Dave Ramsey Is Wrong About Fixed Index Annuities

[@missouri6014]

Excellent excellent commentary. And you were 100% correct in your analysis of Dave Ramsey when it comes to annuities I have over a half $1 million into two separate fixed index annuity’s. I watch Dave Ramsey over the last 20 years and I watch your station as well But just like the things that you say about Dave Ramsey not knowing or understanding I could say the same things about you when you bash Dave Ramsey so that’s why it makes it so confusing out there as to what to do. But on this one you are 100% right I use the fix index annuities as my bond alternative and then I have, a little over 300,000 into growth ETFs. And by the way I was able to figure out the mutual funds that Dave has and although they have been good, they are certainly not the best or near the best and they are high cost and perhaps that would be a great video for you to do I look forward to your videos every week with her. I agree with him or not so thank you.

[@markmedley6849]

What Mutual Fund does Dave have?

[@missouri6014]

@@markmedley6849 ask KZbin, what mutual firms does Dave Ramsey have And it will tell you

[@CoffeeBreakSomewhere]

Have you heard of SCHD.. That's where your annuity money should have went

[@bman6502]

I put $330k into an annuity back in 2010. It’s now at $696k and I just triggered the lifetime income which I received $3k per mth ($36k/yr)… it includes a rider for my wife. Between the two of us, we’ll receive steady monthly income for the next 30+ yrs.. I realize I could have potentially made more by investing that $330k, but I have other investments in the market.. I got the annuity so as my wife and I get older, between SS and the annuity, we’ll have a base income that is not market driven… I think it’s important to have some portion of your retirement income stable regardless of market volatility..

[@dustinw471]

Is the FIA cap rate a fixed rate? Say I find an FIA with a 7% cap rate and its a 7year contract. Is that 7% cap only for the 1st year and then they can change it on me? What specific insurance companies do you recommend shopping when looking for an FIA?

[@DavidMcKnight]

Yep caps can change. And which annuity you should get depends on what you want the annuity to do for you.

[@levargwilson]

I appreciate your great "nuggets". There are so many that blindly follow the Ramsey philosophy in error.

[@DavidMcKnight]

Thanks!

[@144Donn]

What percentage of finances should be in a Annuity? I heard a limit of about 25%. Thx

[@DavidMcKnight]

Two approaches: you can convert your age to a percentage (say 60% if you’re 60) and make the annuity the bond portion of your portfolio or you can use the annuity as a way to bridge your income shortfall.

[@4378200]

​@DavidMcKnight what this offer of a bonus if I enroll into an annuity ($30k) the guy says it will be deposited into my account less the tax requirement. I'm 68...he says my money in the Vanguard IRA is at more of a risk. We/Vanguard just balanced my account 50/50 stocks/bonds. I was originally 85% stock. Not sure what to do right now. I have other accounts stocks ACORN accounts...

[@SBqwerty]

I agree annuities are not comparable to stocks (esp ones with a floor). The comparison to bonds is also problematic though because bonds are liquid vs annuities not so much. During the distribution phase of retirement accounts bonds can be rebalanced with, for example, indexes in a 3 fund portfolio. Given that, we should discuss annuities on their own merits and the fee structure they come with. If, for example, the financial advisor is paid 3% of assets per year (making this up) it almost surely rules out that annuity being a viable financial product, even adjusting for the lower longevity risk.

[@DavidMcKnight]

Research some of the academic studies on annuities with no fees. There’s reams of evidence that show how they extend the life of your investments and increase your income over the stock market approach alone. It’s not useful to throw up the straw man of 3% fees.

[@randallmadison9910]

​@DavidMcKnight Overwhelming research shows otherwise. Is it possible that most academics are wrong? Possible. Also, highly unlikely.

