Annuity Fee Comparisons
Annuities are insurance policies. These contracts guarantee you an income during your retirement. However, these insurance policies may come loaded with fees. Each annuity is different, but the fee structure among them is similar in principle. Make sure you understand how annuities charge fees before you purchase one so that you get the best annuity for your needs.
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No Fee
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Some annuities, called fixed annuities, do not charge a fee. Instead, they pay a fixed rate of return. This fixed rate of return is all you'll get from the product. The insurance company invests the annuity's proceeds into bonds or bond-like investments and credits the annuity with a set rate. This rate is normally guaranteed for a set number of years.
Spread
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A spread is common on indexed annuities. This type of fee is a flat fee charged on the annuity. The fee is expressed in terms of a percentage of profits. When the annuity is credited with interest, the fee is deducted from the interest credited and the remainder is credited to the annuity. This type of fee is ideal when you think the annuity will perform exceptionally well.
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Flat Fee
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A flat fee is a fee found on variable annuities. In addition to mutual fund fees charged, the annuity is assessed a flat fee regardless of the performance of the annuity. Even if you lose money in the account, the annuity will be assessed a fee. This fee will be paid out of the proceeds of the annuity.
Surrender Charge
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A surrender charge is a fee assessed on all annuities. A surrender charge is a fee or penalty imposed for cashing in the annuity before the date specified on the annuity contract. Surrender charges are normally on a sliding scale. This means that your annuity policy's surrender charges may start out at 10 percent and then may decrease over time until they reach 0 percent.
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