Thinking about using an annuity to help you meet your financial objectives? That could be a wise decision. Annuity benefits vary by type, but many annuities offer downside protection, tax advantages, and even guaranteed lifetime income.

However, annuities can also have costs associated with them. Of course, that’s true of most financial vehicles. There are few financial tools that offer helpful benefits without any costs, expenses, or risks.

An annuity could be right for you, but it’s important that you understand all possible costs. Below are some of the most common types of costs found in annuity contracts. Be sure to do your due diligence and review all possible costs before you move forward with an annuity contract.

Surrender Schedule

Nearly all deferred annuities have something called a surrender schedule. This is a period of time in which you may face a penalty if you surrender your annuity contract. Surrender schedules often last from three to seven years, and the penalty usually declines over time.

Keep in mind, you only pay this penalty if you surrender the contract or take a sizable withdrawal during the surrender period. If you don’t do either of those things, then you won’t have to pay this charge.

Mortality, Expense, and Administrative Charges

Some annuities have an annual fee that may be called the mortality, expense, and administrative (ME&A) charge. This cost is usually found in variable annuity contracts. It’s charged as an annual percentage of your contract value.

Fixed annuities and fixed indexed annuities don’t usually have ME&A fees. Instead, the cost of the contract is factored into the interest rates. That means that the interest you receive each year is net of fees, so you don’t face any additional charges.

Rider Fees

Many deferred annuities offer optional benefits called riders. These optional riders are used to enhance the contract. For example, some might increase the death benefit. Others may offer guaranteed income for life. The actual benefit depends on the contract and the terms of the rider.

While riders can be useful tools, they also usually come with some level of additional fee. Often the fee is charged on an annual basis and is expressed in terms of a percentage of the contract value or the rider benefit amount.

Ready to evaluate annuities to determine how one may fit into your financial plans? Let’s talk about it. Contact us today at America’s Annuity for more information. We welcome the opportunity to connect with you and start the conversation.


Types of Annuities

Annuity Tax Benefits

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