The Ramsey Show Says Annuities “Make Sense for Almost Nobody.” Here’s Who the Rules Say Is the Exception

“Annuities make sense for almost nobody.” That line comes from a February 21, 2025 episode of The Ramsey Show called Money Is a Tool To Create a Life You Love. The hosts have kept repeating it to callers ever since. If you’re at or near retirement and considering guaranteed income, the question that matters is who fits inside the word “almost.” Federal tax law and the show’s own transcripts help answer it.

What Ramsey Show Callers Actually Heard

The caller said the money in her annuity had been sitting there “not earning anything at all.” The show answered: “Annuities make sense for almost nobody. And the only one that would even be okay in the Ramsey world if you really wanted to do it is a variable annuity. But even then, you’re better off investing.” It added that annuities “are used to prey upon people who are scared of the stock market” and that “there is actually more risk in missing out on the returns.”

In a July 17, 2025 episode, the show moderated its tone but kept the same conclusion: “Annuities are not evil. They’re not bad. The variable annuity is a mutual fund inside of an annuity.” The drawback it pointed to was access: “It’s very difficult to get to it inside of seven years.”

The message hasn’t changed in 2026. George Kamel told a couple considering a $250,000 annuity for long-term care that “If you invested 250 grand in the stock market for 10 years at 10% average return, you’d have $676,000.” Jade Warshaw spoke with a caller whose mother had locked $450,000 in a fixed annuity with high fees and an 11% surrender charge.

Why the Show’s Default Fits Most Savers

The show’s case rests on two things: liquidity and cost. The national average 12-month CD yield was 1.76% as of October 1, 2026. That’s a modest return, but a CD matures and the cash comes back to you. Surrender charges, by contrast, punish you for leaving early. Clark Howard warned listeners that annuity buyers can be “our prisoner for up to 15 years.”

The February 2025 caller also mentioned something important: “I’ll get a teacher pension as well, so that’ll help.” A pension is an annuity. She already had guaranteed lifetime income, so the show’s advice fit her situation.

Exception One: No Pension and a Real Fear of Running Out

Retirees without a pension usually have Social Security as their only lifetime income. After the 2026 COLA of 2.8%, the estimated average benefit for retired workers is $2,071 a month. If your essential bills cost more than that, the difference comes out of a portfolio that can run dry. An income annuity turns a lump sum into payments for life by pooling longevity risk across many buyers. A portfolio can’t do that on its own. Wes Moss, speaking on The Clark Howard Podcast, cited research finding that “having more of your money in the form of income rather than assets seems to give retirees a license to spend.” Even the show leaves room for this case: “You don’t need to be in annuities unless you’re just scared to death or something.”

Know what stands behind the word “guaranteed.” The payments are only as good as the insurer’s claims-paying ability, and state guaranty association limits vary by state. Before buying, compare an annuity with delaying Social Security, which raises a lifetime benefit that gets COLA increases. On taxes: if you buy with nonqualified (after-tax) money, the part of each payment that represents your own investment is excluded from income under 26 U.S.C. § 72(b)(1). That exclusion ends once your full investment has been recovered, under § 72(b)(2).

Exception Two: Retirees Who Sell When Markets Drop

Kamel’s $676,000 projection assumes the money stays invested for the full decade. If you sold during a past crash and missed the recovery, you may never earn that average. Covering fixed expenses with guaranteed income can make it easier to leave the stock portion of your money alone. Kamel has said annuity sellers “preyed on her fears of market volatility.” That fear is real for some retirees. The question is whether a simple income annuity, sized to cover the gap, actually addresses it, or whether a complex product is being sold as a substitute for stocks.

Exception Three: Big Traditional IRAs and the QLAC

Under 26 U.S.C. § 401(a)(9)(A), distributions from retirement accounts must start by the required beginning date. Publication 590-B (2025) applies the age 73 rules to people who reach age 72 after December 31, 2022. If you take less than the required amount, § 4974(a) charges a tax equal to 25% of the shortfall.

A qualifying longevity annuity contract (QLAC), defined in 26 CFR 1.401(a)(9)-6(q), is a deferred income annuity held inside an IRA or plan. Payments can start as late as age 85 (as adjusted), according to 26 CFR 1.6047-2(b)(1). Money moved into a QLAC is left out of the balance used to calculate RMDs until payments begin. That lowers required withdrawals in your early 70s and funds income in your late 80s. Premiums are capped at an indexed limit, so check current-year IRS guidance. Each year, the insurance company must report the contract’s premiums and fair market value under 26 CFR 1.6047-2(a)(2).

Who Should Follow the Ramsey Rule, and Who Is the Exception

For most savers, the show’s advice holds up. It fits you if you have a pension, are still building savings, can sit through a bear market without selling, or are being sold a product with a long surrender period as a “safe” alternative to stocks. The exception is narrower but real. It covers retirees with no pension whose essential bills are higher than their Social Security check, retirees who have sold during past downturns, and people with large traditional IRAs who want to push some RMDs late into life. For them, a simple income annuity or a QLAC sized to the gap is worth pricing, after checking the insurer’s strength and their state’s guaranty limits. Two things to watch: the 3.6% COLA for 2027, which changes how big your income gap is, and the IRS’s next QLAC premium limit.

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