Last we we started the 7 week series on common myths about Annuities with the introduction. This week we dive into Myth #1: Annuities Have High Fees.
This one is just funny. With a quick Google search you can find a number of supposedly reputable people quoting that Annuities have really high fees. I’m not quite sure yet why the SEC and Insurance Departments allow lying in this industry but this lie is all over the place.
To start to expose this lie let me ask you a simple question:
“Do Musicians make good money?”
How did you answer in your mind? Did you think of Taylor Swift or James Taylor and say “yes”? Did you think of the guitar player at the cafe or your musician friend and say “No way!”? Did you pause and think “I don’t know how to answer”?
I’ve asked hundreds of people this question in my life events and those are the three most common responses.
Why is it so hard to answer this question?
Because this question must be countered with another question before it can be answered. Asking this question is like saying “Are houses built well?”. Which houses? Houses in the US or houses in Mexico? Which House? Which Builder…….do you see my point? You would have to ask back “Which Musician?” before you could answer my question of “Do Musicians make good money”.
So, no matter who it is, and no matter what major financial publications allow them to write articles for them, if someone says “Annuities have high fees” you MUST ask Which Annuities?.
So what’s the truth….which Annuities have high fees and which ones have low or no fees? Here’s a list of six different types of Annuities and their fees:
- Single Premium Immediate Annuities (SPIAs)
- Fixed Annuities
- Variable Annuities (Sold by Joker Brokers)
2-4% Per Year of Account Value in Fees
- Fixed Indexed Annuities
- Fixed Indexed Annuities with Guaranteed Income Riders
0-1% of Account Value or Benefit Base Account Value
- Single Premium Life Insurance Contracts (Modified Endowment Contracts=MECs)
Varies based on contract and skill of the agent who designs it
Notice above the ones with no fees or no fee options. Four of the six types can have absolutely no fees at all. Now if you hear any so called professional advisor say “Annuities have high fees” you can dismiss them with confidence as being either too ignorant or too immoral to help you in your financial and retirement planning.
Here’s the bottom line:
- If you want safe growth in retirement (no losses or fixed gains) you will have no fees whatsoever using Annuities
- If you want income only, with no death benefit, you will have no fees whatsoever
- If you want guaranteed income for life with a death benefit, then you will pay between 0% and 1% of the account value……which is what your heirs get when you pass away. So in essence your HEIRS pay the fee out of the account they will inherit
I hope this helps you to understand that Annuities indeed DO NOT have high fees unless you let your Joker Broker rope you into using a variable Annuity.
To your amazing retirement,
Author, Speaker, Podcast Host and Whistle-Blower
What you can look forward to in the next 5 weeks!
Annuity Myth #2: Annuities Will Tie Up My Money and Limit My Access
Annuity Myth #3: Annuities Have No Upside Potential and Low Rate of Return
Annuity Myth #4: Annuities Pay The Agent a High Commission
Annuity Myth #5: Annuity Companies May Go Out of Business and I’ll Lose My Money
Annuity Myth #6: Annuity Companies Will Keep All of My Money If/When I Die