Episode Overview
Title: Should We Cash Out Our Variable Annuity to Pay Off Debt?
Date: October 15, 2025
Hosts: Ramsey Network (Dave Ramsey, Ken Coleman, et al.)
Featured Caller: Valerie from Minneapolis
In this episode, the hosts answer listener questions about personal finance decisions, particularly focusing on using a variable annuity to pay off debt. Through Valerie’s situation, the hosts break down how variable annuities work, why they’re typically inappropriate for young investors, and how to make sound financial decisions when stuck with complex products.
Key Discussion Points & Insights
1. Valerie’s Situation: Variable Annuity and Debt (00:16–01:59)
- Valerie’s Question (00:20): Valerie and her husband are in Baby Step 2 (debt payoff) and are considering cashing out a $25,000 variable annuity she bought after selling property. She wonders if they should use it to pay down their debt.
- The annuity matures at age 65, was bought in 2021, and was recommended by her financial advisor (who, as Dave points out, is actually an insurance agent).
Notable Quote
“No one sells this stuff to a 34 year old except insurance agents... Sometimes a financial advisor will sell a variable annuity, but never to a 34 year old.”
— Dave Ramsey, (02:13)
2. Understanding Variable Annuities & Surrender Charges (01:12–03:21)
- Variable Annuity Basics: Essentially mutual funds inside an insurance wrapper; offers principal protection and a minimum return.
- Critical Caveat: Early withdrawal (“surrender”) could result in significant penalties (“surrender charges”) that usually last 5–7 years.
- Advice: Find out the current surrender charge before deciding to cash out.
- If the charge is minor, cash out and use the money to pay down debt.
- If the charge is high, wait until it drops or disappears.
Notable Quote
“The surrender charge will tell you whether to tap the brakes or cash it. If the surrender charge is minor, take it and cash it out and use it on your Baby Step 2. Right? But if the surrender charge is half of what you put in...there’s no reason to take that huge hit.”
— Dave Ramsey, (03:04)
3. Evaluate Your Advisor and Get Multiple Opinions (02:00–04:42)
- Advisor’s Role: Valerie’s “advisor” was actually selling insurance, not providing fiduciary-level investment advice.
- Action Step: Gather all information on the annuity and meet with a vetted, fiduciary financial advisor (like a Ramsey SmartVestor Pro).
- General Guidance: Always double-check advice from any professional, and get second opinions from those who don’t sell the product in question.
Notable Quote
“Before you sign on to a financial product, make sure that you are getting the pros and cons okay from multiple sources.”
— Ken Coleman, (04:12)
4. Bad Industry Practices & How to Respond (04:42–06:58)
- Intimidation Tactics: Many people don’t understand investing; unscrupulous salespeople take advantage by acting as untouchable “experts.”
- Ramsey Rule: If an advisor talks down to you, intimidates, or can’t explain things clearly, fire them immediately.
Notable Quote
“Anytime someone in the investment world...drops that kind of professor, I’m going to talk down to you posture, fire their butt...Their job is not to talk down to you. Their job is not to do it for you. Their job is to teach you.”
— Dave Ramsey, (04:50)
5. The Realities of Variable Annuities — Fees, Features & Suitability (06:59–end)
- Fee Structure: Investors pay both mutual fund fees and annuity fees, resulting in double fees (and commissions for the seller).
- Key “Benefits” Debunked:
- Principal guarantees are largely unnecessary for young buyers; the market historically rises over 5–7-year spans.
- Guaranteed returns are lower than the long-term market average.
- Passing outside of probate is a minor perk for most.
- Who Should Use Them? Variable annuities are usually inappropriate for young investors. Even Dave Ramsey, at age 64, has “precisely zero” annuities.
Notable Quote
“If you’re a scaredy cat about the market...the variable annuity gives you some comfort...But I’m 64. The number of variable annuities I own is precisely zero.”
— Dave Ramsey, (06:58 & end)
Memorable Moments & Practical Takeaways
- Action for Valerie: Gather surrender charge info, consult a SmartVestor Pro, weigh penalties vs. debt payoff benefits.
- Listener Homework: Vet your advisor’s credentials, get advice from real financial professionals, never buy complex products you don’t fully understand.
Timestamps for Important Segments
- 00:16–01:59: Valerie describes her situation and the annuity details.
- 01:12–03:21: Dave Ramsey breaks down what a variable annuity is and discusses surrender charges.
- 02:00–04:12: Discussion about the advisor’s role, suitability, and next steps.
- 04:12–04:42: Ken Coleman on the importance of multiple opinions.
- 04:42–06:58: Dave Ramsey’s rules for firing “talk-down” advisors.
- 06:59–end: Deep dive into annuity fee structure, guarantees, and why such products are usually unsuitable for young investors.
Tone & Language
The episode features Ramsey’s trademark directness, humor, and passionate energy. Listeners are encouraged to both educate themselves and demand clear, respectful communication from all financial professionals.
Summary Takeaway:
If you’re considering liquidating a complicated financial product to pay off debt, get all the facts, weigh surrender charges vs. benefits, and always get advice from a credentialed fiduciary—not just someone trying to sell you a product. And if your “advisor” can't teach you what you need to know, “fire their butt.”