What kinds of charges are involved when purchasing an annuity?
Be careful to ask about the many fees attached to every annuity contract. Many companies do not charge an initial commission, or load. Instead, they levy a substantial surrender charge of as much as 10% of your principal if you want to cash out or transfer your annuity to another company within the first five or 10 years of the contract. However, some annuities permit a free withdrawal after the first year and for every year thereafter that surrender charges apply. This allows you to withdraw a certain portion (usually 10%) of the accumulated account value. Note that withdrawals are subject to income tax and, prior to age 59 1/2 withdrawals would be subject to a 10% penalty tax by the IRS. Annuity surrender charges do not apply to immediate annuities because, once you have purchased the contract, it cannot be surrendered. There are also annual expenses to be considered. Most annuity sellers also charge annual maintenance fees of $25 to $50. Variable annuities have higher expenses than
