How much Money do you need in Annuities to Retire Securely?

This article is really about what you need for retirement versus what you want. Yes, we all would like to have astronomical returns and phenomenal **guarantees associated with every annuity and investment but reality can at times be somewhat sobering.

A recent survey of near retirees who were contributing to their 401ks were asked how much they would have to contribute to an annuity to **guarantee $500 per month in income for the rest of their lives, starting when they were 65. The scary thing is that 96% of them answered incorrectly (to a multiple choice question)! The vast majority of those surveyed, 72 percent, believed that $25,000 would generate $500 per month for the remainder of their lives. ( By the way, the correct answer is closer to $100,000) [continued below video…]

Video: Watch as Dick and Eric tackle the tough question of how much in annuities is enough?

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.


Annuities utilized for securing income are excellent ways to create your foundational income. But you should not commit more to annuities than you need too. Unfortunately, if you don’t know what your foundational income need is you will be likely to fail miserably. No planner can hit the correct allocation number when he or she doesn’t even know the amount that’s needed for income.

So if you are ready to start retirement planning, take some time to find out how much income you will need to be comfortable.

A calculator can get you started but ultimately you will want to work with an annuity income specialist who can help narrow down the best options for you!

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Here’s the video that inspired us from Joe Simonds at Annuity Think Tank.

Ready to become an industry insider? Here is a summary from InsuranceNews.Net that discusses the Cerulli report.

Consumer Confusion Begs for Advisors’ Direction on Annuities

By: Linda Koco

Cerulli analysts were struck by the naiveté they found in the answers to a survey of older 401(k) participants regarding retirement income expectations. Their conclusion produced an enlightening perspective on the need for advisor-sold annuities.

In 2013, the analysts posed the question to people age 55 and older who were active participants in 401(k) plans. Even though this study focused on retirement funds and variable annuities#, it was instructive for fixed annuity sellers. The respondents’ answers are valuable for any annuity seller, but they might also be important in considering the analysts’ conclusions about fee-based versus commission-based sellers.

The survey participants were asked to indicate the size of a one-time lump-sum premium they would hand over in order to receive $500 a month for life beginning at age 65. There was no mention of taxes, investment vehicle or feeds, the analysts said.

Would the participants hand over $25,000, $50,000, $75,000, $100,000 or $200,000?

(Before you read on – what would you guess?)

Survey Said!

The majority – nearly 72 percent – answered $25,000.

Coming in second place was $50,000, with nearly 18 percent of the group selecting this answer. Third place went to $75,000, chosen by nearly 6 percent of the group, and fourth place went to $100,000, with nearly 4 percent picking that answer.

The remaining answer – $200,000 – was selected by less than 1 percent of the survey participants.

The majority answer was pretty far off the mark. A $25,000 single premium immediate annuity “would most likely generate less than $150 per month for a 65-year-old female,” the Cerulli researchers said. And that assumed a single-life-only **guarantee.

Even when looking at the most aggressively priced products in that category, the same 65-year-old woman would most likely need to spend between $90,000 and $100,000 to generate $500 a month for life, without a death benefit **guarantee, they said.

This finding speaks to the complexity of annuities and the lack of awareness of how annuities function and the trade-offs that are involved, the Cerulli analysts continued.

“It also helps verify why annuities remain advisor-sold products and why less than 3 percent of variable annuity# sales were derived via the direct-to-consumer channel,” their report said.

Mixed Bag

The findings and conclusions drawn are among several points of interest in Cerulli’s new report, Annuities and Insurance 2013: Balancing Shrinking Supply and Increasing Demand for Guarantees. Those looking for an all-positive forecast for the annuity future will not find it in this report. The researchers present a mixed bag of potential annuity opportunities amid cautionary warnings, some with implications for advisors. [Read More…]

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Using OutCome Based Planning™ for Your Retirement

"The Annuity Guys will never call you unless you request our assistance". When you are ready for specialized help we will be available to assist you.. We practice and recommend a "Holistic - OutCome Based Planning™ process when considering annuities." This approach has the effect of balancing your overall portfolio with annuities so you can meet your retirement objectives by "first identifying the least amount of your investments or savings that should be considered for annuities." OutCome Based Planning™ analyzes and models multiple outcomes so you can clearly identify your best income and growth opportunities.

"Working with an Experienced Fiduciary Financial Planner can help you Avoid a Trial & Error or Risk Based Retirement"

This type of approach does take considerably more time, effort and analysis which will show you mathematically the successful possibilities by comparing various outcomes rather than trying to sell or convince you of that "so-called one best solution." Clients frequently tell us that this process removes some of the confusion and emotion to help them objectively identify a better retirement plan; rather than just ending up with the most convincing salesperson or advisor.

When requesting help you can be assured of working with an experienced Annuity Guys' Retirement Planner who is an independent, licensed insurance agent and (also a securities licensed fiduciary financial planner) who has access to many different companies and annuities in helping you choose the best annuities using a holistic-outcome based planning approach. We consider the high quality advisor recommendations we make to our website visitors as a direct reflection back on us.

Based on survey feedback on advisors from our website visitors, we eliminated about two-hundred local advisors and now only recommend a few that we consider experienced vetted Annuity Guys' Fiduciary Advisors. Many local advisors continue requesting us to recommend them as an Annuity Guy's vetted advisor. However, our reputation and future business is driven only by satisfied website visitors. So, unfortunately we've had to tell the vast majority of local advisors no, since we changed our business model four years ago. At that time we stopped trying to satisfy everyone with local advisors, we now primarily work with individuals who are comfortable using today's internet technology to their fullest advantage by working with a select group of vetted, experienced and knowledgeable Annuity Guys' Fiduciary Planners.

