Annuities tend to spark strong opinions — and a lot of confusion. But when you strip away the noise, annuities are simply insurance contracts designed to help create predictable income, often for life. A recent Kiplinger piece highlighted several common myths that keep people from evaluating annuities clearly. Here’s what Jacobs Financial Services wants you to know — and what to ask before you decide if an annuity belongs in your plan.
Myth 1: “Annuities are too complicated”
Reality: There are multiple types of annuities, which can make the category feel overwhelming. But the core concept is straightforward: you purchase an insurance contract that can provide income for a period of time or potentially for life.
Jacobs Financial Services take: Complexity isn’t a reason to avoid an annuity — it’s a reason to slow down. If an annuity is being recommended, you should be able to explain (in plain English) what it does, what it costs, and what you’re getting in exchange.
Myth 2: “Annuities are bad investments”
Reality: Annuities aren’t designed to be “investments” in the same way stocks or mutual funds are. They’re insurance tools that can help address retirement risks — especially around income stability and longevity.
Jacobs Financial Services take: If you evaluate an annuity only by whether it beats the market, you’re grading it on the wrong test. A better question is: Which retirement risk is this solving? (Income predictability? Market volatility? Outliving your savings?)
Myth 3: “You’ll lose all access to your money”
Reality: Many annuities offer withdrawal features, but access can come with guardrails. Depending on the product, there may be surrender charges for early withdrawals, and taxes and penalties may apply if money is taken out before certain ages.
Jacobs Financial Services take: This myth persists because liquidity varies widely by product. A smart plan usually includes keeping enough cash reserves and liquid investments outside the annuity so you’re not forced to tap a contract at the wrong time.
Myth 4: “Annuities are only for the wealthy”
Reality: Annuities aren’t exclusively for high-net-worth households. For many retirees, the appeal is simple: turning part of a nest egg into an income stream that’s easier to count on.
Jacobs Financial Services take: For many families, the question isn’t “Is this fancy?” — it’s “Does this help cover essentials?” If reliable income helps you feel confident about your retirement budget, an annuity may be worth evaluating.
Myth 5: “Annuities don’t make sense in today’s economy”
Reality: In uncertain markets, guarantees can be valuable. Certain annuity structures may offer ways to participate in market-linked growth with limits, while still emphasizing income stability and protection features.
Jacobs Financial Services take: The right question isn’t whether annuities make sense broadly — it’s whether a specific annuity makes sense for you, given your timeline, income gap, other guaranteed income sources, and need for flexibility.
The bigger point: What annuities can actually do
Annuities are often used to address a very real retirement concern: outliving your savings. In the right situation, they can help create a paycheck-like income stream and add predictability to a retirement plan.
At Jacobs Financial Services, we often describe annuities as one possible piece of an overall strategy — particularly when a client values:
- Predictable retirement income
- Reducing the impact of market volatility
- Longevity protection
- Coordinating multiple income sources (Social Security, pensions, and portfolio withdrawals)
What to review before buying any annuity
Not all annuities are built the same. Some are relatively simple. Others may include layers of costs and restrictions such as surrender schedules, insurance charges, administrative fees, and optional riders. The goal is not to assume “good” or “bad,” but to understand the trade-offs.
Before committing, make sure you can clearly answer:
- What problem does this annuity solve in my retirement plan?
- What are the fees, surrender schedule, and withdrawal rules (in writing)?
- What income is guaranteed — and what is not?
- How does this fit with my need for liquidity and emergency savings?
- What happens to the contract if I die? (Beneficiary and death benefit terms)
Bottom line
Annuities aren’t “good” or “bad” in the abstract. They’re tools — and like any tool, their value depends on how they’re used, what they cost, and whether they match your goals. The best next step is a plan-first conversation: identify your retirement income gap, map your income sources, and then decide whether an annuity helps you close that gap with the right balance of stability and flexibility. If you’d like help reviewing an annuity (or comparing options), Jacobs Financial Services can walk through the pros/cons, fee structures, and how an annuity might fit alongside your broader retirement strategy.
Sources
Kiplinger, “I’m a Financial Adviser: Don’t Believe These Five Myths About Annuities” (Jeff Juniper), published September 27, 2025.
