Just like any other investment, buying an annuity involves paying certain fees. These fees may be quite high at times, the reason many investors and financial planners dislike annuities. However, with the benefits they return, it might not always be a bad choice to accept paying these fees. What is more important is to do your annuity homework well - to compare all available options and then, to make the right choice. Let’s take a glance at annuities fees.

The price for an annuity depends on the insurance elements it offers. As for the fees, it varies among products. A more popular product may have a higher fee. In general, annuities have three types of fees attached to them: the Insurance fees or Mortality and Expense charges, the Surrender charges, and the Management fees.

Mortality and Expense or Insurance Charges

The "mortality and expense" (M&E) charge is paid against the insurance guarantee, commissions, and other administrative expenses of the annuity contract. For a fixed annuity, the M&E charges are usually included in the periodic interest rates or annuity payout amounts, over the annuity phase. For a variable annuity, however, they constitute a percentage of the value of the annuity and is measured in terms of "basis points", which is 1/100th of 1 percent.

Surrender Charges

These are the penalizing charges that you have to pay if you surrender your promise made in the annuity, that is, if you withdraw gains from your annuity before the committed period. Usually, annuities impose surrender charges if you cash the annuity before a specific period. Typically, for fixed annuities, these charges may not always apply unless you withdraw your money before reaching the age of 59 ½. Some insurance companies may also waive these charges off if the annuitant is a senior citizen or in other special cases. For fixed annuities, however, the surrender charges may start with 7 percent in the first year, declining by 1 percent every year. Basically, this surrender charge is designed to discourage short-term annuity investments.

Management Fees

Management fees are more relevant with variable annuities. Since variable annuities depend on the market reactions and the sub accounts linked with the various stocks and accounts need to be constantly monitored, it takes a full time effort from the person managing the variable annuity account. The management fees, therefore, goes to reward the skills and efforts of this investment manager or financial planner. This means, if you have got a fixed annuity, you don’t need to pay the management fees.

Although one may feel that the charges and fees increase the cost of an annuity, it in fact depends on how you manage your finances. A fixed annuity has lesser costs attached to it than a variable annuity, yet it gives guaranteed returns. However, if you have a very high-yielding variable annuity, you can ignore the risks or the charges associated with it. For more information and advice on annuity fees, refer to the experts at AnnuityLibrary.com. Click here or call www.AnnuityLibrary.com at 1-800-998-4056 toll-free.