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Selecting the Best Annuity & Retirement Income Advisor

Are you willing to work with an Annuity Guys' retirement and annuity advisor based on their experience and expertise as a first priority rather than being limited by a local or regional area? The good news is that technology has forever eliminated our geographical limitations and leveled the playing field for everyone! As a result of today's technological advances, all of us can now work confidently with experts in any field including personal finance. We are no longer confined by regional or local boundaries limiting our choices and ultimate success. A high quality Annuity Guys® advisor is now as close as a click or phone call away.

Video:"Choose a National or Local Advisor"?
"There is no room for trial and error when it comes to choosing MarketFree® Annuities or a Successful Retirement Planner."
When you think about it, your money is almost always in some other state with a custodian; whether invested in the market or with an annuity insurance company, the advisors competence is primarily needed when positioning your money initially. So working with a specialized expert in a financial discipline like annuities or retirement planning is imperative. There are no undo buttons in retirement! Once the annuity or annuities get set up correctly, it is customary and more efficient for annuity owners to benefit by having direct access to the annuity issuer instead of having to go through the agent. And, of course any reputable advisor, local or national, is more than willing to assist their clients if needed after annuities are implemented.
Video:"Why These 3 Types of Annuity Advisors are Not Created Equal"
"There are no undo buttons in retirement so it is vitally important that you do it right the first time!"

We are fortunate to have a select few who we believe are truly the highest qualified annuity and retirement advisors out of about two hundred licensed insurance agents that we eliminated. Your survey feedback is what helps us make these tough decisions. The Annuity Guys advisors have an independent financial practice, specializing in annuities and retirement planning, which helps ensure that you are given the best annuity options available for your retirement planning.

Video: "How Much of Your Money Should You Consider Placing into Annuities"?
"It takes an experienced expert to know how to structure annuities for income, inflation, growth, return of principal, and tax advantage."

"Anyone can sell you an annuity; however, it takes a truly qualified and experienced advisor to know how to structure annuities for income, inflation, growth, return of principal, and tax advantage. Typically, there is not just one annuity that can accomplish all of these objectives. It is how an annuity advisor structures multiple annuities in balancing your total portfolio that makes it possible to achieve your most important retirement objectives."

Video: "How to Choose a Great retirement Advisor"?

Why Searching for the Best Annuities on Your Own Can be so Frustrating...

Almost everyone nowadays turns to the internet for answers on everything - from buying new widgets to researching just about everything under the sun; and finding the best annuity is no exception!At first, it may seem that researching annuities will be straightforward but the more time you spend researching them, the more frustrating it can be. Why is this? First of all, it does not take long to realize that gimmicks abound - such as warnings and alerts from salesmen who just want your attention so they can sell you an annuity or the "too good to be true" claims of 8% to 14% **guaranteed interest and of course the claim that you can get the full market upside with no downside risk! If you have done any research you have heard all of these claims in advertising which are mostly half truths and not fully explained.So how can you find the best annuities on the internet? The truth is... you can't! And what is even more frustrating is all the conflicting points of view from so called experts. There are well over 6,000 different annuities - all designed for different reasons, so is it any wonder that the deck is stacked against the average researcher or do-it-yourselfer. Add to that the fact that annuities pay high enough commissions to attract a plethora of both good and bad agents. This does not make annuities good or bad; they are simply a financial tool that truly benefit those who use them correctly.How can you find the best annuities for your unique situation?
  • Use the internet cautiously;
  • Work with a vetted and experienced annuity specialist;
  • Do not settle for that one dubious best plan or annuity compare multiple Outcome Based Plans to decide on the one that is truly best for you;
  • Be keenly aware of scare tactics and hyperbole - avoid those advisors and websites;
  • Avoid websites that are focused on rushing free reports, rates and quotes to get your contact information they are rushing you to speak with them, instead, take your time and choose someone you are more comfortable with that works on your time-table;
  • Know the Five Vital Factors (listed above) that an experienced annuity specialist must answer before helping you select the best annuities for your situation;
  • Watch this telling video "Avoid Annuity Gimmicks, Amateurs and Charlatans"...

Video: "Avoiding Gimmicks, Scams & Charlatans"

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Annuities are not FDIC insured and it is possible to lose money. Annuities are insurance products that require a premium to be paid for purchase. Annuities do not accept or receive deposits and are not to be confused with bank issued financial instruments.

*Retirement Planning and annuity purchase assistance may be provided by Eric Judy or by referral to a recommended, experienced, Fiduciary Investment Advisor in helping Annuity Guys website visitors. Dick Van Dyke retired from his Investment Advisory Practice in 2012 to focus on this Annuity Guys Website. He still maintains his insurance license and assists his current clients. Annuity Guys' recommended Fiduciary Financial Planners are required to be properly licensed in assisting clients with their annuity and retirement planning needs. (Due diligence as a client is still always necessary when working with any advisor to check their current standing.)

