Annuity Fees and Costs Explained
Let’s get something straight: every annuity has costs. The problem is, most of them are hard to find.
When you read an annuity brochure, it’s full of words like “guaranteed,” “protection,” and “income for life.” Those sound great, but hidden inside that same contract are layers of charges: mortality and expense fees, administrative costs, rider fees, subaccount expenses — and surrender charges that lock up your money for years.
I’ve seen annuities with all-in costs north of 4% per year. That means you start every January four yards behind the line of scrimmage and have to make up that ground before you see real growth.
The industry counts on people not reading the fine print.
And let’s be honest — most people don’t. They trust the salesperson to explain it.
If you’re considering an annuity, or if you already own one, ask for a breakdown of every single fee in writing. Ask how long the surrender period lasts, and what happens if you want out early. And ask how the company calculates your “guaranteed” income — because that number usually comes from an income base calculation that doesn't match the actual cash value you see on your statement.
Because we operate as a Fee-Only firm, we don't sell annuities or collect sales commissions on them. That gives us the freedom to review existing policies objectively, expose hidden fee layers, and tell you straight up whether a contract is helping or hurting your plan.
Annuities can play a role in a financial plan, but they shouldn’t be the default solution.
If someone can’t clearly explain what you’re paying and what you’re getting, you’re probably not getting a good deal.
Annuities generally aren't inherently "bad." It’s how advisors use them (or overuse them) that is the problem.
