Sales pitches for annuities tend to lead with guaranteed income and peace of mind.
What they rarely lead with is the fee schedule, a document that can run dozens of pages and quietly determine how much of your money actually survives to retirement.
Annuities are insurance products, not pure investments, and that distinction shows up in the costs.
You may pay a mortality and expense fee that runs roughly 0.5% to 1.5% of your account value every year, plus administrative charges, fund management fees inside the subaccounts, and surrender charges if you pull money out early.
A guaranteed income benefit, a death benefit, or a long-term care rider each carries its own annual fee, often 0.5% to 1.5% apiece.
Stack a few together and you can hand over 2% to 3% of your balance annually before your money has a chance to grow.
On a $100,000 account, a 2.5% annual drag costs $2,500 in year one.
Over a decade, the compounding you lose can easily exceed six figures, which is why fee disclosures buried in prospectuses matter more than the brochure's headline rate.
Many contracts lock you in for seven years, sometimes longer, with penalties that start around 7% and step down each year.
If your situation changes and you need the cash, the exit fee can wipe out years of gains.
Where annuities can still make sense: if you genuinely want lifetime income you cannot outlive, if you have maxed out tax-advantaged accounts, and if you shop multiple carriers rather than accepting the first quote from an agent working on commission.
Indexed and variable annuities tend to carry the heaviest fee loads, while plain immediate annuities are often simpler and cheaper to compare.
Before signing anything, ask for the full fee table in writing, the length of the surrender schedule, and the total annual cost of every rider you are considering.
Compare that total against a low-cost index fund plus a Treasury ladder.
Our take: annuities are sold as certainty, but the certainty is mostly for the insurer.
If you cannot explain every fee in your contract in plain English, you are not ready to sign it.
Final Thoughts
Ask a fee-only advisor to read it with you first.