Special Consumer Report

The 15 Biggest Mistakes Americans Make When Buying An Annuity - And How To Avoid Making Them: 

By Scott Brooks, CFP®

Updated May 2026 

As Advertised On 

If you could read just one article to avoid the most costly mistakes when buying an annuity, this is it.

15 Biggest Mistakes To Avoid When Buying An Annuity

15.  Not getting third-party verification - Don’t trust someone who simply tells you their product is the best. Look for independent third-party research. Request our free report, and we’ll compare 1500 annuities from America’s two largest annuity databases to show you the best products available. You've worked hard for your savings. It's time to make your savings work hard for you. 

14. Paying for features you don't need.  You should NEVER pay for riders you don’t need because the fee comes directly from your balance. Don’t pay 1-3% in fees when many annuities don’t charge any fees whatsoever. Educate yourself and know what you’re paying before you sign.

13. Underestimating renewal rate risk - 99% of index annuities allow the insurance company to legally change what you can earn after year one. 

The cap that impressed you can drop from 10% to 1% in year two. The participation rate that looked like 100% can drop to 15%. The spread that started at 0% can jump to 6%. 

None of this appears in the fancy proposal most companies show you. 

How to avoid: Request the specimen contract! It's a sample contract that lets you review the fine print before signing. Look for companies that lock their crediting rates for the entire term or publish their renewal rate history. 

Pro tip: Don’t transfer your 401k/IRA before you do this. Those transfers are painful and costly to reverse. In our free report, we can show you which rates are locked, which can change, and what the contract allows after year one. 

5. Misunderstanding real vs. fake account balance - Some index annuity proposals show an income account value growing at 7-8% per year.  

You're not earning 7-8% on your account balance. 

This is not your cash value or balance.  We call it the "fake balance" because you can't withdraw it, spend it, or leave it to your family.  

Focus on the potential growth of your actual account. Don’t let an illustration confuse you with the growth of the fake income account value! 

Before you buy, make sure you know which number is yours. 

11. Not researching the company's history - In business since 1930 might really mean in business since 2024.  

Here’s why. Brand new insurance companies purchase empty shell corporations to use their “born on date” in their marketing.  

Before you buy, ask:  How long have they been operating under the current name? Has it changed names? When? Who’s their parent company? A good rate means less if you don't understand the company behind it. Trust but verify. 

10. Replacing an annuity for the wrong reason. Some agencies advertise – “Stuck in a low-rate annuity?” or "Is your annuity underperforming?" 

 Don’t fall for their trap.  Avoid paying a surrender charge to exit an annuity until you carefully compare the cost of leaving, the new term, and the real benefit of switching.  

If your current annuity is underperforming because it was designed to do so, buying another annuity with the same problem is doubling down on the same mistake.  We can help you see whether replacing your currrent annuity actually makes sense - before you pay anything or start a new term.  

9. Trusting the hypothetical illustration.  An annuity expert regularly says, "I've never seen an illustration come true."

An index annuity may show an index return, but hides the renewal rates that the company can change every year after year one. 

Variable annuities hide 2-4% in annual fees. 

Volatility-controlled indexes are designed to move less. So don’t be misled by their huge participation rate.   

  Find out what assumptions were built into your proposal. We help you look past the illustration and focus on what matters.  Get a second opinion. 

8. Thinking the bonus is free money - 28% bonus! Found money? 

No. Please think this through.  

Do you honestly think the same insurance companies that deny valid homeowners’ claims will just give away free money?  No. 

Here’s how they can get you: 1. They can offer horrible renewal rates. 2. They will apply the bonus to the “fake money” income account balance - not your real cash value. 

Ask which account the bonus is applied to. And inspect the specimen contract to see how much they can change your renewal rates. 

And please do not replace an underperforming index annuity with a bonus annuity. 

7. Ignoring these 3 contract terms - 1. Will your beneficiary pay a surrender charge? Ask if the death benefit is paid on the accumulated value or the surrender value. 

Look for contracts that pay based on the accumulated value.  Steer clear of products that pay based on the surrender value. This would reduce what your family receives. 

2. What happens to your annuity at the end of the term? Does it renew automatically for the same term? Or does it let you keep your money there and relax? We prefer contracts that do not automatically renew, especially for our oldest clients. 

3. What's the lowest rate they can offer after your annuity matures? This is very helpful when you narrow down your selection to 2-3 choices.   

Small contract details make a big difference. We help you compare them before you choose. 

6. Not exploring all of the types of annuities.  Most companies show you a small fraction of what is available. Most banks and major investment firms offer 3-7 annuity options. 

Some banks lower the annuity's interest rate to increase their profits. We've seen many insurance agents focus on selling only one index annuity. 

That’s why it’s so important to shop around before buying. Our free report can help you compare the best annuities available. 

12. Not asking the right questions before buying.   What type of annuity? Fees? Surrender charge schedule? Is there an MVA (market value adjustment)? What free riders are included? What is the company’s rating? How long has it been there? How much can I take out penalty-free? How long is the fixed rate, cap, spread, or participation rate guaranteed for? How is the gain calculated? If I die, does my beneficiary pay a fee? How long is the term? RMD friendly? Index annuity? What’s their renewal rate history? Do they publish their rates? Does it auto-renew at maturity? How is their customer service? Who owns it? Simple or compound interest? Lowest rate they can offer after maturity?

