Annuity Fees and Commissions

Written By : Elaine Silvestrini
Financially Reviewed By : Marguerita M. Cheng
This page features 24 Cited Research Articles
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Like most financial products, annuities come with costs. Sometimes those costs, such as commissions and fees, are hard to discern unless the consumer knows what to look for and asks the right questions.

One of the biggest knocks on annuities is that they can be expensive. And it’s true. Commissions and fees on some annuities can really add up, especially if you don’t pay attention and ask the right questions when you buy an annuity. But, as CNN reports, not all annuities have high fees.

Different annuity types come with different costs. In general, the more complicated the annuity, the higher the costs to the consumer. Commissions and fees are generally higher for complex financial products than they are for straightforward investments.

A fixed annuity will have much lower costs than a variable or an indexed annuity. That’s because fixed annuities are relatively simple. They’re not linked to investment portfolios or indexes like the S&P 500. They pay at a rate that is specified in the contract and don’t have complicated rules.

The same goes for the addition of riders, or special contract provisions to customize the annuity to your needs. These add-ons to the contract will increase your cost. Riders can include death benefits, minimum payouts or long-term care insurance. Each rider you add, each change you make to the basic provisions of your annuity contract will add to your yearly costs. These charges can range from 0.25 to 1 percent a year.

In total, average fees on a variable annuity are 2.3 percent of the contract value and can be more than 3 percent.

Interested in Buying an Annuity?

Learn about the different types of annuities and find out which one is right for you.

Dig into the Contract

Often, these costs will not be apparent, as they will be built into the fine print of the contract. It’s important that you make sure you have a complete understanding of the contract.

Ask the person selling the contract a lot of questions, including what additional fees you will have to pay. If you’re working with a fee-only advisor — a planner with a fiduciary responsibility to you, the buyer — you will not pay a commission. But when dealing with a commission-based broker, make sure they tell you their commission.

Write down your understanding of all the costs and ask the agent to sign what you’ve written.

Annuities are still an attractive option for a lot of people. The key is to purchase with a full understanding of the costs and benefits so you don’t regret your decision and can enjoy the benefits of your annuity.

Annuity Costs Defined

It’s important to know what you’re paying for. Here are some of the costs you may find linked to your annuity.


All annuities have commissions, which are usually built into the price and not highlighted in the contract. Commissions are a portion of the annuity cost that is given to the agent. Usually, they’re known as trailing commissions. Trailing commissions are paid every year.

The commissions can be anywhere from 1 to 10 percent of the total value of your contract, depending on the annuity type. The more complex the annuity, the higher the commission. And the simpler and more straightforward the contract, the lower the commission. In 2014, Wells Fargo announced that it would only include fixed-indexed annuities that limited commissions to 4 percent.

Typical Commissions on Varying Annuity Types:
  • Fixed annuities are the least complex annuity type and have lower commissions than other types. Fixed index annuities can have surrender periods as low as four years, but most have 10 years with a surrender charge. The commission on a 10-year fixed index annuity ranges from 6 to 8 percent.
  • Commissions on single premium immediate annuities typically range from 1 to 3 percent.
  • Deferred income annuities, also known as longevity annuities, charge commissions of 2 to 4 percent.
  • Multi-year guaranteed annuities (MYGAs) usually have no fees, and the surrender periods range from three to ten years. Commissions on MYGAs are usually between 1 and 3 percent.

Administrative Fees

Generally you will also have to pay an annual fee to manage and administer your annuity. This could be higher than the fees on your IRA or 401(k). Typically, it’s about 0.3 percent of the value of your annuity contract. This can also be a flat fee, perhaps $25 or $30 a year.

Surrender Charges

Many annuity contracts will have built-in time periods at the beginning, usually for a set number of years, known as the surrender-fee period. During this time, you are charged a surrender fee if you withdraw money in excess of the scheduled payment amounts. Sometimes, the contract does permit limited withdrawals. If you withdraw more, you will incur a charge that can be as much as 7 percent of the value of the annuity. Typically, the percentage goes down over time. Longer surrender-fee periods usually mean the agent gets higher commissions.

