Annuities carry a lot of baggage, some deserved by older products and some out of date. Here are six common concerns, answered straight.
“Annuities carry hidden fees.”
Some annuities have no annual charges at all. FIAs may have optional riders that carry a fee — disclosed, optional, and buying specific benefits. Ask for the costs in writing.
“Annuities are too complicated.”
The core idea is simple: your principal is protected, and you earn index-linked interest up to a cap. A good advisor makes the moving parts clear before you sign.
“They're tied to the stock market, so I could lose money.”
With an FIA, your money is not invested directly in the market. Your account value is never credited less than zero if the index falls.
“If I buy one, I can't access my money.”
Most contracts allow penalty-free withdrawals each year (commonly up to 10%). Many include riders for terminal illness, nursing, or home care. Surrender charges may apply to larger early withdrawals.
“When I die, the insurance company keeps my money.”
For fixed and fixed index annuities that haven't been annuitized, remaining account value passes to your named beneficiaries and usually avoids probate.
“I have to pay the advisor out of pocket.”
You don't pay the advisor directly. Your full premium earns interest from day one; licensed producers are paid by the carrier through commissions not deducted from your premium.