You get invited to a free dinner seminar, and the salesman claims annuities can beat the stock market. Is it true? The short answer: it depends what he is selling and what he means by "beat."

First, what is an annuity? It is an insurance contract where you give money to an insurance company, and they promise to pay you back — either a fixed amount each month, or an amount tied to how the stock market performs. There are three main types.

A fixed annuity pays a set amount, locked in at the start. The insurance company takes all the investment risk. A variable annuity lets you pick how your money is invested in stock funds inside the insurance wrapper — so you take the risk if markets fall. A registered index-linked annuity, or RILA, splits the difference: your money follows the S&P 500 or another stock index, but gains are capped and losses are cushioned with a floor.

Now, do they beat the market? Variable annuities hold the same stocks as regular index funds, so the returns start out identical. But then you pay fees. These annuities charge 1.0–1.5% yearly just for the insurance company's costs, plus another 0.5–1.0% or more for the income guarantee riders. Total: 2.5–3.5% a year. That is a big hole to dig out of. You would need the fund managers inside to beat the market by at least that much just to keep pace with a simple, cheap index fund — and research shows that almost never happens.

RILAs are trickier. The loss cushion is real and matters if the market crashes early in your retirement and you need to withdraw money. But you pay for that protection by giving up some upside. If the index returns 20% in a great year, your RILA might only capture 15%. Whether that trade is worth it depends on how volatile things get and how much money you actually spend — questions a dinner pitch does not try to answer.

Where you buy matters too. Variable annuities and RILAs are regulated as securities, so brokers selling them must follow strict rules. Fixed annuities are just insurance products, sold by agents with fewer federal rules to follow. The steak-dinner seminars almost always pitch fixed or fixed-indexed annuities — products where regulators are less likely to question the sales approach.

The money part is important. Insurance agents selling these products get paid large commissions upfront, often 5–8% of what you put in. But you do not see that as a separate bill — it is baked into the contract. That setup gives the salesman a reason to emphasize the good scenarios and downplay the costs.

So why do people buy them? Because the fear is real. If you retire at 65 and the market crashes the next year, and you need to withdraw money, you could run out before you die. A guaranteed floor protects against that. It is a legitimate concern that a plain stock portfolio does not address.

Here is the honest pitch: annuities can protect you from devastating early-retirement downturns, in exchange for capped gains and significant costs that probably leave you worse off in the long run than a diversified stock portfolio. That is a reasonable choice for some retirees, but calling it "beating the market" is not honest. The difference between that claim and the truth is where the real problem lives.