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For years, “annuity” was almost a dirty word in personal finance. So it got my attention when Jean Chatzky — who spent decades warning people off them — changed her tune. In her new book, “The Forever Paycheck,” she now calls annuities a legitimate tool with “a valid place in the landscape” (1).
Her core insight is a good one: “It’s not the size, it’s the frequency.” Research backs her up — retirees with guaranteed monthly income spend about twice as much as those living off a pile of savings, because a steady check calms the fear of running out (2).
I’ve been a CPA since 1981, and I’ll say something that might surprise you: Chatzky is largely right. A guaranteed floor under your retirement can be worth more than a slightly bigger number on a spreadsheet.
But “largely right” isn’t “sign here.” Annuities are where good intentions meet some of the ugliest fine print in finance — surrender charges that lock up your money for years, and layers of fees that can quietly erode your return (3). So let me referee this one, item by item.
1. Where Chatzky is right: peace of mind is a real return
Most retirees under-spend out of fear. They’ve saved for 40 years and can’t bring themselves to draw it down, so they live smaller than they need to.
A guaranteed check breaks that freeze. If turning part of your savings into a paycheck lets you actually enjoy the money you worked for, that psychological win is worth taking seriously. Chatzky’s “forever paycheck” framing gets that exactly right.
2. Her one-third rule is the smart part
Notice what Chatzky does not say: she doesn’t say annuitize everything. She suggests roughly a third of your savings — enough that, with Social Security, your essentials are covered — while the rest stays invested for growth (1).
That’s the balance I’d endorse too. An annuity is a tool, not a religion. Guarantee the floor, invest the rest.
Before you commit a dime, though, get advice from someone who doesn’t earn a commission on what they sell you.
Free services like SmartAsset will match you with up to three fiduciary advisors — legally required to act in your interest — who can tell you whether an annuity fits your plan. If you’ve got $100,000 or more saved, get matched free in minutes. First appointments are also free. Why not get an expert opinion?
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3. Where they bite: fees and surrender charges
Here’s the fine print Chatzky’s fans need to hear. Many annuities hit you with surrender charges if you need your money back in the early years, and some carry fees stacked so high they swallow much of the benefit (3).
The regulators themselves warn about this. Read the surrender schedule and the total annual cost before you sign anything — if a salesperson rushes you past those two numbers, that’s your answer.
4. The inflation trap most people miss
A “forever paycheck” that never grows isn’t forever at all. A fixed $2,000 a month feels fine today and feels a lot smaller in 20 years, because inflation quietly nibbles away at it.
If you buy income, price the inflation-adjusted version, or keep enough invested elsewhere to cover rising costs. That’s the piece the sales pitch tends to skip.
5. You may already own the best annuity there is
Before you buy guaranteed income, remember you already have some. Social Security is an inflation-adjusted, government-backed annuity — and delaying your claim raises that check for life. For many people, “buying” more of it by waiting beats any product on the market.
If you’re 62 or older and house-rich, your home can create income too. A reverse mortgage lets eligible homeowners turn part of their equity into cash while keeping the title to their home.
It isn’t right for everyone, but it's worth understanding how it works before you lock savings into an annuity.
And if your real goal is leaving money to the people you love, an annuity is often the wrong tool — term life insurance usually does that job cheaper. Money's Life Insurance Comparison shows quotes from top insurers side by side, free. Compare your rate here.
The bottom line
Chatzky has earned her reputation, and her turn on annuities isn’t a flip-flop — it’s a seasoned expert admitting a tool she once dismissed has a real use. I agree with her more than I expected to.
But an annuity is a contract, not a miracle. The same guarantee that buys you peace of mind can, in the wrong product, lock up your money and bleed it through fees. The difference between the good version and the bad one is entirely in the fine print.
So take Chatzky’s advice and give annuities a fair look. Just bring a healthy skepticism, a fiduciary who isn’t paid to sell you one, and the patience to read every line before you sign. Peace of mind is worth paying for — but only at a fair price.
Sources
1. Yahoo Finance; 2. InvestmentNews; 3. U.S. Securities and Exchange Commission (Investor.gov)
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