Most retirees buy annuities because they don’t want to lose money. They want lifetime income, market protection, and predictable retirement cashflow.
But here’s the real question:
Can you actually lose money in an annuity?
Short answer: Yes — but only under specific circumstances. And most retirees never experience those scenarios if they structure their annuity correctly.
In this article, I’ll break down the exact situations where losses can happen, and the situations where they can’t.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
Can You Lose Money in Variable Annuities?
Answer: Yes.
Variable annuities have sub-accounts that work like mutual funds.
If the market drops, your account value drops with it — simple as that.
This is why many people come to me saying they’re tired of losing money in their annuity. Usually, they’re in a variable annuity and don’t even know it.
As the “Guaranteed Retirement Guy”, I don’t use variable annuities for my clients. I prefer to work with only the annuities that offer true contractual guarantees – like the ones you’ll find below.
💡 Pro Tip: If your annuity has “sub-accounts,” it is not protected from market loss.
Can You Lose Money in a MYGA or Fixed Annuity?
Answer: Only If You Surrender Early.
Fixed annuities and MYGAs (Multi-Year Guaranteed Annuities) are simple:
They pay a guaranteed interest rate, have no fees, and never lose value.
The only way to lose money is if you surrender early and get hit with surrender charges.
If you hold the contract to the end of the term, you cannot lose money.
👉 Thinking about a MYGA? Schedule a call and I’ll show you today’s best rates.
Can You Lose Money in a Fixed Indexed Annuity?
Answer: Only Under Certain Conditions.
Fixed Indexed Annuities (FIAs) do not lose money from market performance.
Your worst-case growth in a bad year is 0% — never negative.
However, here’s where people can see their account value go down:
Condition #1 — You Added an Income Rider With a Fee
Income riders charge an annual fee. In the above video example, that fee was roughly $4,000 a year.
If the market (or index strategy) earns 0%, then after the fee, your account value moves downward — even though your benefit base is growing at 8% guaranteed.
Condition #2 — You Surrender the Annuity Early
Early surrender = surrender charges.
In the video scenario I shared:
- $350,000 invested
- Market earns nothing
- Rider fee pulls the account down to ~$332,000
- Cash surrender value = ~$324,000 after charges
This is a loss — but only if you quit the contract early.
Condition #3 — You’re Deferring Income With No Growth
If you defer income for several years and the index doesn’t credit any interest, fees (from the rider) can reduce the account value until income starts.
💡 But remember: Even when the account value hits $0, the insurance company still pays you lifetime income. That income is contractually guaranteed.
But If You’re Using the Annuity for Income… Losing Account Value Doesn’t Matter
This is the part most people misunderstand.
You don’t buy an income annuity for the account value — you buy it for the guaranteed paycheck.
In your example, the fee-based income rider produced:
- A $385,000 benefit base after the bonus
- 8% compound growth for 10 years
- A lifetime income payout of $52,000 a year
That’s essentially buying a $1.3M pension using $350k.
Even if you “lose money” in the account value along the way, you end up with hundreds of thousands more in lifetime income.
👉 Want help comparing no-fee vs. fee-based income annuities? Schedule a call
Want to Avoid Any Chance of Account Value Declining? Use a No-Fee Income Option
If you hate the idea of paying a rider fee, you can choose:
A No-Fee Lifetime Income Annuity
- No rider = no fee
- No fee = no way for the account value to drop
- Income is still guaranteed, but usually much lower
In your example:
- Fee-based option: $52,000 a year
- No-fee option: $27,000 a year
That’s almost a 50% reduction in income.
So you’re paying roughly $50,000 in total fees over time…
…but you’re receiving $700,000+ more lifetime income in exchange.
For many retirees, the math clearly favors the rider.
When You Cannot Lose Money in an Annuity
Here are the situations where loss is impossible:
- You don’t surrender early
- You don’t pick a variable annuity
- You choose a fixed, fixed-indexed, or MYGA
- You hold the contract and use it for lifetime income
Once you start taking lifetime income, you cannot lose.
You typically get your entire premium back in 6–8 years, then everything after that is pure profit.
Conclusion
Most retirees never lose a dollar when:
- They choose the right type of annuity
- They avoid surrendering early
- They use income riders correctly
- They understand fees vs. guaranteed payouts
And if you’re buying for lifetime income, account value swings don’t matter — because the insurance company pays you forever, even if the account hits zero.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have
Answer any other questions you may haves