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  3. It is recommended that site visitors should work with licensed professionals for individualized advice before making any important or final financial decisions on what is best for his or her situation.
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  9. MarketFree™ Annuity Definition: Any fixed annuity or portfolio of fixed annuities that protects principal / premium and growth by remaining market risk free.
  10. Market Free™ (annuities, retirements and portfolios) refer to the use of fixed insurance products with minimum guarantees that have no market risk to principal and are not investments in securities.
  11. Market Gains are a calculation used to determine interest earned as a result of an increasing market related index limited by various factors in the annuity contract. These can vary with each annuity and issuing insurance company.
  12. Premium is the correct term for money placed into annuities principal is used as a universal term that describes the cash value of any asset.
  13. Interest Earned is the correct term to describe Market Free™ Annuity Growth; Market Gains, Returns, Growth and other generally used terms only refer to actual Interest Earned
  14. Market Free™ Annuities are fixed insurance products and only require an insurance license in order to sell these products; they are not securities investments and do not require a securities license.
  15. No Loss only pertains to market downturns and not if losses are incurred due to early withdrawal penalties or other fees for additional insurance benefits.
  16. Annuities typically have surrender periods where early or excessive withdrawals may result in a surrender cost.
  17. Market Free™ Annuities may or may not have a bonus. Some bonus products have fees or lower interest crediting and when surrendered early the bonus or part of the bonus may be forfeited as part of the surrender process which is determined by each annuity contract.
  18. MarketFree™ Annuities are not FDIC Insured and are not guaranteed by any Government Agency.
  19. Annuities are not Federal Deposit Insurance Corporation (FDIC) insured and their guarantees are based on the claims paying ability of the issuing insurance company.
  20. State Insurance Guarantee Associations (SIGA) vary in coverage with each state and are not to be confused with FDIC which has the backing of the federal government.
  21. Annuity Guys website is not affiliated with or endorsed by the Social Security Administration.
  22. *"Best” refers only to the opinion of Dick, the Annuity Guys site author; or the opinion of Dick & Eric in videos and is not considered best for all individuals.
  23. *"APO” refers only to the Annual Pay-Out of annuities in the guaranteed lifetime income phase. *APO is NOT an annual yield or an annual rate of interest.
  24., is only a linked to subscription service, which is not affiliated with, it supplies and updates all Annuity Rates, Features Ratings, Fees and Riders.'s information is available in the public domain and accuracy is not verified or guaranteed since this type of information is always subject to change.
  25. Dick helps site visitors when help is requested. Dick may receive a referral fee as compensation from an advisor for a prospective client referral. This helps compensate Dick for time spent assisting site visitors and maintaining this educational website.
  26. Eric Judy is both insurance licensed and securities licensed. Eric offers securities as an investment adviser representative through Client One Securities, LLC.
  27. Eric purchases prospective client referrals from Annuity Guys Ltd. and may be compensated by commission for helping prospective clients purchase annuities. Eric may also recommend these prospective clients to an annuity advisor and earn a referral fee or a referral commission split.
  28. Vetted annuity advisors refers to advisors that are insurance licensed and recommended based on referral experience from satisfied clients.
  29. Any recommendation of an advisor is only one aspect of any due diligence process. Each site visitor must accept full individual responsibility for choosing a licensed insurance agent/advisor.
  30. In the event that a recommended licensed advisor/agent is not considered satisfactory, Eric will make reasonable efforts to recommend other advisors one at a time in an attempt to satisfy a site visitors planning or purchasing needs.
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  36. Use this website like the vast majority of websites at your own risk. No risk or liability of any type are accepted by any business entity or any of the information providers for this website.

Avoiding Annuity Gimmicks, Amateurs and Charlatans

Everyone loves a good practical joke – unless the joker is the person that just sold you an annuity and your retirement ends up as his or her punch line.

To help you figure out if your advisor is a “joker”, we have put together a list of red flags to look for… (continued below video)

Video: Dick and Eric Discuss…So, what is the best way to avoid a bad advisor experience?

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

Be aware of these leading indicators and work with proven experts by referral whenever possible.

  • Sensationalism in marketing materials (the WOW Factor!!!)
  • 8% to 15% Secret Returns or Guaranteed Gains (not clarifying that this is neither interest, yield nor cash gains; rather it is an income payout percentage or a formulaic aspect of an income **guarantee)
  • I Hate Annuities (advertisements that actually love to sell annuities)
  • Senior Alerts (to warn you about annuities when the real purpose is to sell you one!)
  • Free Reports (should say get a phone call from several annuity salesmen today)
  • Instant Quotes (should also say get a phone call from numerous annuity salesmen today)
  • Urgency to buy (way to much selling pressure)


  • Talking product without a sound basis for recommendations (no in-depth questions about your situation)
  • Rely heavily on brochures (knows how to read)
  • Focus on generalities that are all positive (cannot think of any reason for you not buy)
  • Avoid tough questions lacking solid factual answers when asked (repeats simple benefits lacking detailed answers)


  • Present a too good to be true scenario (over the top opportunity, impossible to improve on, insider information)
  • Rush the sale (pressure, awkward, more pressure, expects the sale)
  • Create false sense of urgency (again insider information, limited time opportunity, everyone in the know is getting in)
  • Create an atmosphere of authority that is beyond questioning (makes you feel foolish or untrusting when you pose questions)
  • Lacks willingness in encouraging questions ( demands trust and wants you to trust based on their implied expertise by pointing out your lack of knowledge)
  • Typically focus on one or two high commission products; concealing their one size fits all mentality (Ask to talk to several clients see if they were all sold the same thing, hmmm)
  • Overly friendly and personable prior to the sale (beware of those who are mostly focused on getting to know you with little focus on the planning or products)
  • Unavailable and indifferent after the sale (oops… it is a bit late at this point, this is what you must avoid)


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Here is an exerpt from the article – Here We Go Again: Annuities Promising 7 Percent Returns

It is too good to be true.

Understanding the **guaranteed returns takes time and perseverance.  From the products I’ve analyzed, the most common **guarantee involves two annually calculated values. The first is the actual value based on the underlying investment performance.  The second, or “**guaranteed value,” is increased by the predetermined return each year.  If the “**guarantee” is 7 percent per year, this value would, over a 10-year period, almost double the value for which you originally bought the annuity.

However, and this is a BIG “however,” you can not take the amount accrued over a 10-year period out of the annuity in a single lump sum.  You have to “annuitize” that value, meaning it must be paid out over the remaining years of your life (or some other time period).  When I calculated the advertised rate of return for one annuity claiming a “7 percent” **guarantee, I found that the rate of return paid out on the annuitized payments was less than 1 percent!  In total, the “**guaranteed return” was less than the current 10-year Treasury Bond yield … hardly a 7 percent **guarantee, and you paid some pretty hefty fees for the right to have it.

