Do All Annuities Have Fees?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Understanding Fee Structures in Annuities

Annuities come with various fee structures depending on their type. Here is an in-depth look at the common types and their associated fees:

Single Premium Immediate Annuities (SPIAs)

SPIAs typically do not have traditional management or administrative fees. However, they may have lower payments if you opt for extra add-ons, such as:

  • Cost-of-Living Adjustments: To protect against inflation, reducing initial payouts.
  • Survivor Benefits: Ensuring payments to a beneficiary after your death, potentially lowering monthly income.

Multi-Year Guarantee Annuities (MYGAs)

MYGAs generally do not include traditional fees but often involve trade-offs:

  • Higher Interest Rates: You might sacrifice liquidity provisions, meaning access to funds could be restricted.
  • Penalties for Early Withdrawal: If you need access to your money before the end of the term, you could incur penalties.

Fixed Annuities

Standard fixed annuities usually offer stable returns without traditional fees. Key points include:

  • Guaranteed Interest Rates: Fixed rates provide predictability in earnings.
  • Surrender Charges: While there are no management fees, withdrawing funds early can result in significant charges.

Fixed Indexed Annuities

Fixed Indexed Annuities (FIAs) link returns to a market index and typically don’t have traditional fees unless you choose additional features:

  • Guaranteed Lifetime Withdrawal Benefit (GLWB): This rider ensures a lifetime income but incurs a fee.
  • Higher Caps and Rates: Opting for higher participation in market gains can come at an extra cost.
  • Long-Term Care Riders: Enhancing benefits for long-term care needs may involve additional fees.
  • Enhanced Death Benefit: Providing more for your beneficiaries at a cost.

Variable Annuities

Variable annuities are the most expensive, as they include traditional fees such as:

  • Management Fees: Ongoing costs for the investment options within the annuity.
  • Mortality and Expense Risk Charges: To cover insurance risks and administrative costs.
  • Rider Fees: Additional costs for optional benefits like income guarantees or enhanced death benefits.

Surrender Charges

Many annuities have surrender charges if funds are withdrawn prematurely, usually within the first years after purchase. These charges can significantly impact the overall cost if you need early access to your funds.

Return of Premium Rider

Some annuities offer a Return of Premium Rider, which can waive both traditional fees and surrender charges under specific conditions, such as the annuitant’s death. This feature provides an added layer of financial security and flexibility.

Do All Annuities Have Fees

What We Recommend

Not all annuities have traditional fees. SPIAs, MYGAs, fixed annuities, and FIAs often exclude these fees in their base contracts but may include surrender charges. Variable annuities do have traditional fees and are generally the most expensive. Understanding these nuances is crucial for making informed annuity choices.

When evaluating different annuity options, carefully consider the fee structures and potential surrender charges. Understanding the specific terms and conditions of each type of annuity can help you make the best decision for your financial situation.

For personalized advice or a free quote, contact us today. Our team of licensed financial professionals is here to help you navigate your annuity options and find the best solutions for your retirement planning needs.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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