It might be exactly the right move. It might also be something you're still paying for years from now, wishing you'd asked a few more questions. These five questions help you know which it is.
It usually comes up pretty naturally. You're getting close to retirement or you just left a job, and your advisor mentions rolling your 401(k) into an annuity. The pitch sounds reassuring — guaranteed income, protection, something you can't outlive.
For some people, that's exactly what they need. Annuities solve real problems, and a solid income guarantee can bring real peace of mind.
But it's also one of the decisions that's hard to unwind once it's done. After 13+ years working inside brokerages and advisory firms, this is the kind of recommendation I always slow down on. Not to kill the idea — just to make sure we both understand it.
Most financial moves you can reverse. Sell a fund, change your allocation, move on. Rolling into an annuity often locks you in for years, with surrender charges if you want your money back. That alone makes it worth pausing to ask a few direct questions.
Annuities stack several layers: the insurance charge, any rider fees for the guarantees, and the cost of the investments inside. It can add up to more than a straightforward low-cost 401(k) or IRA.
Ask for one clear number, in writing:
"What will this actually cost me every year, as a percentage and in real dollars? How does that compare to keeping my 401(k) where it is?"
Percentages feel small. Dollars feel real. Get both. If you want to see the long-term impact first, run it through The Examination.
Know the exit before you enter. Ask:
"What's the surrender period? What would it cost me to take my money out in year one, year three, year five?"
If it's "you can leave anytime," great. If it's a multi-year penalty that steps down, that's fine — just know it upfront.
This one can feel awkward, but it's important. Many annuities pay a commission when you sign. Leaving the money where it is usually pays nothing. That doesn't automatically make the recommendation wrong. It just means you deserve the full picture.
A good advisor shouldn't have any trouble answering this. The answer doesn't make the recommendation good or bad by itself. It just helps you see the whole situation clearly.
This is really the heart of it. Sometimes the answer is straightforward — a lifetime income guarantee you can't outlive. That has real value for the right person.
Then the follow-up:
"What specific problem does this solve that a lower-cost option can't? And what am I paying for that extra piece?"
If someone is recommending you move your retirement money, asking them to document why it's right for you (including the total costs and surrender terms) is completely reasonable. A good recommendation holds up on paper. If they hesitate, that's useful information.
I've met people who were thrilled they bought an annuity. I've also met people who didn't fully realize what they bought until years later.
That's exactly why I don't start with the product. I start with the questions. Good recommendations survive good questions.
The answers matter more than the product itself. Annuities aren't the problem. Buying something you don't fully understand is the problem. Good decisions survive scrutiny.
The person answering these questions is often the same one who gets paid if you buy. That's why a neutral second opinion — from someone with no custody, no products to sell, and no stake in your decision — can be helpful.
Make sure you can check these boxes:
Five straight answers. Eyes open. That's it.
An annuity might be the right answer for you. You just deserve to know that before you sign — not after the surrender clock starts.
Run the numbers through The Examination first — free fee calculator, no name, no email. Then, if you're still considering it, book a Confidential Fee Review with someone who has nothing to sell you.
Book a Confidential Fee Review →