Salespeople love to pitch annuities as a safe harbor, but the paperwork rarely leads with the price tag.
Every annuity contract carries layers of costs, and those costs come out of your balance whether the market goes up or down.
Before you sign anything, it helps to know who gets paid and how much.
A broker selling an indexed or variable annuity can earn 5% to 7% of your deposit up front, sometimes more.
On a $100,000 rollover, that's $5,000 to $7,000 that leaves your account on day one.
You don't write a check, which is exactly why it stings less in the moment and hurts more later.
Then come the ongoing charges baked into the contract.
Variable annuities often carry mortality and expense fees near 1.25% a year, plus fund expenses that can push the total past 2%.
Indexed annuities skip the fund fees but replace them with caps, participation rates, and spreads that limit how much of the index gain you actually keep.
Surrender charges get their own paragraph because they trap people.
A typical schedule starts at 7% and steps down one point a year for seven years.
Need your money in year two for a medical bill or a down payment?
That's a 6% haircut on top of everything else you already paid.
Riders sound like upgrades and are priced like them.
A guaranteed income rider might run 0.95% to 1.50% annually, and a long-term care rider can add more.
Each one is charged on your contract value, so a 2% base plus two riders can quietly hit 3% to 4% a year.
At that rate, the insurer doesn't need bad markets to win.
Annuities aren't automatically bad, and some buyers genuinely want a pension-like paycheck they can't outlive.
The problem is that the pitch almost never compares the contract to the cheap alternative: a low-cost index fund plus a Treasury ladder, or a plain single premium immediate annuity with no riders attached.
Those options exist, and they're often a fraction of the cost.
Ask for the fee table in writing, not a verbal summary.
Ask the agent to state their commission in dollars, in writing.
Ask what the surrender schedule looks like in years one through seven, and what happens if you die mid-contract.
If any of those answers arrive vague or delayed, treat that as your answer.
Add up every annual fee, multiply by the number of years you expect to hold the contract, and compare that total to what a simple portfolio would cost over the same stretch.
A 2.5% annual drag over 20 years can consume a third or more of what you'd otherwise earn.
Our take: annuities are sold, not bought, and that's the tell.
If a product needs a commission structure to move, the buyer deserves to see the price tag before the signature, not after.
Final Thoughts
Ask the hard questions, get the numbers in writing, and remember that the person explaining the fees is usually the person collecting them.