The Truth About Annuity Commissions

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Let’s set the scene: you’re planning for your financial future, and the term’ annuity commissions’ keeps popping up. You’re thinking, “What is it exactly?” Well, dear reader, you’ve come to the right place. Buckle up because we’re about to delve deep into annuity commissions, shedding light on topics like annuity commissions vs. management fees, direct-sold annuities, and many more.

Unpacking Annuity Commissions

Annuity commissions, in essence, are the remuneration that insurance agents receive for selling annuity products. The insurance company pays the commission as a percentage of the amount you invest in the annuity. This commission can vary greatly depending on the type of annuity being sold – whether it’s fixed annuity commissions, fixed index annuity commissions, or variable annuity commissions.


Imagine you’re investing $100,000 into a variable annuity. If the annuity agent’s commission rate is 5%, they will receive a $5,000 commission from the insurance company.

Annuity Commissions

Annuity Commissions Vs. Management Fees

At first glance, annuity commissions and management fees may seem synonymous, but they are distinctly different. As we’ve mentioned, the annuity commissions are paid to the agents by the insurance company. On the other hand, management fees are costs that you, the annuity owner, are responsible for paying. These fees are charged for managing your annuity investment and are usually a percentage of the assets under management.

  • Commissions: Paid by the insurance company.
  • Management Fees: Paid by the annuity owner


Suppose you have a $200,000 annuity with a yearly management fee of 1.5%. In this case, you’d be responsible for a $3,000 yearly fee.

Key Takeaway: Annuity commissions are priced and predetermined by the insurance company’s actuaries. This means annuity performance is not affected by commissions. However, the annuity owner pays management fees charged by advisors, and any increase in management fees could potentially decrease the annuity’s performance.

Is Annuity Commissions A Bad Thing?

Annuity commissions can polarize various consumers, financial advisors, and insurance agents. Annuity compensation has been a controversial topic and a tactic to scare or bad-mouth the annuity industry. This guide will explain how the financial advisor and insurance agent earn a commission in various scenarios so you understand the difference and make an informed decision.

First things first. 

Ignore any negative feedback on commissions.


Because commissions are just an alternative and standard method of earning revenue in the insurance and financial services industry, financial advisors or insurance agents earn commissions just like a real estate agent or mortgage broker.

Commission can be abused, but after reading this, you’ll have enough information to determine whether a commission is abused.

Annuities Commission

Annuity Agent Salary – How Much Does An Annuity Salesman Make?

The income of an annuity agent largely depends on the number and type of annuities they sell. It combines their base salary and the commissions they receive from each sale. A successful annuity agent can earn a substantial income considering the average annuity commission.


If an agent sells ten $100,000 variable annuities in a year with a commission rate of 5%, they will earn $50,000 from commissions alone.

Annuity Commission

Annuity Sales Commission Options

Commission on annuities comes in 2 different methods, upfront and trail commission.

Upfront Commissions

The most popular annuity compensation option is paid once upfront in a lump sum payment after issuing the policy.


  • A $100,000 annuity (10-year contract) is issued. 
  • The upfront commission option is 7% of the initial premium that is invested. 
  • The financial professional will receive an income amount totaling $7,000 and will not be paid again on the policy as long as that annuity contract is active.
  • In this scenario, the total commission for the entire ten years of managing the policy would be $7,000.
  • This commission comes from the issuing insurance company or financial institution, not you, the contract owner.

Trail Commissions

Trail commissions will provide lower commissions to the financial professional upfront and a “trailing” commission based on the total annuity value every year as long as the contract is active.


  • A $100,000 annuity (10-year contract) is issued. 
  • The trail commission will compensate 3% upfront in a lump-sum payment, then pay the financial professional an additional 1/2% of the total annual annuity value. 
  • The annuity agent or advisor will be paid $3,000 in a lump sum and will also be paid 1/2% of that annuity’s value every year.
  • In this scenario,  if your annuity stayed the same value (no growth/no loss from market performance) for ten years, your advisor would have received a total commission of $7,500 ($3,000 upfront + $500 annually for the remaining nine years).
  • This commission comes from the issuing insurance company, not the consumer.

Fee-Only Commissions

This is where the Money Manager is supposed not to take any commissions from the insurance companies but instead charge the contract owner (you) a fixed fee quarterly, semi-annually, or annually based on the total account value in a good or bad market.

Annual fees typically range from 1% to 3% of the current account’s value each year. 

The higher the rate of return, the higher the fee you will be charged, and the heavier the commissions the financial advisor will receive. This will leave less money in your retirement plan.

A Warning: This fee does not include any fees coming out of your contract for riders, enhanced benefits, and/or management fees.


A $100,000 annuity or investment is issued.

If your annuity or investment stayed the same value (no growth/no loss) for ten years, your advisor would have received a total commission of:

  • 1%  Annual Fee = $10,000 total for the 10 years
  • 2% Annual Fee = $20,000 total for the 10 years
  • 3% Annual Fee = $30,000 total for the 10 years.

This commission comes from you, the contract owner, not the insurance company or financial institution.

Now let me state, that using a fee-only financial professional isn’t necessarily a bad thing. It’s just more expensive for you.

The idea is that the fee-only advisor is working to grow your retirement savings, so the more they grow your accounts, the more of a fee they will receive.

Just understand the fee can still apply if you lose money as well.

Flexible-Premium Compensation

A contract owner can add additional annuity premiums into their existing retirement account with flexible premium deferred annuity contracts. For a specific initial period, the financial professional will collect an additional commission for each deposit made into the contract.

Average Annuity Commissions

Despite commissions built into the annuity structure, the compensation levels will depend on the varying annuity types. Below are the financial services industry standards. Agents call this “street-level” compensation.

Average Upfront Compensation

  • Immediate Annuity – 3% upfront commission from the insurance company.
  • Fixed Annuity (MYGA) – 2.5% upfront commission from the insurance company.
  • Variable Annuity – 6.5% upfront commission from the insurance company.
  • Fixed-Indexed Annuity – 6.5% upfront commission from the insurance company.

Average Investment and Money Management Fees

  • You pay 1% – 3% of your investment’s value out of pocket.

Next Steps

Thank you for reading our guide on annuity commissions. We hope that this information has been helpful and informative. If you have any questions, please do not hesitate to contact us. We would happily provide you with a quote and help you find the right annuity for your needs.

Commission On Annuities

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Frequently Asked Questions

Why are some annuity commissions higher than others?

Commissions vary due to varying factors. The primary factor being the length of the deferred contract. The more guarantees offered to the annuity owner, the less commission. Age is a factor. Basically, the longer the annuity companies can invest your premiums, offer fewer guarantees, and have a better life expectancy, the higher your commissions will be.

What’re the lowest and highest commissions on annuities?

There are deferred contracts built for Registered Investment Advisors that pay zero commissions (because of investment management fees), all the way up to 10% upfront commissions for a 14-year annuity contract.

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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