Should My Parents Buy an Annuity?

Summary

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Podcast Summary: Should My Parents Buy an Annuity?

Show: Ramsey Everyday Millionaires
Host(s): Dave Ramsey, Chris Hogan
Date: January 28, 2026
Guest Caller: James (Harrisburg, PA)

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Episode Overview

This episode centers around a question from James, a caller concerned about his parents being advised to move a large portion of their retirement savings into an annuity. Drawing from the Ramsey Network philosophy of disciplined, debt-free living and responsible investing, Dave Ramsey and Chris Hogan guide James through his parents’ options and the pitfalls of annuities, emphasizing education, caution, and the value of a second opinion.

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Key Discussion Points & Insights

1. James’s Situation & Parental Concerns

• James’s parents have about $475,000 saved, with a third already in an annuity, considering moving the rest.
• They live modestly, have no debt, a paid-off house, and are on track for retirement.
• James’s Worry: “They want to move the whole thing into this. It just doesn’t seem…” ([02:12])

2. Annuities: Ramsey’s Position

• Dave: "In general, we are not a fan of annuities. They may have a time and place. I can tell you Dave Ramsey has zero annuities. And they make sense for very few people." ([01:25])
• Concerns center on high expense, lucrative commissions for advisors, complexity, and limited genuine benefit for most investors.

3. Types of Annuities & Associated Issues

• Dave: Explains main annuity types and drawbacks ([04:36]):
  • Fixed Annuities: Barely keep up with inflation.
  • Variable Annuities: “One of the most expensive and complicated financial products out there.”
  • Indexed Annuities: Subpar returns, high fees, capped gains, and tied to insurance products.

4. The Role of Fear & Advisors

• Often, annuities are pitched to retirees fearful of market volatility.
• Dave: “My red flags go up… when I hear that someone’s getting pushed into annuities.” ([01:25])
• Advisors may profit more from annuities than other investments.

5. Importance of Understanding Investments

• Ramsey Network advice: “Don’t invest in anything you don’t understand.” ([04:36])
• Advisors can be persuasive; seek clarity and independent verification.

6. The Value of a Second Opinion

• Chris and Dave recommend connecting with a SmartVestor Pro (Ramsey’s network of vetted investment advisors) to review options without sales pressure.
• Chris: “If you suggested and said, ‘Hey… I’d love for you guys to get set up with a SmartVestor… a second opinion’… do you think that they would do that?” ([03:37])
• James’s mom is receptive to this; his dad is less able due to health.

7. Staying the Course & Not Fixing What Isn’t Broken

• Dave: If their current investments are solid, there’s no need to overhaul the portfolio for an annuity:
  • “Don’t fix it if it’s not… already in the annuity. Good mutual funds and all that and good, you know, equities. And I wouldn’t mess with it.” ([06:13])

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Notable Quotes & Memorable Moments

• Dave Ramsey [01:25]:
  “In general, we are not a fan of annuities. They may have a time and place. I can tell you Dave Ramsey has zero annuities. And they make sense for very few people.”

• Chris Hogan [03:10]:
  “The hard part about this is you’re not where they’re at yet. And to offer advice in that area could, could be tough. Unless they’re asking you, James, what do you think we should do? Are they?”

• Dave Ramsey [04:36]:
  “Don’t invest in anything you don’t understand. And so until they fully understand it. And I would not just trust the advisor’s explanation because they’re clearly going to do a good job selling them on it.”

• Dave Ramsey [04:36]:
  “Fixed annuities… barely keep up with inflation. If it’s variable annuities, it’s one of the most expensive and complicated financial products out there… Indexed annuities… subpar returns and super high fees. And those are, that’s always my concern.”

• Dave Ramsey [06:13]:
  “Don’t fix it if it’s not… already in the annuity. Good mutual funds and all that and good, you know, equities. And I wouldn’t mess with it.”

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Important Segment Timestamps

• 00:22 – James introduces his parents’ situation
• 01:25 – Dave shares skepticism of annuities and industry incentives
• 02:33 – Discussion of retirement readiness and lifestyle
• 03:10 – Chris encourages family dialogue and respect for parents’ stage
• 03:37 – Recommendation to seek a SmartVestor Pro for a second opinion
• 04:36 – Dave outlines different annuity types and risks
• 06:13 – Closing advice: avoid unnecessary changes, stick with solid investments

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Actionable Takeaways

• Be cautious with annuities; know their costs and limitations.
• Always fully understand investments before moving forward.
• Seek independent, trusted advice—don’t rely solely on a salesperson’s recommendation.
• Help loved ones get a second opinion, especially if they’re considering complex financial products.
• Maintain a disciplined, conservative approach—if your investment plan is working, unnecessary changes can do more harm than good.

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Tone: Empathetic, practical, and direct—staying true to the Ramsey Network’s reputation for trustworthy, straightforward financial advice. The hosts balance technical explanations with encouragement and actionable next steps for listeners facing similar decisions.

Transcript

[Chris Hogan]

Foreign.

[Dave Ramsey]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor all right, let's go to James in Harrisburg, Pennsylvania. What's going on, James?

[James]

Oh, not much. How are you doing?

[Dave Ramsey]

Better than we deserve, my friend. How can we help?

