This Client Didn’t Trust Annuities Until He Ran These Numbers

This week’s episode is a research journey from a past client that I think a lot of you are going to relate to. His name is Dave, and he spent months researching whether or not to buy an income annuity for his retirement. When he told me his story, I realized this is exactly the process so many people go through – the fear, the conflicting advice, the deep dive into numbers, the technicalities of contracts.

Dave actually offered to share his story because he thought it might help people. I didn’t ask him to do it – I just took him up on his offer. And I’m glad I did, because what we produced from this episode is the real, unfiltered journey of someone making one of the biggest financial decisions of their life.

The Setup: When Your Advisor Drops You

Dave had been with Goldman Sachs for a few years. They’d recently acquired some firms for private investing, and things were going pretty well with the traditional stocks and bonds approach. Then one day, Goldman basically said, “Sorry, this is too hard. We’re getting out of this business. You’re on your own.”

This happened right when Dave retired. Suddenly, he had time on his hands and a critical need to find the right advisor for the next 20-30 years of his life.

“I’ve had a couple advisors that ended up really having more self-interest in products they could sell me than my interest. And then I had this situation where I establish a relationship, get things in place, and then they leave.”

So Dave did what any smart person would do – he interviewed multiple firms. Local firms, firms that specialize in retirement, the big boys. He spent hours with each one, showing them his portfolio and asking, “What are you going to do with it? How are you going to manage it?”

The Annuity Suggestion That Changed Everything

Out of all the advisors Dave talked to, only ONE came back and said something different: “Look, what you have here is pretty good, but a big risk I see is that you don’t have enough guaranteed income. The only guaranteed income you have is social security. You should consider something to address that. One of those options is an annuity.”

Dave’s immediate reaction?

“I don’t know what those are. It sounds complicated and I just had a bad reaction to it because of things I’ve heard.”

Sound familiar? That’s exactly how most people feel when they first hear about annuities.

But here’s where Dave’s story gets interesting. He didn’t just dismiss it. He started researching. And that research led him to me.

Down the Rabbit Hole

When Dave and I first talked, he told me he never thought he’d be looking in this direction. He felt like he was about to jump down a rabbit hole.

He was nervous about it.

“I’m pretty financially astute and I like to crunch numbers. So I wasn’t really worried about doing the math on it. It’s just there was a lot of things to consider and there’s a lot of ins and outs and there’s so many different kinds of annuities as well.”

What made it even more confusing was that some advisors were adamantly against annuities. Dave compared it to going to the doctor with a twisted calf muscle – one doctor says stay off it for four weeks, another says stay off it for one week but not four or it’ll atrophy. Two experts, completely opposite advice.

So Dave did what he does best: he started doing his own research.

What Dave Was Really Looking For

When Dave originally set out to find an advisor, he had specific goals:

• Protection for his heirs
• Tax efficiency (RMDs, IRMA, all that complexity)
• Someone to handle the mental stress of portfolio management

“I try to manage my own portfolio, and while I can do it, I don’t like to do it. It’s just stressful when the market’s down and you feel like you need to do something.”

He narrowed it down to two vendors: Vanguard (low-cost, simplistic approach) and Fidelity (more actively managed, individual stocks, tax harvesting).

Then the annuity research started solving problems he didn’t even realize could be solved.

The Bond Problem

One of the biggest revelations for Dave was realizing how inefficient bonds were for his situation.

You need something with steady income in retirement, right? Bonds are the traditional answer. But bonds barely pay anything. And if you want to do it right with individual bonds, you’re constantly managing bond ladders, worrying about rates, timing purchases.

Plus, if you’ve got someone managing that for you and they’re charging even half a percent, that’s taking a decent chunk out of an already low 3% return.

The annuity started looking more appealing because it solved the income problem without all the hassle.

The Index Annuity Confusion

Here’s something Dave noticed that I found really interesting:

“I just want to be really clear because most of the videos I see on YouTube where people talk about annuities, it’s almost always an index annuity. I don’t know why people are so caught up on index annuities.”

