The Framing
Search for annuities online and you’ll find two extremes: someone trying to sell you a new one, or someone telling you the one you have is a disaster.
Neither is particularly helpful if what you actually want is an honest answer.
The truth is simpler than either side makes it sound. Some annuities are doing exactly what they should. Some aren’t. And many people have no idea which camp they’re in — not because they’re careless, but because no one ever explained it to them in plain English.
We sat down with Bill Aldrich, founder of AnnuityMax, to walk through what a healthy annuity actually looks like, what the warning signs are, and what you can do right now — even before talking to anyone — to get a clearer picture of where you stand.
Q: Let’s start with the good news. When you review an annuity and determine it’s solid — what are you seeing that tells you it’s working?
Bill Aldrich: The big thing is that it should be doing what it was designed to do.
If an annuity is supposed to provide guaranteed income and stability, and it’s doing just that — there’s no need to change. If it’s meant for guaranteed growth, and it’s delivering on that — it’s doing its job.
Could you always find an annuity with a slightly higher rate? Maybe. Could the insurance company behind it have a slightly better rating? Sure. But even in those scenarios, I wouldn’t recommend moving anything. Money in motion causes fees, new commissions, and new surrender periods in most cases. I couldn’t recommend that for a marginal improvement.
You wouldn’t close your bank account and move across the street for a 0.05% higher CD rate. If the engine is running fine, don’t take it apart.
If an annuity is aligned to its goal and performing its specific task, it’s working. Leave it alone
Q: Now flip it. When something IS wrong, what are the red flags?
Bill: It’s the opposite of everything I just described. We’re looking for annuities that are not aligned with what the client’s goals and those funds’ goals actually are.
If you’re looking for growth, a fixed annuity or fixed indexed annuity is probably not the best place for you. If you’re looking for guaranteed income, stocks may not be the best place either. The product needs to be aligned with your goals and strategy. When something doesn’t line up, that’s an immediate red flag.
Q: Can you give a specific example of what misalignment looks like in practice?
Bill: When I purchased a retiring advisor’s book of business, it was 100% annuities — mainly fixed indexed annuities. The majority of those clients were still working and actively saving for retirement. They were locked into products that I would typically use for guaranteed income or as an alternative to CDs. These are people who should have been in growth mode, and instead they were trapped for ten-plus years in contracts completely misaligned with their goals.
I see a similar pattern with my Clark County School District clients. A lot of them ended up in variable annuities inside their 403(b) plans. A variable annuity is one of the most inefficient ways to pursue growth. We can match them with the same style of investment lineup for usually about a third of the price.
This isn’t about one product being better than another. It’s about alignment. Different products are strong in different areas. The job is making sure the client is in the right one for what they’re actually trying to accomplish.
Q: What about the stuff buried inside the contract that people don’t even know they’re paying for?
Bill: Riders — or better said, unused and unneeded riders — are one of the most common mistakes I see with annuities.
And I want to be clear: riders, especially guaranteed income riders, can be fantastic tools in income planning for retirement. I have dozens of cases — probably more — where clients have used income riders with great success, providing lifetime income and real certainty.
The problem is when you see these expensive riders attached to contracts way before their intended use date, or with no real purpose at all. They can be complicated and very expensive — some as high as 2% or more annually.
Imagine paying a 2% “tax” every year for two decades on a feature you don’t understand and never intended to use. That’s not just a line item on a statement — that’s money that should have been compounding for your retirement.
I see people paying for riders for years without ever using them more often than I see riders actually being used for their intended purpose. That’s a major drag on returns, and in many cases the rider can simply be dropped.
Q: If someone reading this wants to do a quick self-assessment of their own annuity — not a full review, just a gut check — what should they look for?
Bill: Three things
First, make sure it’s in line with your goals and intentions. No one knows this better than you. Is your annuity providing income as it should? Is it providing guaranteed returns as it should? Just double-check that it’s doing its intended job.
Second, look for any unused riders. This will be a major drag on your annuity’s returns and it’s usually easy to evaluate whether they’re needed or not. In many cases, a rider can just be dropped.
Third, make sure you understand what you’re looking at and what the product is doing. If you see a statement with caps, spreads, and indexes you’ve never heard of — surrender charges and terms that read like a different language — you should probably have a review. Even with your current advisor. You’ve invested in this product and trusted it to get you to and through retirement. You deserve to understand it.
Those three things would be my main focus. The exact funds or saving 0.10% on M&E charges won’t have the same long-term effect as misalignment, unused riders, or the confidence you gain in understanding what you’re invested in. Start there.
Q: When someone goes through a review and finds out their annuity is fine — what does that moment look like? And what about when the news isn’t as good?
Bill: It’s always nice to give someone good news. “Hey, this policy is great. You’re doing a great job. Things are on track.” That’s a relief.
But here’s what surprised me early on: a lot of the reactions when we find something wrong are the same. Relief.
The clients coming in for reviews usually have some concerns or they’re looking for a better understanding. They didn’t know the options. I was shocked by this reaction at first. But when you show someone they’re a bit off track and then show them how to fix it — in a way they understand and feel good about — there’s relief. They finally have confidence in their plan.
The anxiety was never really about the annuity being good or bad. It was about not knowing.
Q: Last question. If someone reads this and walks away without doing anything else — what do you want them to take with them?
Bill: I’m not here trying to call certain products, riders, or advisors bad. Things get misaligned. Goals change. Circumstances change. That’s normal.
What I’d like to see is more people thinking about annuity reviews — and financial reviews in general — the same way they think about a checkup with their doctor or an annual visit to the dentist. It doesn’t have to be a sales meeting. It doesn’t have to mean something is wrong. It’s maintenance on something important.
You work hard for your retirement and investments. They deserve the same respect as your health and the other things in your life you take care of regularly. Whether that review happens with your current advisor, through a self- assessment, or with me — I’d be thrilled to help personally — the most important thing is the habit. Stay educated. Stay on track.