No matter which type of annuity you choose, projected and guaranteed charges are an important consideration. The first fee to consider is the surrender charge. Most annuities do not have front-end fees, but nearly all have some back end fee. A very common annuity surrender charge would be a 7-year, 7% decreasing surrender penalty (7%,6%,5%,4%,3%,2%,1%,0%). In a contract such as this, you would pay a 7% penalty for surrendering the policy in year one, a 6% penalty in year two, 5% in year three and so on. The bottom line here is this: the longer and higher the surrender penalty, the worse the value to the consumer.

"Administrative Charges" can also be an important consideration, especially for annuities of a smaller amount. These fees vary from $0 to $50, with most fees falling between $12 and $30 per year. Remember that with a $5,000 annuity, a $25 annual fee represents 1/2% point off the yield.

Additional Information on Annuities:

Deferred Annuities
Immediate Annuities
Who Should Invest in an Annuity? -Investor Profile
Tax Deferred Accumulation
Tax Preferred Payouts
Guaranteed vs. Promises
Fees
Carrier's Financial Strength

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