So this is a very hot topic among annuities right now. A lot of times, that’s why a lot of advisors will kind of advise against annuities because the fees that are associated with them and the commissions inside of it. So, it’s very important that when you’re purchasing the annuity, whether you’re purchasing it from an advisor or a company, that you understand and have them disclose every aspect of the fees that are built up inside of it. Either those are annual fees, whether that’s investment fees or expense ratios inside the investments you choose for a variable annuity, or your mortality and expense fees, which are going to make sure the policy stays in force for longer periods of time. Those fees are going to be there throughout the life of the products. Being able to understand them and know them upfront can help you make a good decision.
For instance, variable annuities, a lot of times, you’ll see fees from investment fees and expense ratios and the M&E fees that could easily be 4% to 6% per year, which is drastic. You look at index funds, you can have a total out-of-the-door fee of 0.15%, so you’re talking 500% more, 400% or 500% more, in fees, which can have a drastic impact on your total account balance. But then, you have to understand what exactly are those fees paying for? And then, if you can look at the value that those fees provide, maybe through downside protection, through guaranteed income, through things like a guaranteed income base that grows over time, and make sure, if you are paying those fees, that the value that you’re getting for them is worth it. If it’s not worth it, then the annuities are not the right product for you, or that annuity is not the right product for you.