‘The Return Is Negative Right Now’: Retired Nurse’s Entire $450,000 Pension Trapped in Annuity With 11% Exit Fee

“The return is negative right now on these particular annuities.” That is how a caller named Crystal described her retired mother’s savings on a recent episode of The Ramsey Show, hosted by George Kamel and Jade Warshaw.

Her mother worked as a nurse for 30 years. She put her entire pension, about $450,000 about five years ago, into what she believed was an investment. It was a fixed annuity from a life insurance company.

Crystal said her mother is “locked in for like 12 years paying fees.” The surrender charge is 11% of $450,000. The contract guarantees only 87.5% of the premium. And the money is “basically all of my mom’s income.”

Walking away costs $49,500. Kamel said the seller likely “preyed on her fears of market volatility.” The S&P 500 was up about 13% for the year when the episode aired, and still up about 12% now. That gain alone would have covered the exit fee. Even the 10-year Treasury yields about 5%, while this “safe” product is losing money.

Hosts Got the Diagnosis Right, but Leaving Is a Separate Math Problem

Warshaw called it a stupid tax, which she defined as “what takes place when you make a choice without having all the information.” That conclusion is correct. A retiree’s only income source was tied up for over a decade in a product she didn’t understand.

Five years later, though, the original decision is a sunk cost. Dave Ramsey put it simply in an October 2026 episode: “When you wouldn’t buy it again for what you paid for it, it’s time to sell it.” No one would buy this annuity today. The question is whether paying to leave makes more money than staying.

That is a break-even calculation. Assume, as an example, the full surrender charge applies. She would leave with $400,500. If she moved it into Treasuries paying about 5% while the annuity earned nothing, she would recover the fee in roughly 2.4 years. Every year after that is money she would never have earned by staying.

The S&P comparison needs care. This year’s gain is hindsight. A retiree drawing all her income from stocks can be forced to sell during a crash, which is exactly the fear the annuity played on. Treasuries offer the cleaner comparison: guaranteed, liquid, and still far ahead of a negative return.

Your Annuity’s Credited Rate Decides Whether Leaving Pays

The single variable that matters is the gap between what the annuity credits and what the alternative pays. In the example above, the gap is 5 points, and break-even arrives in about 2.4 years.

Now suppose the contract actually credits 3% once fees and adjustments are applied (an illustrative figure). The gap shrinks to 2 points. Break-even extends to about 6 years. If her surrender charge drops sharply over that window, waiting could beat paying.

The alternative matters just as much. The national average 12-month CD pays under 2%. Park the money there and the exit fee could take far longer to recover than in Treasuries.

Five Steps Before Paying a Surrender Charge

1. Get the surrender schedule in writing. Ask the insurance company for the charge percentage for every remaining year, the current credited rate, and whether a market value adjustment applies. That adjustment often explains why a “fixed” product shows a negative value.
2. Check the free-withdrawal provision. Many fixed annuities allow about 10% of the value out each year without penalty. On $450,000, that would be $45,000 a year, enough to fund income or move money out gradually.
3. Run your own break-even. Write down the dollar surrender charge, the annuity’s real credited rate, and the rate on a Treasury you could buy today. If the alternative recovers the fee well before the charge runs out, leaving wins.
4. Protect the tax status on the way out. Pension money rolled into an annuity is usually tax-deferred. Use a direct transfer to an IRA rather than taking a check, which can trigger income tax.
5. Work with a fiduciary. Kamel recommended “an actual, credible financial advisor and not an insurance agent.” He also wanted her mother making moves “out of a place of strength and confidence,” so she doesn’t bail on the new plan the first time markets drop.

A surrender charge is a cost you can measure. Once you know how long the alternative takes to earn it back, you know whether to stay or go. Turning a lump sum back into reliable monthly income is its own project, and we laid out the mix, the payment calendar, and the withdrawal order in a free guide to the Paycheck Portfolio method.

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