Episode 325: Suze Orman: Here’s Why Annuities Are So Bad! (Avoid Them at All Costs!)

David McKnight takes a closer look at Suze Orman’s take on annuities – and at why she recommends her audience avoid them at all costs. Suze Orman labels the 5.4% compounded annual rate of growth one of her audience members (Janet) has had over the last six years as “horrific in today’s market.” David believes that the main issue with Suze Orman’s approach is that it engages in a classic case of apples to oranges comparison. According to David, index annuities are a bond alternative and were never meant to be a stock market replacement. David makes the case for index annuities performing far better than bonds – with a lot less risk. The average return on corporate bonds is between 4% and 5%, the one for treasury return is 3-4%, while the average return on municipal bonds is 2.12%. In David’s opinion, Janet should only feel bad about her 5.4% return over the 6 year time frame if the advisor who sold it to her sold it as a stock market alternative. Suze Orman’s audience member Janet purch...