That’s just some of what you should ask.  Our free report is designed to help answer many of these questions before you sign anything. 

4. Not exploring the newest features - Did you know there are index annuities that lock the crediting rates for the entire term? This means you don’t have to worry about the renewal rates. 

Or that some index annuities include dividends? 99% don’t. The annuity market changes. Learn about the best new features in our free report.

3. Buying what pays your advisor the most - Why does everyone focus on selling you a variable annuity, index annuity, or RILA? 

Because they pay the agents the highest commissions. We could triple our commissions if we decided to sell them.  

We are different from most agencies.  Most agencies lead with long-term annuities because they pay the highest commissions.  We focus on simpler, contractually guaranteed annuities: MYGAs, SPIAs, DIAs, and a few index annuities that lock their crediting rates for the full term.   

2. Chasing the highest rates - The best annuity is not always the one with the highest rate. It’s the one with the best contract for your situation. 

If it looks too good to be true, double down on your research. A higher rate from a weaker company is not always a better deal. Compare rates, features, and contract terms side by side in our free report before you buy.     

Are you conservative? – I would avoid insurance companies owned by private equity firms because they are more likely to take on risk in private credit and other higher-risk areas.

1. Trusting an unstable insurance company - You don’t need to trust an unstable company to earn a reasonable rate of return. 

Here’s how you should evaluate your company’s AM Best rating. A++ is the top 3% of all US insurance companies. A+ is in the top 12%. A is in the top 30%. A- is the top 45-50%. B++ and B+ are roughly the bottom 50%.  

If you are conservative, we recommend an A or higher from AM Best. Serious money deserves a serious company behind it. 

Because most financial advisors only provide information on 2-3 products, we’ve released a free annuity comparison report. 

The report lets you compare over 1,500 annuities from America’s two largest annuity databases to find the best options. 

If you need retirement income, the report shops 150+ income-producing annuities and highlights the companies that guarantee the most retirement income.

The Annuity Resources Advantage:

• You've heard us on 7,000 radio stations and seen our TV commercials on Fox, CNN, Fox Business, and MSNBC since 2012. 
• We're licensed in 48 states and work with over 40 insurance companies. 
• Your report is fast, free, and there's no obligation. 
• One of our specialists will customize it for your age, state, investment amount, and goals. 

Why did Americans invest $464.1 billion in annuities in 2025 alone?

1. Safety - Insurance companies must keep around $1 in assets for every $1 invested in annuities. Because of this, they have been one of the safest places for your retirement savings.

2. Guaranteed income for life – Annuities can fill the gap when pensions, social security, and other retirement accounts don’t produce enough retirement income. Annuities allow you to take a lump sum today and turn it into a steady stream of income paid monthly, quarterly, or yearly.
3. Tax-deferred growth – Annuities offer triple compounding of interest. Your money grows faster because you earn interest on your principal, interest on your interest, and interest on the money normally lost to taxes.
4 . Long-Term Care Benefits – Some annuities offer 200-300% of your initial deposit in long-term care benefits with an optional rider. There is no cost, and everyone qualifies regardless of their health.
5. No Fees – Many fixed, indexed, and income annuities have absolutely no fees.
Request our free annuity comparison report. Let us send you the best annuities for 2026 that offer the best rates, lowest fees, and highest potential returns.

Sincerely,

Scott Brooks, CFP®

Founder, Annuity Resources 

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Annuity Resources

Scott Brooks, CFP®

Founder, Annuity Resources · Licensed in  48 states

5900 Balcones Drive, Suite 100
Austin, TX 78731

(800)540-6109

support@annuityresources.com

Annuities are insurance products. Guarantees are backed by the claims-paying ability of the issuing insurance company. Product availability, rates, features, and terms may vary by state, age, premium amount, and insurer rules. This page is for educational purposes and does not guarantee that any product is right for your situation.

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DISCLAIMER: The information on this website is for educational purposes only. This website is not intended to be a recommendation for you to purchase an annuity. Please consult with a qualified financial planner, advisor, tax, and legal advisor to determine if an annuity is right for your situation. Annuities are not offered by the US Government, not government-guaranteed, and are not FDIC insured. All guarantees are backed by the claims-paying ability of the insurance company. The reviews and annuity information on this website may not be current and may not apply in the state you live in. Product availability varies based on the state you live. The materials, names, logos, brochures, etc used in our annuity reviews are property of their owners and not those of AnnuityResources.com. Annuity information on this site may not be current or applicable in your state. Please contact us to receive the latest brochure. When you contact us you may speak with a licensed insurance agent in your state. They may offer an annuity to you for sale. Annuities are distributed by Annuity Resources, LLC. Annuity Resources, LLC is a licensed annuity producer in most states. We focus on selling MYGAs, SPIAs, and DIAs and a few select index annuities. We do business as Annuity Resources Insurance Services in CA. License 6003435.

Because when you buy an annuity it’s not what you know that gets you into trouble.

It’s what you know for sure that just isn’t true.

I dare you to read this entire page without changing the way you view annuities. How open-minded are you?