‘The Return Is Negative Right Now’: Retired Nurse’s $450,000 Pension Stuck in Annuity With 11% Exit Penalty

A retired nurse’s entire nest egg is tied up in an annuity that is currently losing value, and a $49,500 surrender charge stands in the way of a better option. Before her daughter can persuade her to leave, the next step is to do the math.

“The return is negative right now on these particular annuities.” That is how a caller named Crystal described her retired mother’s savings on a recent episode of The Ramsey Show, hosted by George Kamel and Jade Warshaw.

Her mother spent 30 years working as a nurse. About five years ago, she placed her entire pension, roughly $450,000, into what she believed was an investment. It turned out to be a fixed annuity issued by a life insurance company.

Crystal said her mother is “locked in for like 12 years paying fees.” The surrender charge is 11% of $450,000, and the contract guarantees only 87.5% of the premium. The money is “basically all of my mom’s income.”

Getting out would cost $49,500. Kamel said the seller likely “preyed on her fears of market volatility.” The S&P 500 was up about 13% for the year when the episode aired, and still up about 12% now. That increase alone would have covered the exit fee. Even the 10-year Treasury yields about 5%, while this supposedly safe product is posting a negative return.

The hosts identified the problem, but exiting is a separate calculation

Warshaw called it a stupid tax, defining it as “what takes place when you make a choice without having all the information.” That judgment fits here. A retiree’s only source of income was tied up for more than a decade in a product she did not fully understand.

Five years later, however, the original mistake is a sunk cost. Dave Ramsey put it plainly in an October 2026 episode: “When you wouldn’t buy it again for what you paid for it, it’s time to sell it.” No one would buy this annuity today. The real question is whether paying the surrender charge produces a better outcome than staying put.

That is a break-even problem. If the full surrender charge applies, she would walk away with $400,500. If she moved that money into Treasuries paying about 5% while the annuity earned nothing, she would recover the fee in roughly 2.4 years. After that point, every additional year would represent money she would have missed by remaining in the contract.

The S&P comparison should be handled carefully. This year’s gain is known only in hindsight. A retiree relying entirely on stocks for income can be forced to sell during a downturn, which is the very fear the annuity was sold on. Treasuries provide a cleaner comparison: they are liquid, guaranteed, and still far ahead of a negative return.

The credited rate determines whether leaving makes sense

The key issue is the spread between the annuity’s credited rate and the return available elsewhere. In the example above, the spread is 5 percentage points, which leads to a break-even point of about 2.4 years.

Now assume the contract effectively credits 3% after fees and adjustments, using that as an example. The spread narrows to 2 points, and break-even stretches to about 6 years. If the surrender charge falls sharply over that period, waiting could outperform leaving early.

The alternative matters as well. The national average 12-month CD pays under 2%. If the money were parked there, it could take much longer to recover the surrender fee than if it were moved into Treasuries.

Five things to check before paying a surrender charge

1. Get the surrender schedule in writing. Ask the insurance company for the charge percentage for each remaining year, the current credited rate, and whether a market value adjustment applies. That adjustment often explains why a “fixed” product can show a negative value.
2. Review the free-withdrawal provision. Many fixed annuities allow about 10% of the balance to be withdrawn each year without penalty. On $450,000, that would be $45,000 annually, enough to provide income or move funds out gradually.
3. Do your own break-even analysis. Write down the dollar amount of the surrender charge, the annuity’s actual credited rate, and the rate on a Treasury you could buy now. If the alternative recovers the fee well before the surrender period ends, leaving is the better move.
4. Protect the tax treatment when you move the money. Pension money rolled into an annuity is usually tax-deferred. Use a direct transfer to an IRA instead of taking a check, which could trigger income tax.
5. Work with a fiduciary. Kamel recommended “an actual, credible financial advisor and not an insurance agent.” He also wanted her mother to act “out of a place of strength and confidence,” so she does not abandon the new plan at the first sign of market volatility.

A surrender charge is a measurable cost. Once you know how long an alternative investment would take to earn it back, you can decide whether staying or leaving makes more sense. Replacing a lump sum with dependable monthly income is a separate task, and we have laid out the mix, payment schedule, and withdrawal order in a free guide to the Paycheck Portfolio method.