[James]

I'm calling on behalf of my parents. My parents recently asked me to attend their financial advisor meeting with them, and I'm not sure. I've been listening to Dave Ramsey for a while, and it doesn't seem like it's what Dave would recommend or what you guys would recommend. So they're roughly right at like half a million dollars or 475,000. And a third of that is in a annuity fund that will. Once they start retire, they'll start paying out X number of dollars, like 10 grand or something a year.

[Dave Ramsey]

Yep. What kind of annuity is it, do you know?

[James]

It's with. I don't know if I can say the name.

[Dave Ramsey]

What do you mean? Is it like a fixed annuity, variable index? There's all kinds of types.

[James]

Yeah, I have no idea. I assume it's growing value of some sort. Like the cash value is much like 156of it is cash value. If they pulled it out and there's like 220. Some actual value in it.

[Dave Ramsey]

Okay. Well, in general, we are not a fan of annuities. They may have a time and place. I can tell you Dave Ramsey has zero annuities. And they make sense for very few people. And the issue. One of the biggest issues I have with them is they're. They're expensive. They make the advisors a whole lot of money. And so that's my only fear. I'm not saying they're a bad person. They may have a reason to do this, but I have a lot. My red flags go up. My spidey senses start tingling when I hear that someone's getting pushed into annuities. Did your parents want this for a reason? Like, are they scared of market risks? Because that's usually who's. Who this is for.

[James]

Yeah, I think. I don't know that they're necessarily scared of market risk. It's more they want to be able to sustain through. Through their retirement.

[Dave Ramsey]

Okay.

[James]

My mom's 62. She's not planning on retiring today. Like, she's going to work a few more years and retire, but they want to move the whole thing into this. And it just doesn't seem. It's like you have enough money in my eyes to sustain off interest because they live a super, super within their means lifestyle.

[Dave Ramsey]

Yeah. Are they in baby step seven with a paid for house? No debt, Correct?

[James]

Yep.

[Dave Ramsey]

Okay.

[Chris Hogan]

James, how's your, how's your financial situation?

[James]

My wife and I are in baby step two where we basically have a truck to pay off yet and that's it.

[Chris Hogan]

So I, I love that you're going with them on this and that they invited you to go to this meeting. I would. The hard part about this is you're not where they're at yet. And to offer advice in that area could, could be tough. Unless they're asking you, James, what do you think we should do? Are they?

[James]

Yes. They, they definitely asked me for advice. They asked me to come along because I've been rant and raving to them about you guys for the past two years and how I'm excited to get debt free or my wife and I are excited to be debt free. And, and they're like, well we, they really weren't involved in their investment. I feel like they, they received some money from my grandma when she passed and they just kind of took the financial advisor's word for it and said just here, here's the money type.

[Chris Hogan]

So if you suggested and said, hey, you know, I came with you guys, here's what I heard. I'd love for you guys to get set up with a, a smart vester from Ramsey to get a second opinion. This is the, the people I've been getting advice from that I've been telling you about. Do you think that they would do that?

[James]

Yeah, and I, I already recommended that to him. I said, I, I want to sit down with someone else. Like, I don't.

[Chris Hogan]

And what they say, I don't trust.

[James]

Your advisor, but I want to get someone else's opinion type thing.

[Chris Hogan]

What'd they say to that?

[James]

And, and my mom's, my mom's all for it. So my, my dad's not in the best health, so he's not fully, fully involved with leaving to go meet with people, stuff like that.

[Chris Hogan]

So yeah, so you, you know, if she's open to it, you set her up with the smartvest. Or maybe you sit in on that conversation too if your dad's not able to sit in. And I think that's where you take it from there. The great news is that they're open, which I think is wonderful. Maybe a little too open with the.

[Dave Ramsey]

Other advisor, but yeah, I think they need to. We always say don't invest in anything you don't understand. And so until they fully understand it. And I would not just trust the advisor's explanation because they're clearly going to do a good job selling them on it. But I'll tell you this. Fixed annuities, if that's what they're in, barely keep up with inflation. If it's variable annuities, it's one of the most expensive and complicated financial products out there. And then indexed annuities is another form and it's similar to index universal life insurance where it's, it's tied to an index and so the returns are tied to that and there's caps on gains and protection against losses and all that. But the key here is with that one is subpar returns and super high fees. And those are, that's always my concern when you're trying to mix this insurance product with investment. So not to say there isn't a time or place for it if they really want the guaranteed returns or the estate planning benefits. And they're in baby step seven and they have amassed a serious amount of wealth. Maybe it's an option if they're super spooked by the market. I don't think that's the case here. And so my, my, your spidey senses are right. I would get a second opinion and try to advise them against this. Do you know what they're invested in right now in this portfolio?

[James]

I do not know. I literally sat down with their advisor like two weeks ago. This is the first time they actually left me into their finances or brought me into the loop and asked for my opinion on things.

[Dave Ramsey]

Well, that means they also had a little bit of a red flag.

[Chris Hogan]

That's right.

[Dave Ramsey]

And so if you want to see them retire with dignity, I would stay away from this annuity based on what you've told me. And you can jump on ramseysolutions.com and get connected with a smartvestor pro that can give you that second opinion. But you're a good son, man.

[Chris Hogan]

Or at the very least just leaving it as, you know, leaving it, you.

[Dave Ramsey]

Know, don't fix it if it's not.

[Chris Hogan]

Already in the annuity.

[Dave Ramsey]

Good mutual funds and all that and good, you know, equities. And I wouldn't mess with it.