Why does Dave Ramsey not like annuities?

Dave Ramsey generally dislikes annuities, especially variable and indexed ones, for a few core reasons. First, high fees: many annuities carry hefty commissions, surrender charges, and management costs that eat into returns.

Second, complexity: contracts often bury restrictive terms and penalties in fine print that buyers don’t fully understand.

Third, mediocre returns: he argues that historically, mutual funds invested in good growth stock funds outperform annuities over the long run.

Fourth, liquidity: many annuities lock up your money for years, with steep penalties for early withdrawal.

Ramsey typically recommends maxing out retirement accounts like 401(k)s and Roth IRAs first, and only considers annuities in narrow situations, such as someone who’s already maxed out other options and wants guaranteed income.