Annuities are sold as a simple promise: hand over a lump sum, get a check for life.
What the brochures tend to skip is the layer of fees stacked inside that promise, and how much of your balance they chew through before you ever see a payout.
A variable annuity sold through an agent can carry a commission of 5% to 7% of what you invest, paid upfront and baked into the product.
On a $100,000 deposit, that is up to $7,000 that never gets a chance to grow for you.
The insurer is not eating that cost out of kindness; it is recovered through the fees you pay later.
Variable annuities commonly run 2% to 3% a year once you add up mortality and expense fees, fund management fees, administrative costs, and optional riders like a guaranteed income benefit.
On a $100,000 balance, that is $2,000 to $3,000 leaving the account annually, whether the market is up or down.
A living benefit rider that promises a floor under your income might add 0.5% to 1.5% a year on its own.
It sounds like insurance, and it is — but it is insurance you may not need, priced by the party that profits when you do not use it.
Walk away in the first several years and you can pay 7% of your account value, declining gradually over a schedule that often runs seven years or longer.
That structure exists to keep your money parked while the fees compound.
Indexed annuities are not automatically cheaper.
They avoid the word "variable," but they often cap your upside, use complicated crediting formulas, and still pay a healthy commission.
A cap of 6% on a year the index returns 20% is a cost, even if it never appears on a fee statement.
Fixed annuities are the plainest version, and the spread between what the insurer earns and what it credits you is the real fee — invisible, but real.
Always ask for the MVA, or market value adjustment, which can shrink your payout if you cash out early.
The agent collecting the commission, the insurer collecting the spread, and the marketing machine that sells "guaranteed income" as a product rather than a price.
A plain fixed annuity or a low-cost immediate annuity can make sense for someone who genuinely wants longevity insurance and has shopped the payout rates.
Ask for the total annual cost in dollars, not percentages.
Ask what the surrender schedule looks like and when it ends.
Compare the same money in a low-cost index fund plus a Treasury ladder.
Get the answer in writing before you sign.
Our take: the annuity industry's biggest product is not income, it is the feeling of safety — and feelings are the most expensive thing you can buy.
Read the fee table before the brochure, and make the salesperson put every cost in plain dollars.
Final Thoughts
If they cannot, that silence is the answer.