[@jd4504]

A percentage of most annuities have a minimum 10% liquidity. Plus if you are only using this as a bond alternative and you have a 60/40 portfolio. 60% stocks 40% bonds. Then you have the majority of your assets liquid thus the liquidity shouldn't be an issue. If liquidity is an issue then there are annuites that are liquid some with a fee others allowing you to give up the gain to get back your principal. Bottom line annuities are a great bond alternative.

[@wesleyhempoli5548]

@@randallmadison9910 it's not possible for results to be wrong, though

[@paulbrungardt9823]

Whenever someone comes to you, to sell you something, he is there for his financial benefit. Any college dropout can sell insurance. Buy term insurance and invest the difference in S & P 500. Every 10 year period will have a down market. That would be a good time to buy, buy, & buy !

[@tomm.3994]

Dave Ramsey has some good insight but he’s not the end all. There are some many ways to do things to save money and increase your wealth

[@beerbrewer7372]

I am the first to admit that I'm very ignorant on all things financial. However I will say this: *Don't ever* take advice about a product from the person selling that product. I am a big fan of Vanguard and Fidelity. But I'm just a mechanic so the hell do I know?

[@empty_melodies]

I would tweak your advice a little bit and say: Don’t *only* listen advice from *one* seller. As you mentioned, if you’re ignorant, then you do need professionals’ opinions to guide you. Highly recommend to find a licensed financial professional you trust but also research from _multiple_ experts.

[@beerbrewer7372]

@@empty_melodies Well said sir.

[@SteveLietz]

Simple perfect advice: Never, NEVER, EVER under any circumstances, buy an annuity. There is NEVER a circumstance where this is your best investment option.

[@DavidMcKnight]

This is strongly contradicted by reams of academic studies over the last four decades.

[@WWIIPacificHistory]

It’s insane that this foremost financial expert is completely clueless on the options strategy that indexing utilizes to protect the downside of pseudo market participation! It actually really makes me upset that as famous as he is he doesn’t know this!

[@DavidMcKnight]

It is baffling.

[@macharper8214]

If index annuities had a floor of 5% then we would all be in index annuities. They don't even have a cap usually of 5%.

[@jd4504]

You're speaking in generalities there is currently a product that I know that has a 4% floor and a 10% cap. You get the better of the two either the 4% floor or higher. To be clear this is a newer product that was introduced after this video ran.

[@4378200]

Should I buy an annuity with my IRA? He wants all of my over $200...just made Vanguard my financial advisor...

[@DavidMcKnight]

It just depends on your situation.

[@ChrisSmith-zs9pk]

very pro annuity.take with a grain of sand. His book is disappointingly skewed and misleading .

[@DavidMcKnight]

In what way?

[@thedude5040]

Eh pass. Im keeping my $250k retirement in all stocks and $30k emergency cash savings in money market. I'm 30 years old now maybe in another 30 years I'll give annuities another look. Edit by all stocks it is a mix of single stocks, etfs, and mutual funds

[@DavidMcKnight]

Yes, smart move based on your age.

[@Dempsey222]

Dave Ramsey has an agenda and many times it is not in the best interest of the retail consumer.

[@davidmcknight8201]

If you have a ton of debt, he's your guy. But if you're a sophisticated investor, much of his advice doesn't apply.

[@Dempsey222]

@@davidmcknight8201 He is just another Jim Cramer. Most of his content is filler and meant to help the corporation not the consumer.

[@davidmcknight8201]

@@Dempsey222 That's definitely part of it. He does have good stuff for those in debt. Otherwise, duck and cover.

[@HungNguyen-se8dn]

Fixed annuities have no fees❤

[@SBqwerty]

@@HungNguyen-se8dn they have commissions paid to the seller, which while not a "fee" is a drag on returns just the same.

[@RobbyJakar]

Doesn’t Ramsey have an outstanding litigation against him on something? Or recently settled something? His advice is faulty at best and downright detrimental at worst. The only thing he has right is budgeting tips and tricks. Beyond that, people need to “graduate” to the Power of Zero paradigm.

[@DavidMcKnight]

Agreed.

