Annuities. A threshold test for financial illiteracy.
Annuities. A threshold test for financial illiteracy.
The exposure to the epidemic of brilliant (and poor) imbeciles that amount for most of the high earning W-2 workforce is different for everyone. For me, it was when heard a brilliant partner known for handling the most complex issues, distilling a business conglomerate with 50 shell companies to make it digestible, offshore tax structuring, etc. told me they were invested in annuities. I almost thought it was going to be followed with: just f*cking with you as a test to see if your too dumb to work here.
1. If that doesn’t tell you how little intelligence correlates with financial literacy, nothing will.
2. Annuities are step one in the financial advisor scam—the entry-level pitch that hooks smart professionals who don’t know how money works.
3. So let’s break them down.
What Is an Annuity? A Deal You Would Never Take If It Was Explained Honestly.
An annuity is a contract where you give your money to an insurance company, and in exchange, they promise to give it back to you later—slowly.
It’s pitched as “safe, guaranteed income” for retirement.
What’s actually happening?
❌ You hand over your capital, losing flexibility for decades.
❌ You get locked into a contract littered with riders, fees, and fine print.
❌ Your “guaranteed return” is often just your own money being paid back to you—minus fees. Fat fees for the snake oil salesman.
❌ If you die early? Hope your beneficiaries enjoy navigating 100+ pages of legalese.
Annuities sound like a sure thing, because that’s how they’re marketed. They dress up with fancy branding:
Fixed annuities → A low, set return (locked-in mediocrity, with a rider, which is a term for the portion of your money stolen by the annuity salesman).
Variable annuities → “Market exposure” (with caps, restrictions, and fees).
Indexed annuities → “Tied to the stock market” (except… they aren’t, they track an index but only give you about half the return).
But they all have one thing in common:
The financial advisor gets paid upfront, and you get your money back later—on their terms.
Indexed Annuities: The Market for People Who Don’t Want to Be in the Market
An indexed annuity sounds sophisticated. It’s tied to an index like the S&P 500, Dow Jones, or Nasdaq, so you’d assume you get market exposure without the risk.
That’s the pitch.
Here’s the reality:
❌ You’re paying a premium to an insurance company, not investing directly in the market.
❌ The salesperson who sold it to you? They just made thousands in commissions—off your money.
❌ Your returns are capped. If the Nasdaq returns 12%, you’re lucky to see 6%.
❌ And if the market tanks? You don’t lose money, but you also don’t make any. And you have no dry powder locked and loaded to buy up the next dip (something you should do. In finance douche – you’re illiquid. And your illiquidity isn’t justifiable because you’re barely keeping up with inflation, locking the annuity away).
And if the market doesn’t tank over an extended period? (Like it always has), when the market dips, you have no money to buy the dip.
You are too smart to be dumb enough to buy an annuity.
Because annuities aren’t about protecting you—they’re about protecting the insurance company. Keeping you reliant on the system, and paycheck.
You’re literally handing over your capital, losing flexibility, and (almost assuredly) getting a fraction of what you’d make if you just invested in the index yourself. You’re not beating inflation. You are LOSING MONEY.
Annuities Kill Your Compound Interest—and Your Freedom
The biggest scam with annuities? They completely rob you of compound interest.
If you invest in the stock market, your money grows exponentially over time. Even a conservative market return of 7% compounds into real wealth over decades.
But with an annuity?
❌ Your returns are capped.
❌ Your money is locked up, so you can’t reinvest it freely.
❌ You lose out on decades of growth.
A $100K investment in the market at a 7% return with dividends reinvested for 30 years becomes $761K.
That same money in an annuity? Most compound maybe annually, and your return is hard-capped or half of the index your tracking.
This is what should be common knowledge about the stock market: Over time, it doesn’t tank.
❌ The market goes up, long-term.
❌ The S&P 500 has returned around 10% annually for nearly a century.
❌ Even with recessions, crashes, and corrections, the market recovers and keeps climbing. People who invest frequently and consistently, through bull-markets and bear-markets, who withstand a two day downturn, are going to come out ahead 99% of the time. The 1 % is likely the snake oil annuity salesman who took his commissions and threw them in XLK during the AI face-rocket heater the last few years.
An annuity locks you into low, fixed returns for decades under the assumption that the market is too volatile.
It’s a fear-based product, not a wealth-building strategy.
If Your Financial Advisor Sells Life Insurance, They're Selling Annuities.
Financial advisors love packaging annuities and life insurance together—because both are cash cows for them, not you.
Life insurance is sold the exact same way:
❌ “Tax benefits.”
❌ “Guaranteed returns.”
❌ “Safe income for retirement.”
Sound familiar? It should—it’s the same low-risk, low-reward trap as annuities. Here’s how to handle it:
❌ If your financial advisor sells life insurance, they are selling annuities.
❌ Do yourself a favor. Hang up the phone immediately.
❌ Go bill the thirty minutes they would have wasted.
That’s thirty minutes more sleep you can get, or thirty minutes more you can use to scroll this Tik Tok to stop being the dumbest intellectual giant there is, destined for resentment of your much dumber (but wealthier and happier) clients—not the 3% return they’re trying to sell you over the next three decades.
Annuities Are the First Step to a Life of Financial Handcuffs
The entire point of financial literacy is to give yourself options.
An annuity does the opposite, it locks you into a low-risk, low-reward lifestyle where you’re dependent on your paycheck forever.
❌ It guarantees that you’ll never make enough to leave Big Law early.
❌ It ensures that even in retirement, you’ll be collecting checks small enough to make you budget, only without those golden handcuffs. You’ll be the 82 year old “of counsel” who the firm has been trying to stop sniffing the young female associates hair.
❌ It binds you to a lifestyle where “safe” means “never free.”
Your ceiling for risk is so low that you’re locking yourself into a mediocre financial future—and paying someone for the privilege of doing it.
The First Move in the Financial Advisor Playbook
This is how they get you.
Annuities are step one in the financial advisor pipeline.
Once you bite, they know you’re afraid of risk, you trust “safe” returns, and you don’t know any better.
That’s when they move to step two—telling you that since you already made a “responsible” decision with an annuity, you should let them manage the rest of your portfolio.
Except now? They’re charging you a 1.5% AUM fee to put your money into mutual funds you could’ve picked yourself.
It’s all part of the same grift—one that I’ll break down next.