Mortality Expenses

Mortality expenses compensate the insurance company for the risk it takes and may be charged by the company as a commission. This fee can range from 0.5 to 1.5 percent of the policy value each year.

Investment Expense Ratio

The cost of managing investments in a variable annuity is covered by the investment expense ratio. Variable annuities have investment and management fees. These fees can be referred to as expense ratios, 12b-1 fees or service fees. They can range from 0.6 percent to more than 3 percent each year.

Other Fees

Other charges you may include transfer charges, distribution charges, third party transfer charges, contract fees, underwriting fees, and redemption fees.

Additionally, most annuity contracts carry general fees that are often listed as distribution fees or administrative fees and can range anywhere from 0.2 percent to just over 1 percent of the annuity value. These charges are applied for the management of the contract.

24 Cited Research Articles

  1. Ansparch, D. (2018, March 22). Variable Annuity Fees – If they’re Too High, Your Account Will Suffer. Retrieved from
  2. Borzykowski, B. (2018, May 8). What are the fees on that annuity? Good luck finding them. Retrieved from
  3. CNN Money Ultimate Guide to Retirement. (n.d.). Do all annuities have high fees? Retrieved from
  4. Csiszar, J. (n.d.). How Do Insurance Companies Make Money on Annuities? Retrieved from
  5. Haithcock, S. G. (2019, March 12). The Levels of Commission Agents Earn on Annuities. Retrieved from
  6. Haithcock, S.G. (2019, January 28). Indexed Annuities: The Good, The Bad and The Truth. Retrieved from
  7. Hicks, C. and Moeller, P. (2019, February 25). 15 Things You Need to Know Now About Annuities. Retrieved from
  8. Investopedia. (2018, April 6). Passing the Buck: The Hidden Costs of Annuities. Retrieved from
  9. John, C. (n.d.). How Much Does a Commission Agent Get Paid for a Fixed-Indexed Annuity? Retrieved from
  10. Land, G. (2019, March 3). Ohio National Faces Flood of Litigation After Axing Life Annuity Commissions. Retrieved from
  11. Longo, T. (2019, February 20). Insurance Industry Battles Back Against Fiduciary Standard. Retrieved from
  12. Maranjian, S. (2017, August 13). Read This Before You Get an Annuity. Retrieved from
  13. Money. (n.d.). Why Are Annuity Fees So High? Retrieved from
  14. Olsen, J.L. and Kitces, M.E. (2014, July 3). What you need to know about the cost of fixed annuities. Retrieved from
  15. Pino, I. (2018, July 2). How You Can Find the Fees You’re Paying in an Annuity. Retrieved from
  16. Ritzke, C. (2017, July 25). Why Do the Pundits Hate Annuity Commissions? Retrieved from
  17. Rose, J. (2018, November 16). How One Woman Paid Over $3,500 in Variable Annuity Fees and Didn’t Even Know It. Retrieved from
  18. Tank, J. (2019, March 10). Jason Tank: Explaining how a variable annuity works. Retrieved from
  19. The Motley Fool. (2019, March 17). Americans Overwhelmingly Lack Knowledge About This Key Financial Product. Retrieved from
  20. The Motley Fool. (n.d.). What Commission Is Paid on a Fixed-Indexed Annuity? Retrieved from
  21. Thornton, N. (2018, October 10). Is the commission-based annuity market primed for disruption? Retrieved from
  22. Tuohy, C. (2018, May 25). Agent Commissions Rise For Annuities in 1Q. Retrieved from
  23. U.S. Securities and Exchange Commission. (2011, April 18). Variable Annuities: What You Should Know. Retrieved from
  24. Zacks. (n.d.). Annuity Fee Comparisons. Retrieved from