Dave Ramsey Is WRONG About Fixed Indexed Annuities

08/23/23 • 7 min

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David starts the conversation by describing why he believes Dave Ramsey is wrong about Fixed Indexed Annuities.

In a recent live call, Dave Ramsey revealed why he is not a fan of annuities and what you should consider doing instead.

Dave Ramsey’s thoughts on Fixed Indexed Annuities -

They have a floor that cannot go below a specific number, say 6%.
Fees are double what you might get in a mutual fund and the advisor commissions are four times as high.

David’s response to Dave Ramsey’s thoughts on Fixed Indexed Annuities.

Indexed annuities don’t have a 6% floor. If an index ever goes down in a given year, they simply credit you a zero. The floor is zero percent.
Technically speaking, Fixed Indexed Annuities don’t have fees. You cannot lose money to fees or end up with less than your original contribution.

David goes through the benefits of investing in Fixed Indexed Annuities.

One of the dangers of being a financial guru is you have to project to your listeners that you’re an expert on every financial topic.

For David, fixed Indexed Annuities are not a stock market alternative. They’re a bond alternative.

David believes that if you’re a disciplined investor and want to purge longevity risk from your retirement picture, you should consider Fixed Indexed Annuities.

It’s clear that Dave Ramsey knows far less about annuities, and it’s troubling that he consistently gives investment advice on subjects he’s not familiar with.

Mentioned in this episode:

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

David starts the conversation by describing why he believes Dave Ramsey is wrong about Fixed Indexed Annuities.

In a recent live call, Dave Ramsey revealed why he is not a fan of annuities and what you should consider doing instead.

Dave Ramsey’s thoughts on Fixed Indexed Annuities -

They have a floor that cannot go below a specific number, say 6%.
Fees are double what you might get in a mutual fund and the advisor commissions are four times as high.

David’s response to Dave Ramsey’s thoughts on Fixed Indexed Annuities.

Indexed annuities don’t have a 6% floor. If an index ever goes down in a given year, they simply credit you a zero. The floor is zero percent.
Technically speaking, Fixed Indexed Annuities don’t have fees. You cannot lose money to fees or end up with less than your original contribution.

David goes through the benefits of investing in Fixed Indexed Annuities.

One of the dangers of being a financial guru is you have to project to your listeners that you’re an expert on every financial topic.

For David, fixed Indexed Annuities are not a stock market alternative. They’re a bond alternative.

David believes that if you’re a disciplined investor and want to purge longevity risk from your retirement picture, you should consider Fixed Indexed Annuities.

It’s clear that Dave Ramsey knows far less about annuities, and it’s troubling that he consistently gives investment advice on subjects he’s not familiar with.

Mentioned in this episode:

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

Previous Episode

Financial Guru Loses $400k to Ill-Advised Roth Conversion (Is Your Money Safe?)

David starts the conversation by describing how a financial guru, Derek Sall, allegedly lost $400k in an ill-advised Roth conversation.

According to Sall, you’re way more likely to have a lower income in retirement than you have today, so you’ll likely be in a lower tax bracket in the future.

But as we all know, tax rates must go up as early as 2026 to pay for unfunded government obligations.

David made 3 observations to counter Derek’s claims:

Your income in retirement is not likely to be way lower than it is today. This is one of the huge myths foisted on a generation of baby boomers.

The single largest factor that should determine whether you do a Roth conversion is whether you believe the taxes you pay will be higher now than in the future.

You’re not necessarily guaranteed to be in a lower tax bracket in retirement. More and more experts are beginning to predict that tax rates in the future will have to rise dramatically to pay for unfunded obligations.

David explains that Derek might have unknowingly made a wise financial decision by making a Roth conversation at the 22% tax bracket.

You should always consider doing a Roth conversion, especially when young. Chances are, you will make a lot of money in your later years, so it makes sense to pay taxes now since taxes will likely go up in the future.

For David, Derek Sall did not make the wrong move by converting his 401K into a Roth.

In fact, he didn’t go far enough. He should have taken advantage of the 24% tax bracket as well.

David reveals whether there are certain times it doesn’t make sense for some people to do a Roth conversation.

Mentioned in this episode:

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

Next Episode

Why do Major Money Institutions HATE Tax-free Investing?

David starts the conversation by breaking down his book, Power of Zero, and the problem with America's ever-rising national debt.

For David, the goal of the book is to guide people on how to move their assets into tax-free retirement vehicles - and how such a move is the only way to shield yourself from potentially higher tax rates in the future.

David describes the difference between LIRPs and other life insurance products.

All LIRPs are life insurance policies, but not all life insurance policies are LIRPs.

David reveals why he believes HSAs(Health Saving Accounts) are the holy grail of financial planning - you get a deduction on the front end, let that money grow tax-free, and then take it out tax-free.

Can you have too much money in your 401K? Yes.

You want to ensure the balance in the IRA is low enough that RMDs (when you are finally forced to take them) are equal to or less than your standard deduction and low enough that they don't cause Social Security taxation.

You can have a million dollars in your IRA, but unless you can accurately predict what tax rates are going to be in the year you take that money out, you don't really know how much money you have.

David reveals why many financial planners detest tax-free investing.

Life insurance is not a silver bullet for tax-free retirement. It only works as a complement to other tax-free streams of income.

Is it a no-brainer to get life insurance? David believes it's not. It depends on your situation.

Always remember that the IRS is looking at how much money you withdraw from your IRA and 401k. If you take out too much, they'll tax a portion of your social security.

David talks about the benefits of having 4 to 6 different streams of tax-free income.

According to David, we are in the tax sale of a lifetime because taxes in the next three years will never be as low as they are today.

Mentioned in this episode:

David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free 3-part video series)

@mcknightandco on Twitter

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker