Variable Annuity Fees You Might Not Know About

Hidden fees are the bane of any investor, and variable annuities often have hidden fees or cost that someone inexperienced in the stock market might not know about. While financial planners can undoubtedly help, they can often overlook fees just the same as anyone else.

Here I will outline some of the trickier variable annuity fees you might not know about.

Annuity Account Fee:

A policy fee, also known as an annuity account fee, is something a lot of policies come with and usually top off at 150 dollars annually. This fee can be waived often too if you happen to keep over a certain amount invested, that number being over 50,000 dollars in annuities. Many people can mistake their annuities for having no account fee, when in fact, it has just been waived because they’ve invested over the requisite dollar amount.

Mortality Expense:

They charge you to die! There is often a fee attached to annuities that will have a mortality clause, intended to cover the expenses paid to your beneficiaries and to fulfill any of the other guarantees that may be attached to your contract. This can max out at 1.75 percent a year.

Underlying Investment Fees:

Underlying investment fees, as in costs associated with specific certain sub-investments that you may have elected as part of your annuity, can add up quick, some of them topping off at even 3 percent annually. This could be a good trade-off, depending on what you are investing in and how high the return rate is, but still, you should be aware of these sometimes unadvertised fees.

Guaranteed Income Rider Fees:

Having enough money to last throughout retirement is a primary concern, which is why many people opt to add the Lifetime Minimum Income Rider to their annuity. Often, these riders come with extra fees. While the investments of your annuity should be more significant than the guaranteed income, many people still often opt for this add on to make sure there will be covered financially no matter what. This can allow you to be even riskier with certain investments, netting you even more money. Those fees though on the guaranteed income can add up, and even at only 1.5 percent, if you’re portfolio is valuable enough, can be quite a pretty penny.

Additional Riders:

Many other riders can be added to your annuity, and each one can host its own separate fee. Some of these include Joint Life Rider, Death Benefit Rider, Long Term Care Rider, and others. While covering all your bases is important, these can really add up, if you’re not careful.

Variable Annuity Surrender Fees:

Surrender fees can apply to your annuity if you remove money from the account during specified periods. Be aware of when those times are and how much you’re removing, because if you can push off the withdrawal, you may be able to avoid the fee. While a lot of annuities won’t charge you a fee for removing less than 10 percent of your total investment, if you are relying on your variable annuity for an income, you’ll certainly need more, and that’s when those fees may apply. And they can be steep, some even up to 9.5 percent!

Now that you have a better picture of many of the hidden fees that may be attached to your annuity, review all the fine print before you sign anything or make changes to your account, and it should be smooth sailing, all the way through retirement.