Pricing and Costs of Annuities

Find out how much that annuity really costs over lifetime

Pricing and costs of annuities includes money you pay to the administrator of the fund. These fees usually break down to service charge and maintenance fee and can mount up considerably.

Early withdraw fees are assessed by the program administrator in some cases if you withdraw before retirement. There is also a government-sanctioned penalty that you must pay if the annuity is tax deferred. Consider the following when determining pricing and costs of annuities:

1. Check the administrators charges on variable annuities.

2. Reduce risk of early withdraw penalties by having a safeguard fund when you have tax deferred retirement annuities.

3. Compare funds from annuity companies for the best interest rates possible.

 

Choose fixed annuities funds with low or no service charges and save more

Shop for the best plans to offer to your employees. Many companies do not charge a service fee in the hopes of attracting more business. They may have an early withdrawal penalty or other fees so be sure to get a full disclosure.
Try: Immediate Annuities offers a calculator to determine the amount of money received based on the amount of lump sum your annuity is worth. Use this tool for your employees as a guide for determining how much monthly income they will need for retirement. Morgan Stanley offers fixed and variable annuity programs. Fill out their form to have a representative contact you about their offering, prices and service charges. Annuity FYI offers a comparison of the most common types of annuities, along with the benefits and costs associated with them. Be sure to look at the disclosure about the 10% Federal Tax penalty that may apply if you withdraw from your annuity before age 59 1/2.

Protect your employees from early withdrawal fees with annuities information

Offer annuities as part of the total benefit package and encourage your employees to take advantage of other forms of saving for an early day. Educate them on the risks of early withdrawal not only about the fees but also about not being prepared for retirement if they do not put the money back.
Try: Prudential offers variable, fixed, immediate and modified guaranteed annuities. They offer some annuity packages with interest rates up to 6%. They do charge service fees based on the program they are administering. Contact them for complete disclosure of all fees associated with the program of your choice. All programs may be subject to the federal tax penalty if withdraws are made before age 59 1/2. New York Life offers retirement programs and provides a detailed explanation of the risk of taking early withdrawal from your annuity under the section titled "Taxes and Penalties." In this scenario, they show that a distribution of $50,000 can net only $28,500 after penalties and taxes.

Shop for the best rates for your annuity program

Check with several companies before selecting the annuity program for your firm. Many offer higher interest rates for longer periods if you choose certain products.
Try: Allstate offers equity-indexed annuities. Equity-indexed rates grow the fastest when the market is up while providing a minimum interest rate when the market is down. Most Choice offers a list of the top 15 annuity products with their ratings and rate they are paying. Fill in their short online form and the next page takes you to the list which includes the top products, their AM Best rate, current rate, and yield to surrender. Lincoln Financial Group offers fixed annuity programs that offer a guaranteed interest rate from five to seven years and after this period, they offer interest rate guarantees in one-year intervals. Call a representative for current interest rates on the product that interests you.

 

• Consider the pricing and costs of annuities service charges when making your decision. Many times the programs with the highest interest rates also have the highest maintenance costs.

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