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Shaquille O’Neal says he has a retirement plan that can’t fail. “Fail-proof” is his word.
On the “Dinner Party” podcast, the NBA legend explained that when the money poured in, he locked much of it away. “I had so much money coming in, I put a lot into annuities,” he said. (1)
He said the big payments start next year and that at 55, “I’ll probably get $1,000,000 a month.” His reasoning: “That was my fail-proof, just in case the investments don’t work and this and that.” (1)
Shaq’s not the only one buying. Americans bought $464.1 billion of annuities in 2025, up 7%, according to the industry research group LIMRA. (2)
I’ve been a CPA, and offering investment advice, since 1981. My verdict: Shaq is right about the goal. For most retirees, he’s wrong about the tool.
A paycheck you can’t outlive is a terrific idea. But some annuities can charge yearly insurance fees (the SEC’s example is 1.25% a year) before anything else is added. (3)
And most retirees already own a lifetime, inflation-adjusted paycheck. It’s called Social Security. (4) About 88% of people 65 and older were collecting it as of June 30, 2026. (5)
Here are five things to know before you copy Shaq.
1. You already own a better annuity
Social Security is a lifetime check that rises with inflation. Nearly 72 million beneficiaries will get a 3.6% cost-of-living raise starting in January 2027. (4)
And you can buy more of it. For anyone born in 1943 or later, each year you wait past full retirement age adds 8% to your benefit. The increase stops at age 70. (6)
In my view, for many healthy retirees, delaying Social Security is the cheapest guaranteed-income upgrade there is. The catch: you live on savings while you wait, so it takes planning.
Choosing between claiming early, buying an annuity or doing a bit of both is exactly the kind of decision worth a second opinion. This is exactly what financial advisors specialize at.
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2. Getting your money back can cost you
Many annuities lock you in with a surrender charge. The SEC gives this example: 7% on money pulled out in the first year, 6% in the second, 5% in the third and so on until the surrender period ends. (7)
On a $100,000 contract, a 7% charge is $7,000. If you’re under 59½, cashing out may also trigger a 10% federal income tax penalty. (7)
So never put money into an annuity that you might need for an emergency, a new roof or a parent’s care.
And there’s one big bill a guaranteed paycheck may not be built to cover: the cost of care as you age.
According to government data, about 7 in 10 people turning 65 will need some form of long-term care. And Medicare doesn’t cover custodial care — the day-to-day help with things like bathing and dressing — which can leave families facing six-figure bills that eat into retirement savings.
Long-term care insurance helps fill that gap, covering services like home care, assisted living, and help with daily tasks. Rates are typically lowest if you buy in your 50s or early 60s, couples often qualify for discounts, and premiums may even be tax-deductible.
A little planning now can spare your family a difficult financial situation later.
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3. The yearly fees add up
Some annuities, particularly variable annuities, charge a base insurance fee called the mortality and expense risk charge. The SEC uses 1.25% a year as its example. (3) Investment fees and optional riders can come on top of that.
On $200,000, 1.25% is $2,500 a year. Over 10 years, that’s $25,000, assuming the balance stays flat.
Ask for every fee in writing, in dollars, before you sign.
One thing before we keep going — the financial world is louder and dumber than ever. Hot takes everywhere. Almost none of it is worth your time. I’ve spent 35+ years cutting through the noise so you don’t have to. Sign up for the free Money Talks Newsletter — 10 seconds, no spam, just the stuff that matters.
4. Inflation quietly shrinks a fixed check
If your annuity pays the same dollar amount for life, that feels safe. But if prices rise 3% a year, a $1,000 monthly payment buys only about $744 worth of today’s goods after 10 years.
If an annuity offers yearly increases, ask exactly how much smaller your starting check would be to get them. Shaq can shrug off inflation. Most retirees can’t.
5. Taxes and the insurer both matter
When you withdraw money or take payments from a variable annuity, you pay tax on the gains or interest at ordinary federal income tax rates, not the lower capital gains rates. (3) Don’t expect stock-market tax treatment.
And a guarantee is only as good as the company behind it. If an insurer fails, state guaranty associations step in. In most states, coverage for a fixed annuity is $250,000 in present value of annuity benefits. (8) Putting in more? Consider splitting it between insurers.
My take
Shaq built a guaranteed paycheck as a backstop and took his chances with the rest. That’s smart. His plan is “fail-proof” partly because he has far more money than most of us will ever need.
You can copy his idea without copying his contract. Get the most out of Social Security first. If you still want more guaranteed income, a simple, low-cost income annuity on a slice of your savings can make sense. In my book, a complicated one you don’t understand never does.
The best retirement plan isn’t the one that sounds impressive on a podcast. It’s the one you can explain to your kids in two minutes.
Sources: 1. Fox News (OutKick); 2. InsuranceNewsNet (LIMRA); 3. Investor.gov (SEC); 4. Social Security Administration; 5. Social Security Administration; 6. Social Security Administration; 7. Investor.gov (SEC); 8. National Organization of Life and Health Insurance Guaranty Associations
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