If you are nearing retirement, there is a good chance someone has tried to sell you a variable annuity inside your IRA or 401(k), usually wrapped in language about “guaranteed” 5% or 6% income for life.

Suze Orman has a simple response to that pitch.

On a recently posted full episode of “The Suze Orman Show,” she told viewers she has “not liked variable annuities from day one,” especially when advisors want to buy them inside retirement accounts that are already tax-deferred.

She walked through how these products are sold, what the guarantees really cover, and why she believes this move is one of the most expensive “safety plays” you can make with your retirement money.

Suze Orman says this retirement mistake could be draining you.

The retirement move Suze Orman wants you to avoid

Orman’s main concern is not the existence of variable annuities. It is the specific move of taking pre-tax retirement money and moving it into one of these insurance contracts.

In the episode, she described a common pattern: Investors in their 50s or 60s are told they can “never get less than what [they] originally put in,” with a promise of 5% or 6% income and market participation. She reminded viewers that variable annuities are contracts with insurance companies that invest your money in subaccounts that look a lot like mutual funds, with values that go up and down.

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“The contract guarantees to pay you what that contract is worth at the time that you die, or at least 100% of what you put into the contract,” Orman said, explaining that the protection is tied to the annuitant’s death benefit, not an everyday account floor.

She then added the line that has become her shorthand critique of the product.

“You will never get less than what you originally put in. Now that is true, but you have to die for that to be true,” she told viewers.

Variable annuities: double tax deferral, real-world fees

The other part of Orman’s warning regarding variable annuities concerns taxes and fees.

A traditional IRA or 401(k) already allows your investments to grow tax-deferred until you withdraw the money in retirement. Variable annuities offer their own tax deferral, with earnings taxed as ordinary income when you take them out.

“It makes no sense to put a tax-deferred investment in a tax-deferred vehicle,” Orman said on the show, arguing that the structure adds cost without adding tax benefits when used inside an IRA or 401(k).

In a “Suze School” podcast episode from 2024 called “Understanding Variable Annuities,” she said the mortality charge for the death-benefit guarantee typically runs from about 1.2% to 1.5% a year, before investors even get to fund expenses and rider costs.

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The Securities and Exchange Commission makes a similar point in its investor bulletin on variable annuities, noting that tax deferral is a key feature but that “the benefits of tax deferral will outweigh the costs” only if you hold the product as a long-term investment and weigh the fees carefully.

On her podcast, Orman contrasted that structure with low-cost mutual funds and ETFs, saying that long-term investors are often better off in simple, diversified portfolios than in high-fee contracts.

Financial advisors have sales incentives for recommending annuities

Orman also focused on the incentives behind the recommendation to invest in variable annuities.

On the TV episode, she told viewers that advisors selling variable annuities often earn commissions in the “4, 5, 6, 7%” range on the money they move into the contract. She added that many advisors are “worth their weight in gold” but said a recommendation to put your retirement-account money into a variable annuity is a sign that you may not have found one of those planners.

Fee-only planners have been making similar arguments for years.

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In a column titled “9 Reasons You Need To Avoid Variable Annuities,” published on Forbes, financial planner Allan Roth wrote that these products “were designed for one purpose only… to profit the financial advisor selling those variable annuities,” pointing to high commissions and complex features that are hard for clients to evaluate.

Suze Orman ran the numbers for one caller on her “Women & Money” podcast, according to Yahoo Finance. She determined that staying in a high-fee variable annuity through the full surrender period could cost more in ongoing quarterly charges than paying the surrender penalty and getting out early.

In that case, Orman recommended surrendering the annuity and redirecting the funds into more straightforward investments, reflecting the same logic she applied on her show.

How Orman wants you to invest instead

Orman is not telling you to avoid investing. She is telling you to be very selective about the wrapper you use. In the episode, she listed the kinds of holdings she prefers to see in retirement accounts for most everyday investors.

  • Individual stocks that pay reliable dividends, for people comfortable with stock risk and willing to do the homework
  • Exchange-traded funds that track broad indexes or dividend-focused baskets, with low ongoing expenses
  • Certificates of deposit and insured savings for money that needs to stay very safe or will be spent in the near term
  • A modest slice of gold or similar hedges, if that fits your risk profile and longer-term plan

On her “Annuities in Retirement Accounts – I Don’t Think So” episode, she spelled out her bottom line this way: There’s “absolutely no sense” in owning a variable annuity inside a retirement account, and in her view, investors are “far better off” using those accounts for simple diversified funds.

Regulators back up part of that logic. If you already invest through a tax-advantaged plan such as a 401(k) or IRA, “you will get no additional tax advantage from the variable annuity,” both the SEC and Investor.gov websites note.

This is a reminder that any benefit has to come from the contract’s insurance features, not its tax status.

Ask these questions before agreeing to an advisor’s annuity pitch

If an advisor is asking you to sign variable-annuity papers with IRA or 401(k) money, Orman would want you to slow the conversation down. Here are the questions she effectively pushes viewers and listeners to ask, based on her TV episode and recent podcasts:

  • Is this money already in a tax-deferred account, such as a traditional IRA, Roth IRA or 401(k)? If yes, what exactly does the annuity add besides layers of fees and restrictions?
  • What is the total annual cost, including mortality and expense charges, administration fees and underlying fund expenses, expressed in a single percentage and a dollar amount?
  • How long is the surrender period, and what are the surrender charges if you need to get out early?
  • What is guaranteed, and under what conditions: Is it a death benefit, a living-benefit rider, or a guaranteed minimum income stream, and when does each apply?
  • How is the person selling this compensated, and how large is the upfront commission on your money?

In one call-in segment, Orman told a viewer in her mid-30s who was being urged to roll about $50,000 of retirement money into a variable deferred annuity with a 5% guaranteed minimum income benefit rider that she should “find [herself] a new financial advisor.”

She repeated the “are you kidding” reaction she often uses when variable annuities come up, then reminded viewers that they can buy exchange-traded funds, corporate bonds, and dividend-paying stocks inside IRAs without paying for complex insurance wrappers.

For Orman, the real retirement mistake is not owning stocks, or wanting income, or even considering lifetime-income products.

The blunder is letting a desire for safety push you into a high-fee, hard-to-understand contract that lives inside an account that already gives you the main benefit the product is supposed to deliver.

Orman’s advice, in this case, is as much about saying “no” as it is about what you buy next.

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