Last updated: May 1, 2026 | By Jason Caudill, MBA | Reviewed by the MyAnnuityStore Editorial Team
Dave Ramsey has told millions of listeners that annuities are a bad deal. On his radio show, podcast, and in his books, Ramsey has called them expensive, illiquid, and inferior to mutual funds. His position is simple: stay away.
For his core audience, 30-somethings drowning in credit card debt, he’s probably right. But for a 62-year-old retiree sitting on $200,000 in an IRA rollover looking for a safe place to park it for five years? His advice doesn’t hold up. Here’s why.
What Dave Ramsey Actually Says About Annuities
Ramsey’s annuity stance boils down to a few repeated claims. He has said these on air and in writing over many years:
- “Fixed annuities don’t pay squat.” He has dismissed fixed annuity yields as too low to bother with.
- “Annuities are expensive.” He warns about high fees that eat into returns.
- “They lock up your money.” He criticizes surrender charges and limited liquidity.
- “Mutual funds will outperform annuities.” His go-to alternative is growth stock mutual funds averaging 10-12% per year.
- “Stay away from annuities.” His blanket recommendation to callers who ask.
He does make one narrow exception: he has said a variable annuity could be worth considering, but only after you are completely debt-free, your home is paid off, and you have already maxed out every tax-advantaged retirement account available to you.
Where Dave Ramsey Gets It Wrong
1. “Fixed annuities don’t pay squat” is outdated
When Ramsey first made this claim, he may have had a point. In 2015 and 2016, the best MYGA rates were around 2.5% to 3%. But the rate environment has changed dramatically.
As of May 2026, the best 5-year Multi-Year Guaranteed Annuity (MYGA) rates from top annuity companies are paying between 5.00% and 6.50%. That is not “squat.” That is 150 to 200 basis points above comparable bank CDs, with the added benefit of tax-deferred compounding.
A $200,000 MYGA at 5.50% for five years grows to roughly $261,500 with no annual fees, no market risk, and no tax due until withdrawal. A comparable 5-year CD at 4.00% in a taxable account, after paying federal tax on the interest each year, nets closer to $234,000. That is a $27,000 difference on the same deposit.
2. “Annuities are expensive” is wrong for fixed annuities
This is Ramsey’s most repeated criticism, and it reveals a blind spot. He is talking about variable annuities, which do carry layered fees: mortality and expense charges, subaccount management fees, administrative fees, and optional rider fees that can total 3% to 4% per year.
But a MYGA has zero annual fees. None. The insurance company makes money on the spread between what they earn on their general account investments and the rate they guarantee you. You pay nothing in explicit fees. The rate you are quoted is the rate you earn.
When Ramsey says “annuities are expensive” without distinguishing between variable and fixed, he is conflating two entirely different products. That is like saying “all cars are gas guzzlers” because a Hummer gets 12 miles per gallon.
3. “Mutual funds will outperform annuities” ignores the tradeoff
Ramsey’s go-to recommendation is growth stock mutual funds. He frequently cites 10% to 12% average annual returns. Leave aside that this number assumes full reinvestment of dividends and ignores taxes and timing, the deeper issue is that he is comparing the wrong things.
A fixed annuity and a growth mutual fund are not competing products. They serve different purposes in a retirement portfolio:
| Feature | Fixed Annuity (MYGA) | Growth Mutual Fund |
|---|---|---|
| Principal guaranteed? | Yes | No |
| Annual fees | $0 | 0.5% to 1.0%+ |
| Can you lose money? | No (barring insurer insolvency) | Yes |
| Tax deferral | Yes (built in) | Only in IRA/401k |
| Best for | Safe money (3-10 year horizon) | Growth money (10+ year horizon) |
Telling a 63-year-old to put their safe money into growth stock mutual funds because “they’ll average 12%” is ignoring the fact that a 40% drawdown in year two could force them to sell at a loss to cover living expenses. That is called sequence-of-returns risk, and it is the single biggest threat to a retiree’s portfolio. Fixed annuities eliminate it entirely.
4. “They lock up your money” applies to everything, including his advice
Ramsey criticizes surrender charges on annuities, typically 7% to 10% in year one, declining to 0% over 5 to 10 years. Fair enough. But consider:
- Bank CDs also charge early withdrawal penalties (typically 3 to 6 months of interest).
- Most MYGAs allow 10% penalty-free withdrawals annually starting in year one.
- Some carriers offer return-of-premium features with no surrender charge at all.
- Ramsey’s own advice locks up money too. He tells people to invest for the long term and never sell. How is a 5-year MYGA more “locked up” than “never sell your mutual funds”?
The surrender charge on a MYGA is a known, declining, transparent cost. A 40% market crash on a mutual fund is a surprise cost with no schedule and no floor.