Another option offered by insurance companies allows investors to take a 4 to 6 percent payout every year for the rest of their lives instead of annuitizing.  Investors often confuse this payout with a **guaranteed return.  These are vastly different, as the former does not **guarantee the investment principal, which is still subject to investment risks. […read more]

Ten Annuity Surrender Charge Questions You Need Answered

Since David Lettermen retired we thought we should pick up where he left off, with an annuity themed top ten list! Here are the Top Ten Annuity Surrender Charge Questions You Need Answered… [continued below video]

Video: The Annuity Guys® Dick and Eric have fun discussing the top 10 annuity surrender concerns.

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

  1. …[continued] What is a surrender charge schedule?
  2. Why do surrenders exist?
  3. Why surrender charges are not always bad?
  4. How long do surrender charges last?
  5. Do surrender charges affect my bonus or earnings?
  6. How can I get around surrender charges?
  7. When surrender charges end, do I need to renew my annuity or buy a new one?
  8. Will my heirs get stuck with a surrender charge?
  9. How can I never pay surrender charges?
  10. Should I be focused on surrender charges as the primary factor in my decision or just one of the factors?

There has been quite a bit of news in the last year about annuity companies trying to “buy back” annuities they have **guaranteed. Check out this Wall Street Journal article on….

When to Surrender an Annuity

Your insurer may be trying to persuade you to sell your contract back.

Retirement-minded investors have snapped up hundreds of billions of dollars of variable annuities# with benefit **guarantees. Now some insurers are trying to persuade owners to walk away from their policies.

Variable annuities combine a 401(k)-like investment account with the equivalent of an insurance policy. They appeal to investors approaching retirement with a promise of **guaranteed regular payouts that could reset higher if the policy’s underlying investments fare well.

Yet the products usually have higher fees than plain-vanilla “immediate” annuities, which deliver an annual payout in return for a lump-sum payment. (Variable annuities are complicated enough—and consumers are confused enough about them—that the Securities and Exchange Commission issued an investor bulletin this month explaining how they work.)

Some insurers that sold products with rich **guarantees are trying to dissuade longtime customers from holding on to their contracts. In addition to offering to buy back variable annuities# with benefit **guarantees, insurers are limiting investment choices, raising fees and blocking additional account contributions.

The goal is to limit future payouts on accounts whose balances have tumbled at the same time ultralow interest rates hurt insurers’ own investment returns.

Insurers have sent out a flurry of letters in the past year informing annuity owners that their accounts are being shifted into more-conservative investment options—unless the owners opt out.

Michael Manon, a retired lawyer and entrepreneur who in March 2009 invested $120,000 in a variable annuity# with a **guaranteed-income rider, turned down an offer this month to sell the contract back to his insurer. His account is now worth more than $250,000.

“I still want the protection,” Mr. Manon says, pointing to the stock market’s January downturn as a reason why he values the **guaranteed payout.

He decided to turn down the buyout offer after consulting a financial planner with a specialty in counseling investors and advisers on the pros and cons of such annuities.

When should you consider getting out of an annuity with a **guarantee? If you aren’t seeking income as the main goal, if you have been diagnosed with a medical condition that severely shortens your life expectancy or if you have a dire need for a lump sum of cash, experts say.

Otherwise, consider holding on—as long as the contract still offers a broad range of stock investments, the income **guarantees are higher than what you could get for such a product if you bought it now, and you still want a steady income stream in retirement.

If you—or your parents—are holding an annuity and having second thoughts, here are some strategies to consider.

Stay aggressive.

Some insurers, including AXA Equitable Life Insurance, have sent letters to investors informing them that their assets would be shifted automatically from the growth funds they originally selected into lower-cost index funds, unless the investors opt out of the change.

“We were very clear that the offer was voluntary and that it may not make sense for everyone,” an AXA spokeswoman said. “But for some customers, their circumstances may have changed and it may make sense.” [...Read More at the WSJ]

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Video Transcription:

