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

Summary

---

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.

Transcript

[Dave Ramsey]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Sherry's in Dallas.

Hey, Sherry, how are you?

[Chris Hogan]

Good, Dave.

[Sherry]

How are you?

[Dave Ramsey]

Better than I deserve. What's up?

[Sherry]

So honored to speak to you guys today. I really need your advice.

[Dave Ramsey]

We'll try.

[Sherry]

I fell for the annuity scam and didn't know it was a scam until after I did it. And after my 20 day wind in October, we rolled $689,000 of my husband's 401k into a fixed annuity and they gave us a 5% bonus. So the value today is 724. The problem is the insurance company, as I'm sure you know, keeps 22% of that and the first year charge is 13%. So my question is, do we stay until the surrender charges drop? Especially given, you know, this is 30 days old.

[Dave Ramsey]

This is 30 days old.

[Sherry]

It's, it's over that. It was in October.

[Dave Ramsey]

Well, okay. I mean, it's 45 days old.

[Sherry]

Yeah, he told me it's too late. He told me I had a 20 day window.

[Dave Ramsey]

This is the insurance agent that told you this, this soldier, this crap?

[Sherry]

Correct.

[Dave Ramsey]

Okay, good. All right. I don't know is the answer, but I want more information because I don't believe the person who sold me something that's bad to start with. It's not a good source of information. Fair enough. So go to ramseysolutions.com and click on Smartvestor Pro and get one of our Smartvestor Pros there in your area that you can talk to and tell them what you've got and see if the insurance commissioner in Texas will grant you a little more leeway than that and you get 100 cents on the dollar back.

[Sherry]

Okay.

[Dave Ramsey]

And then get back out of it. So. Yeah. And then get this into some good investments that aren't so front loaded and crappy in performance.

[Sherry]

Right.

[Dave Ramsey]

So.

[Sherry]

So do you recommend an index fund?

[Dave Ramsey]

I recommend a fruit jar before you do this. But. But the index fund is fine. It was a 401k and so you need to roll it into an IRA. And based on the fact that it's in an IRA, I'm probably going to put it in the four types of mutual funds that mine are in, which is a fourth in growth, growth in income, aggressive growth and international with long track records. That's what mine are in. And I'm 65. How old are you?

[Sherry]

I'm 62.

[Dave Ramsey]

Okay.

[Sherry]

My husband is about to be 60.

[Dave Ramsey]

Okay. So, yeah, same category. And that's what mine are in. Because I'm going to leave it alone. And then you've got to start talking about moving some of it out of there before you get to 73 and a half. Because you're going to have RMDs required minimum distributions on your 401k. You're going to have that in the annuity as well, by the way, because it's probably a qualified plan, too. So. Meaning it's.

[Sherry]

What do I do if they won't move it and we're stuck with the 13% get the.

[Dave Ramsey]

I would take 13% hit and move it. Because you may make 13% in Q1. One quarter of the stock market might be 13%, you know, and it's certainly going to, you know, you're going to make your money back quick enough, but I'm going to. I'm not going to accept Joe Bob's answer. Okay. I want somebody that knows the laws and the tolerance for this with the Texas Insurance Commission to put their hands on this. It may be. But 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 rather than being stuck in this thing. And the other thing is every day you wake up and you see the company name, you're pissed again. I don't want to live like that.

[Sherry]

Yeah.

[Dave Ramsey]

Now, let's recap.

[Sherry]

I'm bleeding from my mistake.

[Dave Ramsey]

No, it's okay. Everybody makes mistakes. You were hoodwinked. So let me tell people what happened to you and you tell me if I'm right. A person contacted you in your 60s about helping you create a very stable, predictable investment that would grow without taxes. And they are an investment advisor. They're a financial advisor. And the company name is an insurance company name, not an investment company name. But they posed as and sell themselves as an investment advisor. Is that what happened?

[Sherry]

Close. I actually reached out to them because they were promoted by a person in the church that's well known that I trust and follow.

[Dave Ramsey]

Yeah.

[Sherry]

And then they dropped some big names of people that they've helped and whose money they manage. And so that's what got me.

[Dave Ramsey]

Yeah, but it's a. You did not place your money with an investment company. You place your money with an insurance company.

[Sherry]

Correct.

[Dave Ramsey]

And going in, you were not planning on doing that. That's not what you signed up for. You signed up for. To do some investing.

[Sherry]

Correct.

[Dave Ramsey]

And then they. But they. Insurance agents. Are licensed only to sell insurance products, annuities or insurance products. They cannot sell mutual funds. And so this is what they sell is this crap. And they put people in and they can even sell a decent product which is a variable annuity. But I wouldn't even put you in that because you're getting double feed. So it's just, it's a. Yeah, man, it's awful. I'm sorry you're having that, but if you only lose 13%, I would be in good investments versus a fixed annuity. Fixed annuities, like a high yield savings account rate, it's going to pay you 4 or 5%. If you make 12 or 14 on something in two years, you made your money back if that's all you make. And you ought to make more than that if you watch what you're doing and get some real help. So as a possibility anyway, depending on what the markets are doing. So, yeah, I'm. I'm out of there. Wow, that infuriates me, John.

[Chris Hogan]

That's. Well, it's somebody else getting preyed on in their 60s. Right. We talked about earlier.

[Dave Ramsey]

Yeah.

[Chris Hogan]

Tell me this. So when she says 13%, is that of the growth since this thing was moved or is that over the. In like 13 of the entire portfolio?

[Dave Ramsey]

The entire portfolio.

[Chris Hogan]

Good gosh.

[Dave Ramsey]

Yeah. Yeah. Because they're going to get their blankety blank commission no matter what.

[Chris Hogan]

That's a crazy amount.

[Dave Ramsey]

Yeah, well, the insurance business is all front loaded. It's all. They all get their money on the front end of everything. So these are frustrated life insurance agents is what they are. They're not real good. And so sometimes I see these things, okay, the whales jumping on the pacific life and we'll help you. And you got people walking and they're holding hands in a rose garden and they're retiring and all this bull crap. It's stupid butt life insurance stuff.

[Chris Hogan]

My daughter, you're not going to believe me. My daughter, yesterday, her and I, I wouldn't watch one of. One of Bluey or whatever she wanted to watch. I wanted to watch football games. So she curled up on the couch next to me and they had a commercial and she said, what does that have to do with whatever it is they're selling? She's nine. And I was like, not a lot, Josephine. Not a lot.

[Dave Ramsey]

It's. It's called, it's called branding right now. Yeah. And so if the in. If the name of the company you're dealing with do your investment in air quotes with has insurance in the name you're about to get screwed. That's a good way to remember it. Okay, done. So, I mean, you don't do, you don't get your muffler fixed at the transmission store, you don't do investments with insurance. Okay? It's that simple. We go, you know, we go to qualified people who have securities licenses, not insurance licenses to help you do real investing.

[Chris Hogan]

I just can't believe a penalty on anything would be 13% of the total of your portfolio.

[Dave Ramsey]

What? And how about this? 20 day or 26 days with a 20 day cut off? Oh no, ma', am, we can't do that now. What business does that?

[Chris Hogan]

Yeah, someone who is Home Depot will.

[Dave Ramsey]

Take your lawnmower back two years after you bought it and give you a full refund. But not these bozos.

Thanks for tuning in to Ramsey Everyday millionaires need help with your investments? Connect with a smartvestor [e-mail] smartvestor or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.