Understanding Annuities

Explore how immediate annuities work, their defining features, and the pros and cons that position them as the grandfather of annuities.

Explore the death benefit feature and return of premium in some immediate annuities, which allows beneficiaries to receive remaining principal and offers optional flexibility for lifetime income.

Fixed index annuities typically charge no base fees, but optional riders add fees; advisers may charge an account fee in some newer products, though this remains uncommon.

Grandfathered-in fixed annuities offer high guaranteed minimum rates, typically 2–5 percent, with a fixed return; you usually cannot add more money, and higher minimums may keep up with inflation.

Explore variable annuities, address their controversy and typically high fees, and learn to understand what you own and what you've invested in.

Explore how individual variable annuities operate through sub accounts, which are mutual funds, and how writers for these sub accounts influence performance and fees.

Learn who controls your sub-accounts in a variable annuity, including reallocation and stop-loss features that pull you from the market and sell equities during dips.

Understand how allocation control limits equity exposure in variable annuities, typically 70/30 up to 100% equities, and how riders and insurance components protect you during downturns.

Understand the mortality and expense fee in a variable annuity, which funds a return of premium rider, covers company profits and commissions, and ranges from 0.5% to 1.8%.

Understand riders on variable annuities, which insure money with death benefits, return of premium, or income; weigh costs, often about 1% per rider, and avoid unused riders.

Explore how the return of premium feature in an annuity contract can waive the surrender charge when it exceeds interest earned, keeping access to your money.