Guides
Annuity sales abuses targeting seniors
How misleading annuity sales to older buyers work, the warning signs, what best interest rules require, and what to do if you were sold the wrong one.
Annuities are legitimate products, but older buyers are a favorite target for sales that put commission ahead of fit: long surrender periods sold to people who may need the money soon, "bonus" annuities that hide costs, and exchanges that cost more than they gain. The protection is knowing the handful of warning signs, asking for everything in writing, and using your free-look and complaint rights early.
Why seniors are targeted
Annuity sales are large. why annuity sales hit records covers the 2025 record of $461.3 billion in U.S. sales, reported by LIMRA in February 2026. Older savers have the assets, retirement-income worries and often the time to attend a sales meeting. Commissions on some annuities are high and tend to be paid up front, which is not illegal but is a conflict of interest. Regulators have long treated sales to seniors as an exam priority; the SEC, FINRA and state regulators' review of "free lunch" seminars found that all 110 firms examined were using sales presentations, a pattern that persists in dinner invitations today.
Common abuses
| Practice | What it looks like | Why it harms |
|---|---|---|
| Long surrender period sold to someone who needs liquidity | A 70- or 80-year-old locked into a 10- to 14-year surrender period | Early withdrawals trigger surrender charges; FINRA notes surrender periods on variable annuities can run eight years or more |
| Unsuitable exchange | Told to move an existing annuity or life policy into a new annuity | A new surrender schedule starts and old benefits may be lost; see 1035 exchanges: swapping policies without tax and twisting and churning: replacement sales abuses |
| Annuity inside an IRA, sold for "tax deferral" | The IRA already defers tax | You pay for a feature you already have; see Should you put an annuity in an IRA? |
| Bonus annuities | A "7 percent bonus" headline | The bonus often comes with a longer surrender period, lower caps or rates; see bonus annuity |
| Misleading income claims | "Guaranteed 7 percent income" | The figure may apply to an income base, not your account value; see guaranteed lifetime withdrawal benefit riders |
| Misleading indexed returns | "Market gains, no market losses" | Caps, spreads and participation rates limit credits; see fixed indexed annuities: caps, participation rates and trade-offs |
| Funding with money needed for care | Selling an annuity to a person likely to need long-term care or Medicaid | Locked funds and Medicaid look-back complications; see medicaid eligibility and life insurance cash value |
| Posing as a "senior specialist" | Titles implying advisory or government credentials | Titles do not reflect license or duty |
Warning signs in the pitch
- Urgency. "The rate expires Friday" or "sign today to lock in the bonus."
- Vague answers on fees. FINRA advises asking the seller to explain all of the product's features, riders, costs and restrictions and to disclose how they are paid.
- Pressure to cash out other assets such as a CD, a life policy or a 401(k) without comparing alternatives.
- Unclear who the seller works for. A seller who calls themselves a "retirement advisor" may hold only an insurance license. Check with how to check that an insurance agent is licensed.
- No paper. Refusal to give the contract specimen, the surrender schedule or a written comparison for an exchange.
- Pressure to hide the purchase from family or an adviser you trust.
What the rules require
Under the NAIC's Suitability in Annuity Transactions Model Regulation (#275), revised in 2020, producers must act in the consumer's best interest when recommending an annuity, covering care, disclosure, conflict-of-interest and documentation obligations. New Jersey became the 50th state to adopt best interest rules for annuities in April 2025, according to Insurance Business, though state versions differ. The standard does not forbid commissions or require the cheapest product, so it is a floor, not a guarantee. Details are in best interest rules for annuity sales.
Variable annuities and RILAs are also securities. FINRA says variable annuities are a leading source of investor complaints, and recommends checking a seller on BrokerCheck. A broker or registered representative selling them must be registered; see the licensing section of how to check that an insurance agent is licensed.
Before you sign: a checklist
- Ask in writing: What is your commission, and what would it be on the alternatives?
- Request the surrender schedule, the annual free-withdrawal amount and a plain-language list of all charges (see annuity fees, explained).
- Confirm your liquid reserves: could you cover emergencies and care costs without touching this money?
- If exchanging, ask for a side-by-side comparison showing what you lose, including surrender charges on the old contract.
- Have a person you trust, a fee-only planner or an attorney read it.
- Do not sign blank or partly completed forms, and keep copies of everything.
- Use the free-look period; the length depends on the state and sometimes your age, and some states give longer periods to seniors.
If you were sold the wrong annuity
- Within the free-look window, cancel in writing for a refund, subject to the contract's terms.
- After it, request a copy of the application and the sales file and compare what you were told with what is written.
- Many contracts allow limited free withdrawals, and some waive surrender charges for confinement to a nursing home or terminal illness; read the rider.
- File a complaint with your state insurance department, as explained in how to file a complaint against a life insurer. For a variable annuity or RILA, you can also complain to FINRA or the SEC. A lawyer may be worthwhile for larger losses; see when to hire a life insurance lawyer.
- Complaint deadlines and arbitration clauses vary, so act promptly.
Key takeaways
- Annuities are not scams, but commission-driven sales to older buyers can be unsuitable, especially long surrender periods, exchanges and annuities inside IRAs.
- Watch for urgency, vague costs, bonus headlines and income promises that refer to a benefit base.
- All 50 states have best interest rules for annuities, but they require documentation and care, not the cheapest product.
- Ask for compensation and alternatives in writing, use the free-look period, and complain to your state insurance department if you were misled.