Suze Orman warns retirees that annuities aren't as safe as they think. The growing risk to what seems like a sure bet in retirement

Annuities are offered by insurance companies, not banks or credit unions. That means they aren’t federally protected the same way that some banking products are.

Here’s what that means for you — and what to keep in mind if you’re interested in purchasing an annuity anyway.

Bank accounts have FDIC coverage; annuities don’t

Almost all credible banks are FDIC-insured. That means the federal government backs the deposit accounts of those banks for up to $250,000 per owner, per ownership category, in case those banks fail.

For example, if you had a checking account and a savings account at the same bank, you would be covered for up to $250,000 of the total amount saved in both accounts. If you had a joint savings account with one other account owner, the FDIC would cover up to $500,000 of that account because there are two owners.

The federal government is able to do that because it actively maintains the Deposit Insurance Fund, or DIF. The DIF actively holds a certain amount of money earmarked for use in case of bank failure; as of Q2 2026, it held around $161 billion.

That’s around 1.5% of the money the FDIC would need to pay out if every federally insured bank failed at the same time. Because banks very rarely fail, the FDIC is only federally required to hold at least 1.35% of the money needed to pay out every covered deposit account.

Annuities are not a deposit product; they are an insurance product. As such, they aren’t covered by the FDIC — or by any federal insurance at all.

Instead, annuities are covered on a state-by-state basis by state guaranty associations. If the insurance company that offers your annuity fails, these organizations will pay you back a certain amount of your annuity.

These associations don’t offer as powerful a safety net as the FDIC; notably, there isn’t a state annuity version of the DIF to ensure states have the money on-hand to cover a failure.

There isn’t one set state payout, either. Most states offer $250,000 of coverage like the FDIC, but a few offer up to $500,000. California’s coverage is worse; it covers up to $250,000 like other states, but it will only pay out up to 80% of your annuity’s value at maximum.

If you’re talking to a salesperson who says annuities are just like CDs — as did one of Orzman’s callers — they’re misrepresenting the power of FDIC insurance. Make sure you know what you’re getting into before you commit.

Avoid high-pressure sales tactics and know what you’re buying

Annuities are a complicated product. Depending on what type of annuity you get, you could start receiving a fixed income immediately or be “locked out” for several years; you could get a fixed or variable rate of return; you can get just an annuity, or you can get an annuity with extra “riders” that give you additional bonuses (at extra cost).