A claim at a retirement seminar — that annuities can outperform the stock market — prompted MarketWatch to examine the assertion on June 12, 2026. The conclusion: fixed annuities are unlikely to beat the historical 8–10% annualized equity returns that have defined long-run stock market performance.

"Annuities" covers a wide range of products, not a single type. The spectrum runs from fixed annuities, which guarantee a set interest rate, through indexed annuities, which tie returns to stock market indexes but cap how much you can gain, up to variable annuities, which are classified as complex securities. Variable annuity holders take on direct market exposure inside a long-term contract with the insurance company. Each product sits at a different point on the risk-return curve, and conflating them is the kind of framing that sales pitches depend on.

The Arithmetic Problem With Fixed Annuities

Fixed annuities cannot realistically outperform equities over the long term. The reason is structural, not temporary. A fixed annuity guarantees a rate set when you buy the contract. Insurers set that rate by investing the money mostly in investment-grade bonds, taking a profit margin, and absorbing the cost of longevity risk — the possibility that you live longer than expected and they owe you more than anticipated.

The result: the interest rate the insurer can afford to pay you is bounded by current bond yields, minus their overhead and profit. When 10-year Treasury bonds yield well below the 8–10% long-term average for stocks, the math closes off any realistic path to matching or beating stock returns after fees. A fixed annuity does offer something stocks cannot: guaranteed principal and predictable income during retirement, which has genuine value when you are spending down savings rather than building them. The error the seminar speaker apparently made was framing a locked-in, safety-focused product as a substitute for stock ownership rather than as a complement to it.

Indexed and Variable Annuities: The Risk Gradient

Indexed annuities sit in the middle. As FINRA's investor guidance notes, they expose holders to more risk and more potential return than fixed annuities but less risk and less potential return than variable annuities. The typical mechanism uses participation rates and caps that limit your upside in exchange for a floor — often zero percent — on losses from the index. In a strong bull market, you capture some but not all of the gain. In a flat or moderately down market, the floor protects you. Over a full cycle, results depend heavily on contract terms and when returns arrive, not on a clean comparison to simply buying and holding stocks.

Variable annuities sit at the opposite end. They are securities under regulatory law, not just insurance contracts. FINRA Rule 2211 requires that marketing for variable annuities clearly identify them as such — precisely because disclosure and suitability rules for securities are stricter than those for insurance products. Variable annuities do give you full market upside. But they layer on costs: mortality and expense charges, sub-account fees, and surrender penalties that can run for seven years or more. Your actual net return after costs differs materially from the gross market exposure.

FINRA's 2025 Annual Regulatory Oversight Report includes a dedicated section on annuities, flagging the category as a sustained focus area for member-firm compliance. This attention is not routine. Complex, long-dated products with opaque fee structures and significant surrender charges create persistent suitability and disclosure risks — and the seminar sales channel, where urgency and social pressure are built into the format, is among the highest-risk environments for problems to surface.

What the Pitch Gets Right — and What It Misses

There is a legitimate case for certain annuity structures in retirement portfolios. Guaranteed lifetime income addresses longevity risk in a way a pure stock allocation cannot. Principal protection can matter for a retiree without the time horizon to recover from a market downturn. These are real product features with real value.

What the seminar framing obscures is the cost. Guaranteed returns come at the price of capped upside, illiquidity, counterparty exposure to the insurer, and fee drag. The comparison to stock returns is not false in every dimension — indexed products do participate in equity upside to a degree — but claiming that any annuity type can outperform a diversified stock portfolio on a net, risk-adjusted basis over a long accumulation period is not what the product mechanics support. For advisors evaluating whether an annuity suits a particular client, the questions that matter are: what is the all-in cost, what is the surrender schedule, what is the insurer's credit quality, and what specific risk is the annuity solving for? The answer to that last question almost never is "stock market underperformance."