[@livingtruth2374]

So Dave Ramsey has a problem with an annuity agent earning a one-time commission? What does he think goes on with mutual funds? The broker typically earns at least 1% forever, which comes directly out of the client's account, every year. So if you have 1 million in mutual funds, you're paying the broker at least $10,000 a year out of your own money! And he's implying that this annuity commission is a "fee" which it is not - it is paid from the operations of the general company and does not come from the client account. Big difference. And does he not think that wealth managers are driven by the money? If their client portfolio has $100m, they earn $1m a year just getting up in the morning. And don't give us this stuff about doing it all yourself and no-fee mutual funds. The vast majority of working professionals don't do that because they simply haven't got the time while balancing a full-time career of their own, family, and other responsibilities. Mutual fund investing is good, but it's only one part of the equation, and certainly not the foundation.

[@FinancialGuyLou]

I showed this clip months ago to my entire group. We listened to the entire call and we were totally looking at each other in bewilderment. Another thing to point out, this caller called the show close to the end of 2021. We all know what happened there. The market was great! We were at the end of the bull run. What happened in 2022? The market went down 20% and this caller lost 20% of what was in his 1.4 million dollar retirement account. Way to go Dave Ramsey! Sound advice 😂😂

[@davidmcknight8201]

Great comment.

[@thedude5040]

My all stock portfolio made 11% in 2022 and 85% in 2021. I think everyone praising index annuities is full of horse dung

[@DavidMcKnight]

@@thedude5040 why? They perform better than bonds over time and eventually you WILL need bonds as part of your portfolio unless you’re never planning on retiring.

[@hwan88]

You can’t look at two years of market performance and declare an annuity a better investment. If your objective is growth, is there any circumstance that an annuity is better for you than an s&p index fund?

[@hamptonslegacy9512]

Dave never seems genuine to me. He's always felt like a straight face lier. If we have good products we shouldn't have to bash others to make a sale

[@empty_melodies]

Underrated comment.

[@kevinedward4195]

Fixed index annuities are a shell game. Yeah, you won't lose money, but note they won't tell you the minimum lowest rate you will obtain. You might earn 0%, but yeah you didn' lose money, but then again you did, because inflation and loss of income hits you. The upside is throttled. Never use an index annuity.

[@DavidMcKnight]

You ignore the reams of studies from Nobel laureates that demonstrate how FIAs give you superior returns to bonds with less risk.

[@kevinedward4195]

@@DavidMcKnight You make my point exactly. When it takes a paid Nobel Laureate to explain how a Fixed Index Annuity even works, and what the actual returns even are, -you know it is a complicated shell game. Most people can't even wrap their heads around how they work, but instead depend on unrealistic sales pitches. The FIA sales illustrations assume that the current cap, participation rate, trigger rate, or other index rates stay constant in the projection. The reality is that the rates are only guaranteed for an initial period (often one year), and they are reset on a regular basis thereafter -all at the whim of the insurance company.

[@DavidMcKnight]

So pick a company that has a track record of maintaining consistent levels of fees. It take some homework but it’s not hard to do. And Nobel Laureates opine on lots of things, including traditional stock market investing. Does that mean I shouldn’t invest in my 401(k)?

[@MaryLeonard-mj9ng]

@@DavidMcKnight The point is that sales people LOVE FIA because it is a shell game with a VERY complex product for which they can often count on consumer confusion to steer someone into a very profitable contract (profitable for the insurance compamny and salesperson). YOU ARE A SALES PERSON who makes money hustling people, find a life where you can look yourself in the mirror without seeing the people you screwed into a FIA. By all means invest in 401k, and use a free fidelity account, with a ton of simple easy to understand investment products with no fees that go to salepeople like YOU.

[@DavidMcKnight]

Actually, salesmen who sells FIAs make substantially less than, say, Ken Fisher does managing your investments over time. If that’s the main backbone of your argument then maybe re-evaluate your syllogism.