I do know why – they’re easier to sell with big promises.

Dave wasn’t interested in index annuities. He wasn’t trying to replace his growth portfolio. He was looking for an income-based annuity – something very specific to guarantee income.

The Legacy Question

One of the biggest concerns people have about annuities is: “What happens to my kids? Am I giving up my principal?“

Dave tackled this head-on.

His approach was smart: he looked at what he’d have to invest in bonds to get the same guaranteed income he wanted. As I’ve said many times, you have to invest a lot more money in bonds than annuities to get the same results.

With the annuity calculations we ran together, he was getting the equivalent of a 5.8% return – almost double what bonds could return over a long period of time.

And that’s assuming he lives to 90, which was his target planning age.

“What the annuity buys me is if I do live longer than 90, then it’s a definite win for me.”

But what about dying early? That’s where the right riders come in. The annuity Dave chose has a provision where if he died a year from now, his principal comes back. Not all annuities have that, but it’s something you can add.

The Real Magic: Freeing Up Money for Growth

If you go the traditional 60/40 route (60% stocks, 40% bonds), you’re tying up 40% of your assets in low-return investments.

But Dave was able to do the annuity with only 20% of his assets.

That means 80% of his portfolio is now targeted for growth – not the riskiest stuff, but solid market investments that historically average 8-10% returns.

“Because I’ve got the annuity, I didn’t have to put as much money in to get the same amount of return and it frees that money up to be invested in more growth oriented portfolios.”

His income floor is established. His basic financial needs are guaranteed. So he can be more aggressive with the rest without taking crazy risks.

And here’s the kicker: when he runs the numbers on what his kids will inherit, they’ll actually get more with this strategy than if he’d gone the traditional bond route.

For those of you who’ve been following me for a while, and have seen the Flex Strategy, this should all sound very familiar to you.

The Fidelity Connection

Remember how this whole thing started with Fidelity suggesting an annuity? Well, Dave was smart about this too.

Anytime a financial advisor tells you to do something and they have a product that does it, red flags should go up. Dave’s did.

But the logic was sound. So he did his homework, talked to me, and then – here’s the important part – he sent my offer back to Fidelity to compare.

Fidelity got on a call with him. The person clearly knew what they were doing. They looked at what I’d put together and said, “This is a good deal. We can’t match it.”

The difference was pretty significant for the same level of vendor quality (still an A+ rated company).

“They said the only thing is just make sure that this is for income. It’s not going to help you with growth. And I said that’s not what the intent is. The intent has nothing to do with growth. I’ve got a whole different plan for growth. This is about guaranteed income. Then they’re like you’re good then, you know, you’re good.”

That’s the kind of honest advice you want from your financial team.

Why Dave Moved Forward

After all the research, all the number crunching, all the conversations, Dave moved forward with the income annuity for a few key reasons:

1. Guaranteed income floor – Core expenses covered, no matter what
2. No ongoing management hassle – Not worrying about bond markets every 5 years
3. Better return than bonds – 5.8% vs 3%
4. Longevity protection – If he lives past 90, the return goes up exponentially
5. More money for heirs – The growth portfolio strategy means his kids actually inherit more
6. Mental peace – One less thing to stress about in retirement

Dave put it perfectly:

“If I already have my income floor established and I’ve got my basic financial needs already met, that’s guaranteed. Then I can be more aggressive than I would have been if I would have went to the traditional 60/40 route.”

What’s Next

So Dave has done the research. He’s compared the numbers three different ways (his spreadsheets, my calculations, and Fidelity’s tools). Everything lines up.

But here’s what we haven’t talked about yet:

• How did he actually structure it?
• What percentage did he use?
• How does this affect what he’s leaving to his kids?
• And the big question: Two years later with the market having done well, does he regret it? Should he have waited?

We’re going to cover all of that in Part 2 next week, so make sure you don’t miss it.

Have a great weekend!

Bryan

Watch Episode 216: This Client Didn’t Trust Annuities Until He Ran These Numbers

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Last Updated on March 5, 2026 by Bryan Anderson