What Are The Charges For A Fixed Annuity?
Most annuities do not charge up-front sales charges, rather they have charges for withdrawals before the end of a stated period. A fixed and fixed-indexed annuity do not have administrative fees, although interest crediting rates take into account expenses related to the product.
Variable Annuities
Variable annuities may involve ongoing maintenance and administrative fees to provide guaranteed death benefits and cover expenses related to the product. When purchasing a variable annuity, information regarding contract charges in the contract’s prospectus is available.
All this means is that with an index or fixed annuity there are no fees. Therefore, if you buy from the right insurance carriers, you’ll have little if any fees. Say you invested $100,000 into a fixed or index agreement and made no money. As a result, at the end of the term, you would therefore still get your $100,000 back. Some index annuities have a guaranteed minimum amount of a return, sometime this is as much as 1% simple interest.
In conclusion, say you purchased an index annuity with a 7 year term and it had a minimum of 1% simple interest. You made no money in the contract because the S&P 500 was down 7 years in a row. They would have to give you $107,000 at the end of the term.
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Understanding Surrender Charges and How They Work
While fixed and fixed-indexed annuities carry no ongoing administrative fees, it’s important to understand surrender charges. These are penalties applied when you withdraw more than the allowed amount before your contract’s surrender period ends — typically ranging from 3 to 10 years depending on the carrier and product you choose.
Most fixed annuity contracts in Tennessee allow a free withdrawal provision, commonly permitting you to take out up to 10% of your account value each year without triggering any surrender charge. This gives you meaningful access to your money while keeping the remainder protected and earning interest.
Surrender charge schedules typically decline over time. For example, a 7-year contract might start with a 7% penalty in year one, dropping by roughly one percentage point each year until it reaches zero at the end of the term.
Choosing a contract with a surrender period that aligns with your financial timeline is the key to avoiding these charges entirely — making your fixed annuity genuinely fee-free in practice.