Sales pitches for annuities often lead with guaranteed income and peace of mind.
What they tend to skip is the fee stack baked into the product, which can quietly shave thousands of dollars off your balance over a retirement.
If you own one or are considering buying, the fee math matters more than the brochure.
Start with the mortality and expense charge, or M&E.
This is an annual fee, often around 1% to 1.5% of your account value, that pays the insurer for the guaranteed death benefit and the cost of managing the contract.
It comes out whether your investments gain or lose money that year.
Then there are fund management fees inside the subaccounts you choose.
These work like expense ratios in a 401(k), frequently 0.5% to 1% or more, and they stack on top of the M&E charge.
Add an optional income rider, and you may pay another 0.5% to 1.5% annually for the guarantee, even in years you never turn on the income stream.
The result is a product that can carry total annual costs above 3%.
On a $200,000 account, that is roughly $6,000 a year in fees, money that would otherwise compound for you.
Over 15 years, the drag can run into six figures, which is why financial planners keep telling people to read the fee table before signing anything.
Most annuities lock you in for a set period, often seven years, with a penalty for early withdrawals that starts around 7% and steps down each year.
Need the money during that window, and you can lose a chunk of your own principal to get it back.
Fixed and fixed-indexed annuities tend to be simpler and cheaper than variable ones, though they come with caps and participation rates that limit your upside.
Indexed products may credit nothing in a flat market even when the index is up, because of how the crediting formula is structured.
If you already own an annuity, pull out the prospectus or contract and find the fee page.
Look for M&E charges, subaccount expenses, rider costs, and the surrender schedule.
A fee-only advisor or a fiduciary can review it against a low-cost alternative, and some contracts offer a free look period or a 1035 exchange without a tax hit.
One more thing worth checking: many workplace retirement plans now offer annuities inside the plan at institutional pricing.
Those can carry far lower fees than a retail contract sold one-on-one, so compare before you buy anything on your own.
The bottom line is that annuities are not automatically bad, but the fees are real and they compound against you.
Anyone selling one should be able to show you the total annual cost in plain numbers, not just the income illustration.
Final Thoughts
If they cannot, that silence is your answer.