What fees are associated with annuities?

what fees are associated with annuities
Wooden blocks with text Fees and coins

Annuities are often presented as a beneficial financial tool for retirement planning. They offer a plethora of advantages, including secure income and tax-sheltered growth, making them an attractive option. Though, Annuities can have high fees associated with them, depending on which type of annuity you choose and the insurance company you go with. Be sure to research all your options carefully before making a decision. 

Here are some of the most common fees associated with annuities:

  1. Surrender Charges: Annuities can come with significant surrender fees if they are withdrawn before the set period has passed. These charges can range from a few years to as long as 10 years and might be too expensive for some.
  2. Mortality and Expense (M&E) Charges: M&E charges are an essential part of insurance policies and can differ substantially. Generally, they range between 0.5% to 2% annually based on the account value.
  3. Administrative Fees: Annuities generally involve a certain amount of administrative fees, that are applied to cover their upkeep. These charges can fluctuate but usually remain between $30 and $50 per annum.
  4. Investment Fees: Certain annuities can also come with a cost – investment fees. These fees may be a certain amount or take the form of a percentage of your account value, similar to mutual fund fees.
  5. Riders and Options: While annuities usually involve additional fees for riders and options such as a death benefit or a guaranteed minimum withdrawal benefit, some investors may find these features worth it for the extra security/features they provide.

Annuities can be a great retirement planning tool but it is essential to understand the fees involved. While they offer certain advantages, such as secure income and tax sheltering, the fees associated with them can significantly decrease returns & reduce overall value. It is therefore important to be mindful of these charges when looking into annuities.

Compare Annuity Options

Deciding on an annuity option requires careful consideration of the associated fees. Weigh the potential benefits against these fees to make an informed choice. It can be beneficial to seek professional advice from a financial advisor who can help you get a better understanding of the fees and find an appropriate annuity for your retirement plan. We regularly keep posting in-depth annuity reviews where we cover all the costs associated with each annuity. You can check them here.

To sum it up, annuities involve certain fees which can have an effect on your investments & returns. It is important to be aware of and factor in these charges when choosing an annuity plan. If you take the time to research and understand the fees associated with annuities and consult with a qualified financial advisor, you can make an educated decision about if it is suitable for your retirement planning.


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