Annuity FAQs - Part 3

Some people don't like Annuities, should I invest in them?

Like all investments, annuities are not for everybody. Some people prefer investing in stocks or options and they cannot do that within an annuity product. Some people are risk-tolerant and do not need guarantees. If guarantees are not what you seek, then maybe you want to explore other investment choices. For annuities, you are trading some flexbilities for the guarantee features. See also below for the fees explanation.

What are the fees for Annuities?

Fees are different for different annuities. Many fees run from 1.5%-2%. The fees can be more if you add "insurance riders" such as death benefit riders. The ability to add riders make annuities similar to life insurance. However, for most people who purchase annuities as an investment, no riders are added which keeps the fee low.

Many people have a misconception of Annuity fees. They think that fees means some money will be taken out of their account periodically. This is not the case. Apart from account fees, which are waived for accounts of $50,000 or higher, all fees are factored into the mutual funds. This means you will not see the fees taken out. The only impact this fee has is on the performance of your investments. For example, if the Annuity fee is 2% and your mutual funds in your account are making 10% on average, you will only see an increase of 8% (hypothetically). Many people also do not like this aspect of annuities since they want to gain the whole 10% instead of 8%. However, this is the price to pay for the guarantee.