Eric: Hi, I’m Eric.
Dick: And I’m Dick. We’re the annuity guys.
Eric: Are we looking at the most fun topic today that’s possibly discussed; “Ten annuity surrender charge questions that you need answered.”
Dick: Well, Eric, this seems to be, if you listen to the media, you listen to the financial editorials; this seems to be the thing that everyone should be most fearful of with annuities are those evil surrender charges.
Eric: Surrender charges bad. Annuities good, surrender charges bad. You know everybody is focus on those charges.
Dick: Annuities would have been wonderful if they didn’t have these stupid surrender charges.
Eric: That’s right. So, we’ve got ten questions here that everybody should be aware of when they’re talking annuities and surrender charges like, first of all, what’s a surrender charge schedule?
Dick: Well, a surrender charge schedule is what comes with every annuity and you could see it right upfront.
Eric: It’s not like an add on like bonus feature that you got to choose to add one or not to add one.
Dick: When you fill out your application folks, there’s a schedule of surrender charge.
Eric: Your one, ten percent; our two, nine percent; your three, seven percent. Whatever those numbers may be, they state them in black and white – unless it’s a car printer – what those exact amounts are going to be. So you have that awareness even before you send your money.
Dick: And if for any reason the adviser, the licensed agent doesn’t discuss that with you at that time or should have discuss it with you before that, but shows you that schedule; if they’ve avoided that conversation with you,  you should just exit the room because you have know what you needed to know about this person.
Eric: Exactly. and the other thing is people want to know why we have surrender charges at all? Why do they exist? And I think one other things people have to understand about insurance companies is that they have to reserve for the liabilities that they have. So when they take on a new contract, they owe you money. And annuities designed to pay you back interest or credits, so they have to then reserved those. So to have a surrender charge is actually – and I think I’m jumping ahead – it’s not actually a bad thing because it allows the insurance company to buy investment vehicles that are more long-term knowing that you’re – not want to say on the hook for a longer period –  because annuities are a long term vehicle
Dick: Right,right.
Eric: So they can buy longer-term bond or longer-term commercial investment to help cover that liability.
Dick: Exactly, Eric. It’s really there – the surrender charges – as much as it’s portrayed something bad; it’s there to protect you. You do not want the other policyholders that this company is relying on to **guarantee your benefits, to look at the short term and bail out of it.
Eric: Right, because let’s be honest, if we are rate sensitive; if all of a sudden rates start to go up everybody would dive out of these annuities that had been in a lower rate; and then what would happen? The insurance company would be then scrambling because they got bonds in position for ten- twenty years; all of the sudden what do they do with those bonds? That’s one of the reasons surrender charges are there. They’re not always bad.
Dick: Yes, exactly. So, I think we’ve answered that question about are they good or bad; but how long typically do surrender
charges go on for?
Eric: Well, their short is one year and I’ve seen as long as 20 years. Now, most common – seven to ten.
Dick: Ten to twelve maybe; and I think ten would really be the most common.
Eric: The most common for the vehicle we typically use for our retirement planning, ten is pretty common.
Dick: And I think that, you know folks, one thing that you would want to be aware of is that the longer the surrender a lot of times, the greater the benefit. So, you try to find the sweet spot in there were you get most of the benefits with the lowest surrender. Agree?
Eric: Yes, because you’re looking at when the insurance company knows that you’re more committed for long term…
Dick: Yes, more committed and sincere.
Eric: -They can offer more or future benefit to you typically.
Dick: Right. Eric, what about the bonus that folks get with annuities? I mean not all annuities come with bonuses but they come with.. a lot of them will come with the bonus and then the earnings that folks get, what’s subject to surrender?
Eric: Right, everything that is in your cash account is subject to surrender. So, if you received a bonus, if you had interest credited; if you’re going to surrender, its all on the table. And let’s be honest that with insurance companies if they’re giving you a bonus and you decide to walk away, they want their bonus money back.
Dick: Absolutely.
Eric: A lot of times with a bonus annuity, you’ll see a higher surrender schedule so they can recapture that bonus.
Dick: Or you’ll also see maybe a separate schedule that is called a bonus recapture schedule – which is still just a
surrender… a surrender chart.
Eric: Exactly. Are there ways that we can get around surrender charges?
Dick: There are several ways. One of the most obvious is a ten percent withdrawal feature that the vast majority of annuities have built into the contract.
Eric: Almost every annuity has some kind of a penalty-free withdrawal provision and ten percent is probably the most common; there’s a couple that are five. And there are a few that do not have that but it’s the very small minority; the vast majority are the ten percent penalty-free withdrawal.
Dick: Here’s a little bit more of an unknown thing about annuities; some annuities are what we call an MVA annuity or a market value adjustment annuity and that’s not a surrender charge. It’s actually an offset to a surrender. So it can actually increase your surrender charge or it can decrease your surrender charge. If you choose the opportune time with that market value adjustment, it can actually completely wipe out a surrender charge.You could actually surrender your annuity early; and I’ve had this experience with some of my clients who actually get out at their old annuity which wasn’t performing well, use that MVA to allow them to move to a much better annuity and actually make money.
Eric: It’s one of the most misunderstood aspect of annuities in surrender charge process.
Dick: It really is.
Eric: -Is that market value adjustment. And I do want to point out one other way that you can avoid paying a surrender charge and that is getting to maturity aspect of your annuity.
Dick: So you mean this won’t go on forever.
Eric: So you don’t have to pay that surrender charge.
Dick: So there’s some point where you actually have an annuity but your surrender charge is gone.
Eric: And then, this is a common misconception. The clients want to know: So my surrender charge is up, my seven or ten years…
Dick: Yes, is over.
Eric: Now what happens to my annuity? They don’t realize that it doesn’t stop.
Dick: Throw it away and get a new annuity.
Eric: Annuities doesn’t stop when surrender charge ends, it continues on. Its strange but some people think that when that ten years is up, the annuity stops. It’s a lifetime product.
Dick:  When you buy it, you buy it exactly as a long-term retirement answer; it’s a solution for your retirement so at the end of the surrender charge, you just have the opportunity to get your money out at any time you want with no penalty; but that company is still on the hook.
Eric: They’re contractually obligated to you and there’s something there that will actually provide you with lifetime income
strangely enough.
Dick: We already touched on this a little bit but how about the heirs? You pass prematurely, you’ve still got surrender
charges, what happens to the heirs?
Eric: Well, I was going to say this is one, I would say, big benefits a lot times on annuities is that ninety-nine point nine percent of annuities; when you pass, that surrender fees typically goes away and all the cash is able to pass to the heirs.
Dick: And everything else in that account goes to the heirs penalty-free and I have had so many folks that were so relieved to actually know – they’ve had the misconception because of all the bad press out there about surrenders that they had to have that annuity for this length of time or their heirs were going to loose all this money. It’s not true!
Eric: In fact, I think in view of your shared story where you had somebody look at coming and buying a bonus annuity; so you know you’re getting a big up front perk, and if they were not long of this world, what they’ve done is really buy an enhanced death benefit in some ways. Now, we’re not suggesting you do that because the insurance companies will all basically get onto it very quickly and all benefit would go away; but it is a strategy.
Dick: Eric, how can folks never pay surrender charges. I mean how can they just flat-out never pay a surrender charges?
Eric: Well, the first thing is you plan properly.
Dick: Exactly.
Eric: It’s all part of how you structure your retirement plan. When you purchase an annuity, you know it’s part of a long-term process. And so, if you plan for when you’re going to take withdrawals, you plan for how things are going to come available; you never pay a surrender charge because you outline what’s going to come out, when it’s going to come out, how much are you going to pay, how much are you going to receive so that you never pay a surrender charge.
Dick: Exactly. You know the saying, Eric. “Proper planning prevents pitifully poor performance.”
Eric: That’s exactly what I was thinking.
Dick: So, okay…
Eric: Should we be focused on surrender charges when we’re buying annuities?
Dick: Eric, I don’t think it should be the focus.
Eric: You don’t come in and say “let’s only pick the ones with the shortest surrender charges. I don’t care about my income benefits. I don’t care about lifetime income.”
Dick: Solve your retirement objectives first and look at the surrender charge as one of those factors.
Eric: I was going to say unless you find a surrender charge and I really haven’t found one that is overly punitive, then you would wipe it off the table; but I would say “you know what, surrender charges are part of the equation but they’re there to protect you and they’re not the main factor when you’re deciding to buy an annuity.
Dick: I agree

