Fixed and Variable Annuities Expenses

Variable annuities usually have more features and higher fees than fixed annuities. With some fixed annuities, contract expenses – such as maintenance and contract fees – are taken into consideration when the company declares periodic interest rates or determines the payment amount. Surrender changes may also apply.

Variable annuity fees are more complicated. They may include an annual contract charge that covers administrative expenses and surrender fees, as well as a mortality and expense risk charge. Variable annuities charge this latter fee to guarantee the death benefit, the availability of payout options and the level of expenses.

In addition, a variable annuity has fees for the management and operating expenses of the funding options in which your money is invested. These charges pay for everything from the fund manager's salary to the costs of printing the fund prospectus.

For a variable annuity, all important information will be explained in the prospectus that describes the variable annuity contract. The prospectus must be given to you when you are considering the purchase of a contract with after-tax dollars. Read it carefully before you invest or send money and be sure you understand exactly what your expenses will be.