Guide
Annuity fees, every charge explained
A transparent guide to every fee associated with annuities — surrender charges, rider fees, mortality and expense charges, sub-account costs, strategy charges, and more. Each fee is matched to the product types where it applies.
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The key principle: complexity = cost
Annuity fees vary dramatically by product type. The more complex the product and the more guarantees it provides, the higher the fees tend to be.
Zero explicit fees
MYGAs and SPIAs typically have zero explicit annual fees. Your return is what the carrier declares — its profit is embedded in the rate offered.
2.5–3.5%+ per year
Variable annuities with income riders and enhanced death benefits can carry total annual fees of 2.5–3.5%+, layered across multiple categories.
Is the fee worth it?
Not every fee is bad. Some pay for guarantees that provide genuine value — like lifetime income you can't outlive or principal protection from market crashes.
The question is whether the guarantee is worth the cost for your specific situation.
Surrender charges (withdrawal charges)
Applies to: MYGAs, FIAs, Variable Annuities, RILAs
A surrender charge is a penalty applied if you withdraw more than your contract's penalty-free amount during the surrender period. It's typically highest in Year 1 and declines by about 1% per year until it reaches 0% at the end of the surrender period.
Example · 10-year FIA surrender schedule
Yr 1
9%
Yr 2
8%
Yr 3
7%
Yr 4
6%
Yr 5
5%
Yr 6
4%
Yr 7
3%
Yr 8
2%
Yr 9
1%
Yr 10
0%
- Most annuities allow penalty-free withdrawals of up to 10% of the account value per year
- MYGA surrender periods: typically 3–7 years
- FIA surrender periods: typically 5–14 years
- Variable annuity CDSC: typically 5–9 years
- SPIAs and DIAs: no surrender charges (irrevocable contracts)
Market value adjustment (MVA)
Applies to: Some MYGAs, FIAs, and RILAs
An MVA is a separate adjustment applied on top of any surrender charge if you withdraw during the surrender period. It can increase or decrease the amount you receive based on the change in interest rates since you purchased the annuity.
If rates have risen
The MVA typically reduces your payout — you're moving money when the carrier's underlying bonds have declined in value.
If rates have fallen
The MVA may increase your payout — the underlying bonds have appreciated, and the carrier shares some of that benefit.
Not all products include an MVA. Check your contract for the MVA provision before purchasing.
Income rider fees (GLWB / lifetime income rider)
Applies to: FIAs and Variable Annuities with optional riders
An income rider (Guaranteed Lifetime Withdrawal Benefit, or GLWB) guarantees a lifetime income stream even if your account value drops to zero. The fee is typically charged as an annual percentage of the benefit base — not the accumulation value.
FIA income rider fee
Typically 0.95–1.15% of the benefit base per year. On a $170,000 benefit base at 1.00%, the annual charge is $1,700 — deducted from your accumulation value.
Variable annuity GLWB
Typically 0.75–1.25% of the benefit base. On a $200,000 benefit base at 1.00%, you pay $2,000/year.
Once elected, it usually can't be removed
In many contracts, the rider fee combined with years of zero index credits can actually reduce your accumulation value below your original premium. This is the primary risk of income riders in low-return environments.
Strategy charges (enhanced crediting fees)
Applies to: Select FIAs (Athene BCA 2.0, others), some RILAs
Strategy charges appear on FIAs that offer enhanced crediting methods — such as uncapped participation rates or higher caps on proprietary indices. The charge is deducted monthly from the accumulation value, regardless of whether the index credits positive interest.
Example
Athene BCA 2.0: annual strategy charge guaranteed for the first term, capped at 2.00% (1.80% in some states). In a 0% index year, the charge still reduces your accumulation value. This fee is distinct from an income rider fee.
Premium bonus vesting and recapture
Applies to: FIAs with premium bonuses
Products that offer a premium bonus (e.g., 10–23%) often include a bonus vesting or recapture schedule. If you surrender before the bonus is fully vested, some or all of it may be forfeited.
The bonus is not free
A premium bonus is funded through trade-offs elsewhere in the contract design: lower cap rates, lower participation rates, and/or longer surrender periods compared to non-bonus products.
Mortality & expense (M&E) risk charges
Applies to: Variable Annuities, some RILAs
The M&E charge compensates the insurer for the mortality risk it assumes and the guarantee that administrative costs won't increase. It's charged as an annual percentage of account value and deducted from sub-account returns before they are credited.
Commission-based VAs
M&E: typically 1.00–1.75%/year. On a $200,000 account: $2,000–$3,500/year.
Fee-based (I-share) VAs
M&E: typically 0.15–0.50%/year. Offset by a separate advisory fee paid to your advisor.
MYGAs and most FIAs do not have M&E charges.
Fee summary by product type
| Product Type | Typical Annual Fees | What Drives Cost |
|---|---|---|
| MYGA | 0% | None — rate is all-in |
| SPIA / DIA | 0% | None — payout is all-in |
| FIA (base, no rider) | 0% | None — rate is all-in |
| FIA with income rider | 0.75–1.25% | Rider fee on benefit base |
| FIA with strategy charge | 0.50–2.00% | Enhanced crediting fee |
| RILA | 0.25–1.00% | M&E charge |
| Variable Annuity (base) | 1.00–1.75% | M&E + sub-account expenses |
| Variable Annuity (with riders) | 2.50–3.50%+ | M&E + sub-accounts + rider fees |
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