Disputing Dave Ramsey’s View on Fixed Equity Indexed Annuities

There is no question that Dave Ramsey has some great financial advice and has helped countless people live debt free and financially secure lives.  But his view on annuities is too far-fetched; just because annuities aren’t best for some people he assumes they aren’t good for anyone.  Annuity Think Tank published a great rebuttal to Dave Ramsey’s sweeping generalization of fixed and fixed equity indexed annuities.  Dave Ramsey says that he doesn’t have any annuities and because of this, no one should buy annuities.  Every reputable annuity company and insurer out there is quick to say that annuities are not the best product for everyone, but they are a great product for many people.

Ramsey says that you simply should never buy a fixed annuity.  Annuity Think Tank gave a stellar example of two investors who had $100,000 to invest from 2000 through today.  The investor who had their money in an S & P 500 index from October 2000 through October of this year would have $90,000 right now.  That scenario doesn’t sound very good.  But the investor who bought a 10-year fixed annuity in 2000, with 7% guarantees which were the norm, would have $196,000 right now.  That sounds a lot better to me.  While you may not get the highest returns in a really up market with annuities, you are protected from losing money in a down market and I think that is worth a lot.

In regards to fixed equity indexed annuities, Ramsey says that no one should purchase them and those who want to invest in an index should invest directly in that index.  That argument was already refuted with the above example of investors who would have $90,000 or $196,000 for their invested $100,000 twelve years later.  We agree that annuities are not the best product for every single person.  But we strongly disagree with Dave Ramsey, who says they are not the right product for anyone at all.  We have to agree with Annuity Think Tank on this one.

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