Suze Orman Reveals When To Buy an Annuity—and the One Question You Must Answer First
The financial expert says knowing when to buy an annuity starts with answering this critical question
Key Takeaways
- Calculate your essential monthly expenses before deciding on an annuity.
- If reliable income doesn't cover expenses, annuities can fill the shortfall.
- A well-chosen annuity helps ensure your income stream never runs dry.
If you’re retired or approaching retirement, you’ve probably wondered whether an annuity could give you more financial security than staying invested in the market. It’s one of the most common questions retirees face—and one of the most confusing. Financial expert Suze Orman, bestselling author and host of the Women & Money podcast, says the answer isn’t about following a percentage rule or what everyone else is doing. It comes down to one key factor: your income needs. Here’s how to determine if an annuity is right for you.
Q: I’m no longer working but I want more financial security. Is an annuity safer than staying fully invested in the market, and how much of my savings—if any—should I allocate to one?
Suze: Annuities can be a helpful tool in retirement, but whether they make sense for you depends on one key factor: your income needs.
Here’s what that means
The first step is figuring out how much money you need each month to cover your essential expenses.
Next, look at your guaranteed income sources, like Social Security, a pension, rental properties, interest or dividends.
If those sources already cover most of your essential expenses, then you may not need an annuity at all. But if your reliable income falls short each month, an immediate annuity or deferred income annuity can convert a portion of your savings into a steady monthly paycheck that lasts for life.
However, one important thing to remember with most lifetime annuities: when you die, the payments stop and the money is gone. Unless you choose special features such as a joint annuity or a guaranteed payment period, there may be little left for heirs.
The ‘rule’ to avoid
Notice I didn’t say everyone should put a certain percentage of their savings into an annuity. Percentages can serve as rough guidelines, but they should never be the starting point. The starting point is: How much guaranteed income do you need each month to cover the gap?
Once you know that number, you can determine—based on your age and interest rates at the time—how much you would need to place into an annuity to generate that income. Used carefully, an annuity can provide the confidence that your paycheck will never stop.
This story first appeared in the May 4, 2026, issue of Woman’s World magazine.
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