Do annuities have fees? The honest answer is that it depends entirely on the type of annuity you purchase, the features you select, and how the insurance company structures the contract. Some annuities have no explicit annual fees at all. Others include optional rider charges, investment expenses, or insurance-related costs that are clearly disclosed in the policy. Understanding this distinction is critical because many investors hear generalized statements about “high annuity fees” without realizing that those claims often apply only to certain annuity categories—not all of them.

At Diversified Insurance Brokers, we help clients compare contracts line by line so they understand not only whether fees exist, but also what those fees provide in return. When structured properly, annuity costs are not arbitrary expenses. They are tied to specific guarantees, income benefits, or risk management features. The real question is not simply whether annuities have fees, but whether the value of the guarantee justifies the cost in the context of your retirement plan.

This becomes especially important when reviewing current annuity rates, because two annuities with similar projected returns may differ significantly in internal structure. One may include a lifetime income rider with an annual fee. Another may have no rider cost but lower growth assumptions. Comparing rate illustrations without understanding fee mechanics can lead to misleading conclusions.

Why Fee Confusion Exists in the Annuity Marketplace

Much of the confusion around annuity fees stems from the fact that “annuity” is a broad category rather than a single product. A fixed annuity is structured very differently from a fixed indexed annuity, and both differ significantly from a variable annuity. Yet media commentary often treats them as interchangeable. When someone says, “Annuities are expensive,” they are often referencing variable annuities with layered investment expenses and mortality charges—not traditional fixed contracts.

Additionally, some annuities do not list a visible annual fee at all. Instead, the insurance company earns a spread between what it earns on its general account portfolio and what it credits to policyholders. This indirect compensation model leads some people to believe the product has “no cost,” while others argue that the cost is simply embedded. The reality is more nuanced. Every financial product has an economic structure that compensates the issuer. The question is whether the structure is transparent and aligned with the benefit provided.

Types of Annuities and Typical Cost Structures

This comparison highlights an important distinction: fixed annuities typically do not charge explicit annual fees. Instead, the insurance company earns money through its investment spread. Indexed annuities may operate the same way unless you add optional features. Variable annuities, by contrast, often layer multiple charges on top of investment management expenses.

Fixed Annuities: Often No Annual Fee at All

Traditional fixed annuities—especially multi-year guaranteed annuities (MYGAs)—generally have no annual administrative or rider fees. The rate declared in the contract is the rate credited, and the insurer’s compensation is built into its portfolio yield assumptions. For individuals who want pure interest rate certainty without market linkage, reviewing current fixed annuity rates can provide a straightforward alternative to bank CDs, often with higher yields and tax deferral benefits.

Because there is no rider charge and no investment subaccount cost, fixed annuities are among the most transparent annuity structures available. The primary tradeoff is limited liquidity during the surrender period and the absence of market upside beyond the declared rate.

Compare Today’s Fixed Annuity Rates

See guaranteed multi-year rates with no annual contract fees.

Fixed Indexed Annuities: Fees Depend on Optional Riders

Base fixed indexed annuities frequently carry no annual fee. However, when you add a guaranteed lifetime income rider, enhanced death benefit rider, or long-term care multiplier rider, an annual charge typically applies. That charge usually ranges from approximately 0.75% to 1.25% of the benefit base, depending on the carrier and structure. Importantly, this fee does not reduce your principal in the same way market losses would. Instead, it is assessed in exchange for a contractual guarantee.

For example, if an income rider guarantees lifetime withdrawals regardless of account depletion, the annual rider cost funds that guarantee. Evaluating whether the rider is worthwhile requires comparing projected lifetime payouts to the total rider expense over time.

Lifetime Income Calculator

Model guaranteed lifetime income to determine whether an income rider’s cost aligns with your retirement objectives.

Bonus Annuities and Embedded Economics

Bonus annuities provide an upfront premium enhancement that can immediately increase your income base. These contracts typically do not charge a visible annual fee, but they may include longer surrender periods or adjusted crediting terms. Reviewing bonus annuity options helps clarify whether the upfront incentive offsets any structural tradeoffs.

Explore Bonus Annuity Rates

Compare premium bonuses and guaranteed income structures side-by-side.

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