Annuity Fees and Commissions – The Inside Story

Let me just give it to you straight – annuities pay commissions and some of them have fees. Now that we have those unpleasant facts out of the way, let’s figure out if those facts make annuities a bad choice!

When it comes to a properly designed retirement plan, does it matter what you pay if you’ve hit all your financial targets and fulfilled all your income needs? Of course it matters – nobody wants to overpay, but most people do not have trouble paying a fair price for good financial instruments or planning and assistance. When it comes to annuities 99 percent of  them are…[continued below video]

Video: Watch as Annuity Guys Dick and Eric elaborate on the inside story about fees and commissions!

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

[continued]…sold by advisors or agents who will earn a commission. Unfortunately, this means that as a consumer you have to be wary of the unscrupulous agent who sells you an annuity just to earn a commission; not because it was the right product or strategy to meet your planning goals. Good advisors are not afraid to share with you a variety of annuity options that may be under consideration to meet you goals – irregardless of what commission they  pay.

Early in life, my mother told me “You get what you pay for.” I think that was her way of telling me that if you always buy the cheapest option you might not be happy.

The same can be said of annuities. You get what you pay for and some annuities will cost you more. Fees on annuities are typically tied to benefits. The most common fees we discuss are the income rider fees that are added onto fixed and fixed index annuities to provide clients an opportunity to have lifetime income **guaranteed without having to annuitize.

Unfortunately, the media loves to focus on variable annuities# when it comes to discussing fees… as well they should; however, they tend to go one step to far and lump all annuities into the same category. After all variable annuities# usually have the largest and most costly fees for the benefits they provide. They also place the insurance company at the biggest potential risk. Variable annuities allow your principal account balance to rise and fall with the markets; however, most VAs have riders that **guarantee future income and death benefits. So, if the account balance has dropped and the company is on the hook for a significant portion of lost account value the only way they can cover the potential losses are with fees – lots and lots of fees.

Are the fees worth it? Some, definitely. Just be wise high fees can truly be detrimental. If your goal is to protect your retirement income, are you willing to give up something for a certain level of protection? If you answer yes to that question, then reasonable fees should be worth it.


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Looking for more information on annuity fees and commissions, check out this article by Stan the Annuity Man.

Can I Buy Annuities With No Fees or Surrender Charges?

Written By: Stan the Annuity Man

Question: Can I buy annuities with no fees or surrender charges? Are there no load annuities like no load mutual fund^s?  Ron in Roanoke, Virginia.

Answer: Phenomenal question Ron!  The annuity industry is very late to the party when it comes to “no load” type offerings that are common in the mutual fund^ industry.  No load can mean a few things.  It can refer to no fees for buying a strategy, no fees to keep the strategy, and no fees to sell the strategy.  Let’s cover all 3 as they apply to annuities, and the one annuity that covers all of these issues.

No fees to buy an annuity

Here’s where agents blur the lines when it comes to fees and commissions.  All annuities build in the agent’s commissions into the annuity so that you will see 100% of your money go to work.  Regardless of the type of annuity (immediate, indexed, variable, fixed, etc.), for example….if you put in $100,000, you will see $100,000 go to work.  Just be aware that this doesn’t mean that the agent didn’t get paid.  They did!

No fees to keep an annuity

Some agents might tell you that fixed rate annuities, or indexed annuities have no annual fees, and technically they are correct if these annuities are bought with “no extras.” However, most deferred annuities are sold with attached benefits (also called riders), which always come with an annual fee for the life of the policy.  Single Premium Immediate Annuities and Longevity Annuities (aka: Deferred Income Annuities) have no annual fees, but provide little or no liquidity.

No fees to sell an annuity

Here’s where the rubber meets the road, and where the annuity confusion starts in some cases.  The majority of annuities sold today are deferred annuities.  With deferred annuities, there are surrender charges to get your money out of the product.  For example, if the surrender charge on an annuity was 7% and your accumulation (i.e. walk away) value was $100,000…… would receive $93,000 if you fully surrendered the policy.  In my opinion, surrender charges are “fees” and should be considered when making an annuity buying decision.  If you sell a deferred annuity that is past its surrender charge, then there are no fees to sell.  But if you sell your 10 year deferred annuity in year 5, then you will be charged a fee to sell.  Always remember, surrender charges are fees.  As a caveat to this issue, Single Premium Immediate Annuities and Longevity Annuities are not “sellable” strategies and in turn have no surrender charges……but also no liquidity.  If you are considering these 2 types of annuities, make sure that your money is allocated properly and you do not need to access the funds lump sum.  [Read More…]


Annuity Fees – The Nasty Truth

The conventional press has maligned annuities for years due to high fees and surrender charges, as well they should… when they exist. Confused yet?  You should be. We have all heard the saying about throwing out the baby with the bath water and the same can be said about annuities. If we group all annuities into the “high fee” category we will be throwing out the baby.

Before we continue our thoughts we must express what we feel is obvious. All financial products have a cost of doing business whether it is a reduction of dividends returned, a fee or a charge. Financial professionals, investment and insurance companies are all compensated for their efforts in assisting you. So as we proceed we are not seeking to find the “free lunch” financial product – we are trying to make sure that you understand what you are paying so that you can make the determination as an informed consumer.

