Buy the Kind of Annuities Suze Orman Advises

Buy the Kind of Annuities Suze Orman Advises

If you’ve heard Suze Orman say she doesn’t hate all annuities, you’re right. Her stance is consistent:
use annuities to create guaranteed income you can’t outlive, avoid excessive fees and
complexity, and buy only what fits your plan—not what a salesperson pushes. Below is a practical,
client-friendly guide you can use to understand which annuities tend to fit that philosophy and how
to shop smart.

The Types That Typically Fit

1) Single-Premium Immediate Annuities (SPIAs)

• What they do: You invest a lump sum and receive a lifetime paycheck starting now (or within 12 months).
• Why they fit: Simple, transparent, and built for longevity protection—great for covering essential expenses
  alongside Social Security.

2) Deferred Income / Fixed Annuities

• What they do: Grow at a fixed rate and convert to income later (or allow scheduled withdrawals).
• Why they fit: Emphasis on safety and predictability; useful if you don’t need income right away but want guaranteed cash flow later.

3) Fixed-Indexed Annuities (with care)

• What they do: Link credited interest to a market index with downside protection.
• Why the mixed take: Can balance safety and some upside, but caps/spreads/terms can be complex. Buy only if you fully understand the mechanics and surrender schedule.

Approaches to Scrutinize (or Skip)

• Variable annuities in IRAs/401(k)s: Often high fees and redundant tax deferral if money is already in a tax-advantaged account.
• Overly complex indexed contracts: If you can’t easily explain the cap, participation rate, spread, and surrender terms, it’s probably not a fit.

How to Buy “the Suze Way”

1. Start with an income plan, not a product. Add up essential expenses (housing, food, utilities, insurance). Cover that base with guaranteed sources (Social Security + SPIA/deferred income annuity, if needed). Leave the rest invested for growth.
2. Compare quotes across multiple A-rated insurers. Payouts vary widely by age, rates, and carrier. Get side-by-side quotes and consider splitting among two carriers for diversification.
3. Read the fine print. Confirm surrender charges, free-withdrawal amounts, income options (life, period certain, joint life), and any inflation/COLA features. If fees or terms aren’t crystal clear, move on.
4. Match account type to tax treatment. IRA/401(k) purchases generally make payments fully taxable. Non-qualified funds often receive an exclusion ratio (part principal, part interest). Coordinate with your tax pro.
5. Avoid pressure. Take your time, sleep on it, and verify numbers. Annuities should reduce stress, not add to it.

Quick Checklist

• Do I need guaranteed income to cover life-long essentials?
• Have I compared SPIA/deferred income quotes from multiple A-rated carriers?
• Do I understand payout options, survivor benefits, liquidity, and any COLA?
• Am I avoiding high-fee, complex products I can’t explain?
• Do I know the tax impact for my account type?

Bottom line: follow a simple rule—use straightforward, income-oriented annuities to secure your base, and avoid paying for features you don’t need. Done right, an annuity can act like a private pension: a steady check that lets you live your plan with confidence.