Is an Annuity Right for You? 7 Questions to Ask First

Annuities are not right for everyone, and they are not wrong for everyone either, despite how confidently either side of that argument tends to get presented online. Instead of a verdict, here are seven honest questions worth answering yourself before you decide either way. (For the fuller, situation-by-situation version, see When an Annuity May Not Be Right for You.)

1. What specific problem am I trying to solve?

"Running out of money" points toward an income annuity. "I don't want to lose principal in a downturn, but I'd like some growth" points toward a fixed indexed annuity. "I just want a safe, known rate" points toward a MYGA. If you can't name the specific problem, that's worth figuring out before the product conversation.

2. Do I have enough liquid savings outside of this money?

Annuities generally restrict access to the full amount during a surrender period. If this money is your only cushion for emergencies, that is a real constraint to flag before committing a large sum.

3. How much guaranteed income do I already have?

Social Security and any pension already provide a guaranteed income floor. The less of that floor you have, the more an income annuity might be worth considering to fill the gap.

4. What is my actual time horizon for this money?

Money you won't need for 10+ years has more room to ride out market swings. Money you might need in the next few years benefits more from principal protection, whether that comes from an annuity, a CD, or simply cash.

5. Am I comfortable with reduced liquidity in exchange for a guarantee?

This is the trade-off at the center of every annuity type. If reduced access to a lump sum would cause real stress, that discomfort is useful information, not something to override with a sales pitch.

6. Is anyone pressuring me to decide quickly?

Legitimate guaranteed-rate offers do not usually require a same-day decision. Pressure to sign quickly is a reason to slow down, not speed up.

7. Have I compared this to the alternative, in writing?

Whether the alternative is a CD, staying invested, or simply doing nothing yet, ask for the actual numbers side by side. A good advisor should be comfortable putting a real comparison in front of you rather than just a single recommendation.

If you answered honestly

Walking into an advisor conversation already having thought through these seven questions means you will get more out of that conversation, and it will be harder for anyone to steer you somewhere that doesn't actually fit. That is the whole point of asking them first.