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**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

Dick and Eric discuss annuity fees and some of the hazards and misconceptions of with differing types of annuities.

Annuities come in many “Flavors”

A trip to your local financial professional to select an annuity can seem a lot like a visit to Baskin Robbins… you may end up wishing there were only 31 flavors.

Let start on the most basic level (the chocolate, vanilla & strawberry if you will), here we have variable, immediate and fixed annuities. Variable annuities have fees… lots of them typically. Fixed and immediate annuities typically do not have any fees or charges.

Variable Annuities

Variable annuities all have at the very least mortality and/or expense charges (M&E). This fee pays for the insurance **guarantee, commissions, selling, and administrative expenses of the contract.

Variable Annuity Fee Guide

Annual fee (as % of account value) for:NumberTypical
The insurance (M&E)_____%


The investments within the annuity_____%


Riders and options_____%


Total annual fee:_____%


What you pay to get out
Surrender charge (as % of withdrawal)_____%


Years before surrender charge expires_____



Your next questions should be, “What do I get for paying this fee?”  You usually get an added death benefit that basically **guarantees that your account will hold a certain value if you die before the annuity payments begin. This typically means that your beneficiary will at least receive the total amount invested even if the account has lost money.

The other expenses in the M&E are just truly that – expenses.

In addition to M&E expenses variable annuities# (VA) also have management fees on subaccounts.  The subaccounts are the mutual fund^ choices available within a VA. The management fees are the same as an investment manager’s fees within a mutual fund^. These fees will vary depending on the subaccount options within the annuity. Typically, they will be less than those charged by a managed mutual fund^ within the same investment category — though not always.

The fees associated with a VA’s riders and options can increase the cost of the VA significantly, but these are optional. However, I would hazard to say that most of today’s variable annuities# are sold because of the riders and **guarantees associated with them.

Why would anyone consider a VA with the amount of fees attached, two primary reasons; tax deferral and unlimited market upside potential.

Immediate and Fixed Annuities– the NO Fee Option

For the purpose of our fee discussion when we look at these annuities in their basics forms there are no fees are charges associated with these products. How do the agents and insurance company make money then you ask… similarly to the same way banks make money when you obtain a certificate of deposit. The expenses and cost are figured into the price of doing business by limiting or “managing” what they will return to you in the form of interest or dividends.

What about Equity Index or Fixed Index Annuities

Let me state this emphatically. A fixed index annuity is still a fixed annuity! So there are still no fees.  All the index does is offer a choice to tie interest crediting to a gain in an index rather than a fixed number stated by the annuity provider.

Ready for the Chocolate Sprinkles – of Fixed Annuities

Due to the popularity of the income riders on variable annuities#, fixed annuities have begun to add their own riders – typically for a fee. Some of these annuities are referred to as “Hybrid Annuities” because the riders let you construct an annuity that can combine pieces from the fixed, immediate and variable worlds.

The Ever Popular Hybrid Annuity – Fees can be Tricky

Hybrid annuities typically charge fees for income riders. The income riders typically have fees of less than one percent. However, you need to be sure you know which account the fee is based from. Hybrids with income riders have an account or ledger that tracks the value of the income rider account growth – this account typically grows at a higher percentage than the cash accumulation account.

A key for understanding hybrid account fees is to determine which accumulation total the fee is based upon. Some companies use the number to determine the amount of fee, even though you cannot use this account for a lump sum withdrawal. Other companies use the actual cash accumulation amount to determine the fee. However, the fee is always deducted from the case accumulation account and never from the account.

Why would you pay a hybrid rider fee? Much like the variable income rider, the hybrid rider fee allow for predictability of accumulation for an account geared toward retirement income. The main difference is that the insurance company is assuming the investment risk with a hybrid annuity.


The fees and expenses imposed by some annuities can be costly to own. You have to understand what you are getting for those dollars you are giving up. Annuities of all varieties are basically tools to give you insurance on you income. They are vehicles that are designed to provide a . When utilized correctly they can provide a level of comfort and security for anyone wanting a **guaranteed lifetime income.

Annuities are multifaceted devices that can be key pieces of a savings or retirement plan. Do not let the popular media discourage you from choosing the best decision for your future! Understanding what each annuity fee does empowers you to the best decision for you.

Annuity Guys® Video Transcript:

Dick: We want to clear up some misconceptions maybe about annuities and fees, because you see that in the press a lot don’t you, Eric?

Eric: Oh, the conventional wisdom, everything you read, headlines, “Oh, annuities fees, don’t use them. They’re so bad, nasty, nasty, nasty.”

Dick: Now there is some truth to high fees in annuities. We don’t want to say that there isn’t any aspect of that that needs to be brought out.

Eric: Well, the analogy is throwing the baby out with the bathwater.

Dick: Yeah, we don’t want to do that.

Eric: If you’re going to cast all annuities as being bad, then you’re going to lose some good opportunities, because not all annuities if your fee driven, are bad.

Dick: Well, even the annuities that have the higher fees, in the right situation, if they’re presented properly, they may fit certain situations.

Eric: Exactly, usually you’re exchanging a fee for some kind of service or some kind of piece that you’re given.

Dick: Right, so you’re either going to pay a higher fee or perhaps you may earn a little less.

Eric: Let’s deal with the first flavor of what the highest, the typical highest fee annuity, which is the one that is most castigated about and written about, which is the variable annuity#. Variable annuities typically have higher fees.

Dick: Much higher fees.

Eric: And the reason is…

Dick: They have more upside potential. That’s one aspect of a variable annuity#, yet the fee structure has to do with mortality, because they have a death benefit.

