Annuities and Fees

Below are some questions about annuities and fees. Some people hate annuities because the annuity fees. Ending annuities without paying fees is very difficult and most of the time ending annuities without paying fees is impossible. Therefore, before you buy an annuity, you should do alot of research into the annuity fees and what you must do to end an annuity (if you need to) without paying much fees or no fees. Like a life insurance product, if you want out of an annuity, you usually have to pay fees and penalties.

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.

Will the annuity fees be taken out of my account regularly?

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 usually 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.

I don't see my annuity fees taken out of my account, does that mean I'm not paying any annuity fees?

Just because you cannot see it taken out of your account does not mean you are not paying any annuity fees. Usually, the only impact this annuity 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.