How Annuities Earned the Bad Name

Ask ten random people over sixty what they think of annuities. At least seven of them will make a face. There is a reason. For thirty years, a small group of bad products and a smaller group of agents pushing them earned the entire annuity category a bad reputation. Not all annuities were bad. Not all agents were bad. But enough of them were bad enough, publicly enough, that the word "annuity" itself became a warning sign for a lot of families. Here is what the bad annuities looked like. Fifteen and twenty-year surrender periods. You put your money in. The contract said you could not touch more than 10% of it per year without a penalty, for the next fifteen or even twenty years. If you needed the money in year three, you paid a huge surrender charge from the insurance company, on top of a 10% penalty from the IRS if you were under 59 and a half. People lost tens of thousands of dollars because life happened. Not every annuity had this. Most quality products at the time had shorter surrenders. But the products with the longest lockups also paid the biggest commissions, which meant they got sold the most aggressively. Fees on top of fees on top of fees. Some of the variable annuities from the 1990s and 2000s carried a mortality and expense charge of 1.5%, plus mutual fund fees of another 1%, plus a rider fee of another 1%. That is 3.5% every year, before the market did anything. If the market returned 6%, the client kept 2.5%. If the market did 0%, the client lost 3.5%. Every year.

Commissions that put the agent ahead of the client. Commissions on those bonus and long-surrender products were often 9%, 10%, 11%, even 12%. On a $200,000 sale, that was $18,000 to $24,000 in the agent's pocket the day the check cleared. That is a powerful incentive to push a product regardless of whether it was the right fit.

Not every agent chased those commissions. But there were agents in the 1990s and early 2000s who sold nothing but these products to everyone who walked in the door. They did not ask about your other assets. They did not ask about your goals. They asked how much money you had, and then they wrote it up.

Bonus annuities that were traps. "Put in $100,000, we will give you $110,000 to start." Sounds great. What they did not tell you was that the extra $10,000 was really a loan, and the carrier got it back through longer surrender periods, lower participation rates, or reduced income growth. You paid for that bonus for the next twelve years. Sometimes longer.

Products sold to people who never should have owned them. The 82-year-old on a fixed income who needed her savings for medical bills. The widow who inherited her husband's IRA and got talked into an annuity with a twelve-year surrender when she was already 74. The couple that put their entire retirement into one product and then found out they could not get to it when the roof needed replacing.

I met these people. I still meet them. Most of them are angry. Most of them do not trust anyone in this industry anymore. I do not blame them.

The 60 Minutes expos� in 2008 was not wrong about the products it covered. The class action lawsuits were not wrong. The regulatory crackdowns that followed were not wrong.

Those annuities deserved to be hated.

But here is the part nobody tells you.

The industry noticed. The regulators changed the rules. The products got better. The best annuities on the market in 2026 are almost unrecognizable compared to what was sold in 1998.

We are going to get to those. First, we have to talk about why so many agents still sell the wrong ones.