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Switzer says examples of annuity riders include However, the most common fees are charged for optional benefits called annuity riders.Īnnuity riders are like add-on benefits that can be purchased and are separate from the base contract that you sign when you take on an annuity. By paying an additional fee, you can eliminate some of the risks associated with annuities and make them a more attractive investment. For example, a variable annuity, which requires more investor oversight, will typically cost more than a simple fixed annuity. The more complicated an annuity, the more expensive its fees are. Make sure you understand and are financially prepared for the fees associated with an annuity before purchasing it. Some companies charge fees that may be administrative, like commission fees and maintenance fees. Some companies, like USAA, charge no upfront fees except the 10% IRS penalty for those who make withdrawals before age 59½. The types of fees you encounter depend on the company you purchase the annuity fee from. Annuity fees typically run between 1% and 3% of your account's balance annually. These fees are usually deducted from the balance of your investment. Do you pay fees on annuities?Īn annuity fee is an additional cost associated with purchasing an annuity. These benefits can make annuities a safer investment than owning common stock for example, but the more lucrative your annuity's benefits (or riders) the more expensive your annuity's fees will be. Of course, every investment comes with some sort of market risk, but you can reduce that risk by adding a rider to your annuity contract (for an additional cost), which can protect you from the losses of the annuity investment underperforming.

So, if these investments are left alone for extended periods, they can be extremely lucrative in retirement.ĭifferent types of annuities have varying levels of risk, but annuities as a whole can typically withstand economic downturns. But you can usually expect to see a 4% – 6% annual return on some annuities and as much as an 8% annual return on others. How do you get paid with an annuity?Īnnuity investment returns depend on a number of factors, including the performance of the index it's invested in, the cap on potential interest it can earn, the type of annuity and more. Still, even if your surrender period has expired, you will receive a 10% IRS penalty if you make a withdrawal before age 59½. Most annuity surrender periods are between two and eight years, but some can last as long as 10 years.

Unless your annuity plan has contractual withdrawal amounts, you usually can't access the money until your payout period begins, and in other instances, you may be charged a penalty for withdrawing money before the end of your surrender period - the duration of time during which you cannot withdraw funds from the annuity. Depending on the type of annuity you are investing in, your annuitization phase may begin immediately.

The time during which you receive payments is known as the annuitization phase. The time during which your investment earns interest is known as the accumulation phase.
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