and how people (especially retirees) are drawn in.
• 06:09 – 07:54: Exposing the industry’s structure; ridicule of marketing tactics.
• 07:54 – 08:09: Chris’s disbelief at surrender fees; Dave’s critique of industry practices.

Tone & Style

The episode is direct, practical, and infused with Ramsey’s trademark blend of candor, southern wit, and outrage at consumer exploitation. Both hosts emphasize corrective action, forgiveness for financial mistakes, and practical next steps, aiming to empower listeners to build wealth through proven, transparent investment vehicles rather than high-fee insurance products.

Summary Takeaway:
If you find yourself stuck in a bad annuity—especially one pushed on you as an “investment”—seek professional, unbiased help immediately. Even if it hurts to leave, the sooner you reinvest wisely, the faster you’ll recover and regain peace of mind. Don’t trust insurance agents for investment advice; instead, work with licensed investment professionals who put your interests first.