Myth-Busting: 5 Common Misconceptions About Annuities and How They Impact Your Retirement
Annuities often get a bad rap—clients worry about high fees, lack of liquidity, and inflexible terms. Separating fact from fiction empowers smarter retirement decisions. This week, we debunk five widespread annuity myths and show you what really matters.
Myth 1: “Annuities Are Too Expensive”
Myth
Annuities always carry sky-high fees
Reality
Many fixed and indexed annuities feature annual fees of 0.5%–1.0%. Guaranteed lifetime income can more than offset these costs over time.
Impact on Your Retirement
Dismissing annuities on cost alone may leave gaps in guaranteed income, forcing overreliance on volatile markets or delaying retirement.
Myth 2: “You Lose Access to Your Money”
Myth
Annuities lock up your funds
Reality
Most annuities offer a 10% penalty-free withdrawal each year plus death-benefit guarantees.
Impact on Your Retirement
Believing all annuities are illiquid can prevent clients from building a safety net for emergencies or leaving a legacy.
Myth 3: “Annuity Returns Are Always Low”
Myth
Annuities generate minimal growth
Reality
Indexed annuities can credit returns tied to market indexes (with caps or participation rates), and some fixed annuities include rate-step features that boost growth.
Impact on Your Retirement
Choosing the right annuity can deliver meaningful growth while preserving principal—ideal for clients who want market upside without full market risk.
Myth 4: “They’re Too Complicated to Understand”
Myth
Annuities are a black box
Reality
A concise illustration of payout options, fees, and riders cuts through complexity.
Impact on Your Retirement
Advisors who clearly explain surrender schedules and income riders turn confusion into confidence—boosting enrollment and reducing application abandonment.
Myth 5: “Annuities Aren’t Tax-Efficient”
Myth
Annuity earnings get taxed at ordinary rates only
Reality
Earnings grow tax-deferred until withdrawal, and pairing with IRAs or 401(k)s lets clients manage tax brackets in retirement.
Impact on Your Retirement
Understanding tax deferral turns annuities into a complementary tool alongside Roth conversions and qualified accounts.
Conclusion & Call to Action
By busting these five myths, you’re positioned to build clearer, more resilient retirement plans. Ready to discover which annuity fits your unique goals?
Schedule your Complimentary strategy session today.
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Investment advisory services offered through Redhawk Wealth Advisors, Inc., an SEC Registered Investment Advisor. SEC Registration does not imply any level of skill or understanding. Redhawk Wealth Advisors and Patten Financial Group are unaffiliated and separate legal entities.
