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Home > Blog > Understanding Variable Annuity Fees
WEDNESDAY, FEBRUARY 22, 2017

Understanding Variable Annuity Fees

image of financial growth exampleLet’s be honest. Most of us are likely a little confused by annuities. Is an annuity related to life insurance?

The answer is no, an annuity is not life insurance. 

An annuity is essentially a form of insurance in which you invest. That investment, in turn, entitles you to an annual payment from the investment manager. The investment manager is usually an insurance company.

Annuities are often profitable ways to manage an investment and see financial returns. Your insurance company is, more or less, providing you payment or income for a certain period of time.

How Annuities Can Help

These annuities serve as great ways to prepare your finances for retirement. You could also possibly specify them as an investment for long-term care or a death benefit. 

The good thing about annuities is that they are usually untaxable until you take the money out. That way, your finances can grow without a taxation limit.

Understanding the Variable Annuity

But, buying an annuity doesn’t necessarily mean a one-time payment and nothing more. There are different types of annuities that you can buy. One of these is a variable annuity. 

A variable annuity lets you direct your investments to different plans over time. However, this will likely come with costs.

Fees Associated with Variable Annuities

The types of fees you pay will usually vary. They can be different from annuity to annuity and among different insurance companies. Here are some common fees that you should examine when buying an annuity:

  • Insurance charges: These are basic fees that help with administration, processing and other management fees. You usually pay these when you open the annuity.
  • Surrender fees: These fees are penalties you pay if you decide to close the annuity before you plan to. You may also have to pay some surrender fees if you withdraw portions of the investment over the life of the plan.
  • Expense risk charges: This pays the insurance company that issues the plan. It essentially covers the risk the company takes on by investing the annuity.
  • Underlying fund expenses: You make these payments for any mutual fund investments that you carry under the annuity.

Remember, there will likely be other fees you pay on the annuity. But, the specific fee depends on how you are using or plan to use the annuity.

While annuities are often complicated, knowing if you can afford to maintain them is a great help to you. Make sure you check with your insurance agent. He or she can help you get the right annuity for you.

The Weimer Group is here to help you explore your Perkasie annuity options. Give us a call today at (877) 791-1707.
Posted 5:15 PM

Tags: perkasie annuities, annuities, variable annuity fees
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