Less Wealth, More Certainty: Why Annuities Are Rarely Worth It (E131)
From Personal Finance for Long-Term Investors by Jesse Cramer
February 25, 2026 · 53 min
About this episode
Jesse Cramer critically examines annuities, discussing their drawbacks and the specific circumstances under which a single premium immediate annuity may be beneficial.
In this expansive and deliberately contrarian episode, Jesse takes on annuities—not with a sales pitch or a blanket dismissal, but by putting them under a rigorous planning lens rooted in risk, probability, and real retirement outcomes. He begins by laying out what annuities actually are, clearly separating fixed annuities from their variable cousins, and explaining why high fees, capped upside, illiquidity, and poor expected returns make most annuity products deeply unattractive. From there, Jesse zeroes in on the one annuity type he considers intellectually defensible in narrow circumstances: the single premium immediate annuity (SPIA), framing it not as an investment but as insurance against longevity and sequence-of-returns risk. The heart of the episode introduces the concept of ergodicity and uses vivid examples to show how retirement planning is fundamentally non-ergodic, dominated by tail risks, bad timing, and one irreversible life path. Through this lens, annuities are reframed as a tradeoff: a high probability of modest financial loss in exchange for protection against a low-probability but catastrophic retirement failure. Jesse closes by emphasizing that annuities…
People in this episode
Host: Jesse Cramer
Topics covered
- annuities
- retirement planning
- risk management
- financial products
- investment strategies
Keywords
- annuities
- retirement
- financial risk
- SPIA
- investment
- longevity risk
- sequence-of-returns risk
Mentioned in this episode
Products: fixed annuities, variable annuities, single premium immediate annuity (SPIA)
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