Eric: A lot of them have a death benefit. Then they also have mutual fund^ options, their investment options. So what you’re doing is taking out an annuity wrapper, so to speak and wrapping it around a mutual fund^ option.

Dick: And typically Eric, when we have a mutual fund^ just an average fee structure for a mutual fund^, is approximately what?

Eric: Oh, you’re getting at least a.50%.

Dick: A half is minimal, pretty much.

Eric: Now I’m not talking about the load expense that you’re going to pay up front, your ongoing expenses could be .50% and usually 1.50%, so those fees exist in either world.

Dick: And I believe according to some data on Morning Star that they kind of look at the average and the average mutual fund^, is somewhere around 1.15% now. It used to be 1.5% not very long ago, but it is right around 1.15%. So you take 1.15% and say on a variable annuity# your mortality expense, your mortality and your expense ratio, M&E charges, you’re looking at an average of somewhere around maybe 1.50% or so. You put that with 1.15%, now you’re pushing you’re pushing 3.0%.

Eric: And then you start adding on the riders and that’s where the variable annuities# get really expensive, but that’s the…

Dick: That’s the **guarantee part of a variable annuity#.

Eric: Exactly, those are usually what most people are sold on, when they buy a variable annuity#. You want that insurance on your investment.

Dick: Right. So if the investments are not performing very well, obviously those fees are going to eat in pretty quick to the principal. In addition if you’re taking money out, so the principal may be at a little more risk, but the income is not or the potential for your heirs with a death benefit, because of the rider on the variable annuity#.

Eric: Right, but that’s typically the one thing we see out there when people are looking at fees, they’re looking at that variable annuity# and so you can have variable annuities# as low as .25% and as high as over 5.0%, if you start adding on all those riders.

Dick: It really adds up fast.

Eric: So there’s your high fee option. If you’re fee adverse knowing that your principal’s at risk and some other things with the variable knowing how they work, you have to make the educated choice.

Dick: Right, right and then a lot of times all annuities as we started out saying, in the press you tend to see annuity, high fee, but there are a lot of annuities that have no fees.

Eric: Exactly and when you look at fixed annuities and immediate annuities there are no fees.

Dick: There is no fee. It’s kind of known that you’re not, maybe going to earn as much—when I say you’re not going to earn as much; you’re don’t have as much earning potential, as you would have maybe in a variable annuity#, where it can earn as high as the market goes. You may have a declared interest rate in a fixed annuity or you may have an index option, which indexes to a popular S&P or Dow Jones or something of that nature.

Eric: And those are your low fee/no fee options. People say, “How do you get paid? How do those places make money if there are no fees?” Well, it’s the same way a CD at a bank. The bank doesn’t say, “Oh, I’m going to charge you a fee. I have to pay the salary of the guy that sold it to you.” It’s all factored in as a part of the price of doing business. It’s all built-in to that expense. So what you’re earning on that annuity is truly all, basically earnings. There are no fees that are taken out of those products.

Dick: So I think that’s one thing that we just want to clarify, is that when you are buying an annuity that there are some annuities that really virtually have no fees. They protect your principal. They maybe don’t have as much upside potential. They’re purchased for other reasons than just the potential of a high return. They are purchased for safety, for a more secure retirement vehicle, and those are the ones that do not have fees.

Eric: Now when we talk about fixed annuities and we say there are no fees there is of course the mystical hybrid annuity, which is built off of a fixed annuity chassis, in the sense of your principal is not at risk. However, there are fees associated typically through the riders.

Dick: Yes, there are.

Eric: That is one of the things, when you look at a fixed annuity you can’t just throw the blanket over the fixed annuity and say none of them have fees.

Dick: There are some fees.

Eric: Because if you’re going for that hybrid option, which has basically, an income rider or a long-term care rider, if you’re adding a rider on, that’s where you are going to potentially see fees.

Dick: Right. I do think that we have to add the caveat that the fees typically are very low on the indexed annuity, under 1.0% as a rule, and sometimes some of those riders come with no fee involved. We do want to make that clear.

Eric: Exactly, so it’s understanding, if the rider that you’re buying gets you further to what you’re trying to accomplish with either your savings plan or your retirement cash flow plan, those are the times you’re willing to give up some of that upside or you’re willing to pay for that **guarantee. It’s insurance on your money. It’s insurance on your retirement plan.

Dick: Well, you know that you can potentially by buying a rider, by paying a fee, say it’s a .50% or .75% something of that nature, you know that you can **guarantee that your income potential could double in 10-years of what you would have today, just by buying that rider. That could be money very well spent.

Eric: Well, you’re putting a **guarantee of your future income in the bank. You’re banking on that retirement dollar being there, you’re buying an income stream. That’s what those riders are designed for. They’re designed for income, not for accumulation. If you’re designing them for accumulation, you’re being sold a bag goods, because that’s not what they’re for. They’re income riders, for your future income.

Dick: Exactly. Well Eric, I don’t know that if we’ve cleared up everything on fees, today.

Eric: Well, not necessarily everything. I guess the one thing we should in closing with the hybrid annuity. There is one caveat that you always have to be careful, when you’re working with your adviser you want to ask, “Is the fee based off of the cash account or the accumulation account?” Now we’re not going to explain that in this video, because it would take us another 30 minutes.

Dick: But there’s another part of that I want to give a little clarity to and that is that the fee never comes out of the income account, so even though we haven’t gotten into the detail of the income account and the cash accumulation account, we’ve done that in some other videos. That the fee always comes out of the cash account, so it reduces your cash value, but the income account has whatever the compounding amount is in there, say if it’s 8.0%, it’s not deducted. There is nothing deducted. So now we’ve really confused you.

Eric: I was going to say, “Now we’ve confused you.”

Dick: You have to watch our next video.

Eric: Perfect time to call your financial adviser or to give us a call.

Dick: Or give us a call.

Eric: Thanks very much for watching.

Dick: Thank you.