When it comes to retirement planning, many savers consider annuities as a way to secure guaranteed income. But on a recent episode of her "Women & Money" podcast, Suze Orman made her position crystal clear: for some investors, annuities simply don't make sense.
A Listener With $2.3 Million Asks About Annuities
The conversation began when co-host KT, read a question from a listener named Michelle. At 50 years old, Michelle is single, child-free, and financially secure. She owns her home outright and has amassed $2.3 million spread across brokerage accounts, a 401(k), IRA, and Roth IRA.
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Her specific question: would it be smart to use about $700,000 from her brokerage account to buy an annuity, either for tax purposes or for retirement income?
Before KT could finish reading, Orman jumped in: "No, no, no."
Why Orman Strongly Opposes Annuities
Orman explained that for someone in Michelle's position, an annuity doesn't serve the purpose she hopes it will. "It never makes sense for tax purposes," she said.
Instead of locking money into an annuity or insurance-based investment product, Orman encouraged focusing on other strategies. She suggested continuing to invest in dividend-paying stocks, growth stocks, or value stocks. These, she explained, allow money to compound over time while keeping capital gains tax treatment intact if investments are sold later.
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She was equally dismissive of using annuities as an alternative to real estate investments. Rental properties or real estate investment trusts, while taxable, still provide income opportunities without the restrictions of insurance-based products.
"You have to understand that on no level do I want you to touch an annuity, to touch any type of life insurance policy or any insurance investment," Orman said. "It makes no sense. Do you hear me? That's it, period."
Alternatives Orman Suggests
Rather than worrying about taxes through an annuity, Orman advised looking into other income-generating investments. Options she mentioned include:
- Municipal bonds – which often provide tax-free income.
- Dividend-paying stocks – for steady income potential.
- Continued market investing – using a disciplined strategy like dollar-cost averaging.
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Her point was that Michelle's wealth allows her to remain flexible with investments without needing to tie up a large portion of her money in an annuity.
"Over My Dead Body"
Orman punctuated her advice with one of her signature bold statements. "You are not going to do this over my dead body," she said, adding with a laugh, "and as you can tell, my body is not dead."
For Orman, the message was clear: Michelle already has a strong financial foundation and should avoid annuities altogether. Instead, she should keep her money growing in taxable and tax-advantaged accounts, while using other investments for income when needed.
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