Hand over a lump sum, get a guaranteed monthly check for life, and stop worrying about the market.
What the brochure tends to leave out is the long list of fees that gets subtracted before that check ever reaches your mailbox.
Annuities are insurance products, not bank accounts, and they carry costs that can run from under 1% to more than 3% of your balance every single year.
On a $250,000 contract, that's up to $7,500 annually, money that comes out whether your investments gain or lose.
Over a 20-year retirement, the drag can quietly shave six figures off what your heirs see.
The most common charge is the mortality and expense fee, usually 0.5% to 1.5%.
It pays the insurer for the guaranteed death benefit and its own overhead.
Then come administrative fees, often $30 to $50 a year, and fund management fees if your money sits in subaccounts that look a lot like mutual funds.
Add a guaranteed lifetime withdrawal benefit and you might pay another 0.5% to 1.5%.
Add a long-term care rider or an enhanced death benefit and the total can push past 3%.
Each feature sounds protective on its own, and together they can turn a modest return into a flat one.
These are penalties for pulling money out early, typically starting around 7% in year one and sliding to zero over seven to ten years.
If an emergency hits and you need cash in year two, that 6% haircut is real money gone.
Variable annuities also bury costs inside the funds themselves.
Expense ratios of 1% or more are common, and those fees are charged on top of everything else.
Fixed indexed annuities often skip the explicit fee but cap your upside through participation rates and spreads, which can be just as costly in a strong market.
A plain vanilla immediate annuity with no riders and a low expense ratio can be a reasonable way to turn savings into lifetime income, especially for people who value certainty over growth.
The problem is when fees are spread across a 40-page contract and explained in a five-minute phone call.
Before signing anything, ask for the total annual cost in dollars, not percentages.
Ask what happens if you need to surrender in year three.
Ask whether the same income could be built more cheaply with a simple bond ladder and a smaller annuity.
A fee you can see is a fee you can negotiate around.
Our take: annuities can serve a real purpose for the right person, but the fee stack is where most buyers get blindsided.
Final Thoughts
If an agent won't put the all-in cost in writing before you commit, that silence is its own answer.