5. His audience is not your audience
This is the most important point. Dave Ramsey’s core audience is people in their 20s, 30s, and 40s who are digging out of debt. His “Baby Steps” program starts with a $1,000 emergency fund and ends with paying off the mortgage. He is not talking to someone with $300,000 in a 401(k) rollover at age 63.
For his audience, he is right: a 32-year-old with $50,000 in student loans should not be buying an annuity. But extending that advice to a retiree who needs to protect a nest egg from market risk is a category error. The product is not wrong. The recommendation is aimed at the wrong person.
Where Dave Ramsey Has a Point
To be fair, not all of his criticism is wrong:
- Variable annuities are expensive. We agree. The fee layers on most VAs make them a poor choice for the majority of retirees. We rarely recommend them.
- Annuities sold through high-pressure tactics are a problem. The annuity industry has a sales-culture issue. Dinner seminars, scare tactics, and complex products pushed on people who do not understand them are real problems.
- Not everyone needs an annuity. If you have a pension, Social Security covers your basic expenses, and you have 20+ years before you need the money, a MYGA may not be the best use of your capital.
The issue is not that Ramsey is always wrong. It is that he applies a one-size-fits-all answer (“never buy annuities”) to a question that depends entirely on who is asking.
What Would Dave Ramsey Say About a MYGA?
Here is the thought experiment. Imagine a caller to the Ramsey Show:
“Dave, I’m 62, I just retired, and I have $250,000 in my IRA. I want to put $100,000 somewhere safe for five years. I’m looking at a MYGA paying 5.50% with zero fees. What do you think?”
If Ramsey says “stay away from annuities” to that caller, he is telling her to either leave the money in a savings account earning 3% or put it in the stock market where it could lose 30% in a downturn. Neither of those is a better answer for safe money than a guaranteed 5.50% with no fees and no market risk.
The MYGA is not competing with his mutual fund recommendation. It is competing with the CD, the money market, and the Treasury bond. And it wins on yield, tax efficiency, and cost.
The Bottom Line
Dave Ramsey is a gifted communicator who has helped millions of people get out of debt. His advice for young people in financial trouble is genuinely life-changing. But his blanket “never buy annuities” position does not account for the reality of retirement planning at age 60+, where protecting principal matters as much as growing it.
If you are in Ramsey’s core demographic, a 35-year-old paying off credit cards, listen to him. If you are a 62-year-old with a lump sum to protect, do your own research. Start by comparing what a MYGA actually pays today versus what a CD or money market offers, and make the decision based on numbers, not soundbites.
- Compare today’s best MYGA rates from 90+ top annuity companies
- Top 10 Best Fixed Annuity Companies (2026)
- What Suze Orman Gets Right (and Wrong) About Annuities
- Ken Fisher’s “I Hate Annuities” Campaign: What He’s Not Telling You
- Get a personalized MYGA rate quote
Frequently Asked Questions
Does Dave Ramsey say never buy an annuity?
Yes. Ramsey’s consistent position is that annuities are expensive, underperform mutual funds, and lock up your money. He makes a narrow exception for variable annuities, but only after all debt is paid, the home is paid off, and every tax-advantaged retirement account is maxed out.
Is Dave Ramsey right about annuities?
He is right about variable annuities being expensive. He is wrong about fixed annuities (MYGAs), which carry zero annual fees and currently pay 5% to 6.50% from top annuity companies. His advice is aimed at a younger, debt-focused audience, not retirees protecting a lump sum.
Are fixed annuities expensive?
No. A Multi-Year Guaranteed Annuity (MYGA) has zero annual fees, zero management charges, and zero expense ratios. The rate you are quoted is the rate you earn. Variable annuities are a different story, with total costs often reaching 3% to 4% per year.
What is better, a MYGA or a mutual fund?
They serve different purposes. A MYGA is for safe money you need to protect for 3 to 10 years. A mutual fund is for growth money you can leave invested for 10+ years. Comparing them head-to-head is like comparing a savings account to a stock portfolio.
Should retirees listen to Dave Ramsey about annuities?
Retirees should consider the source. Ramsey’s audience is primarily younger people in debt. His advice does not account for sequence-of-returns risk, which is the biggest financial threat facing retirees with lump sums. A MYGA eliminates that risk entirely with a guaranteed rate and no market exposure.
Sources & Citations
- Ramsey Solutions: What Is an Annuity?
- LIMRA: 2025 Final U.S. Retail Annuity Sales
- Investopedia: Sequence-of-Returns Risk
- AnnuityExpertAdvice: 9 Misleading Claims by Dave Ramsey
- AM Best: Insurance Company Financial Strength Ratings
Disclosures: Educational information only. Guarantees are subject to the claims-paying ability of the issuing insurer. My Annuity Store, Inc. is a licensed insurance agency. We may earn commissions when clients purchase products mentioned on this page.
