What annuities actually are
An annuity is a contract with an insurance company. You give them money — either as a lump sum or over time — and in return, they promise to pay you income, either for a set period or for life. That is the basic idea. What makes annuities complicated is not the idea itself but the number of variations, riders, fees, and surrender schedules that the insurance industry has layered on top of it.
Fixed annuities guarantee a set interest rate, much like a CD issued by an insurance company. Variable annuities let you invest in subaccounts that look and behave like mutual funds, with the added feature of optional income or death benefit riders that guarantee a minimum payout regardless of market performance. Fixed indexed annuities sit in between — they credit interest based on the performance of a market index, subject to caps and floors.
The industry makes its money on the fees embedded inside the contract and on the spread between what it earns investing your premium and what it pays you. That does not make annuities bad. It makes them expensive, and the expense is only justified if the guarantee is doing something you genuinely need and cannot get more cheaply elsewhere.
What working with us looks like
First meeting — reading the contract
We meet in person and read the actual annuity contract — the surrender schedule, the fee disclosures, the rider terms, and the subaccount choices. Most owners have never seen these details laid out side by side. We translate the contract into plain numbers: what are you paying, what are you getting, and is it earning its keep.
A written annuity analysis
You get a written report comparing the annuity's cost and benefit against simpler alternatives. If the annuity is worth keeping, we tell you so. If it is not, we show you the math and map out the exit — including surrender charges, tax consequences, and a 1035 exchange if it makes sense. The analysis is yours whether or not you hire us.
A note on fit
When this might not be right for you
Our annuity analysis service is not the right fit for everyone. Some honest disqualifiers:
- Anyone looking for someone to sell them a new annuity. We are a fee-only firm and we do not sell insurance products.
- Owners who are still inside a surrender period and cannot afford the penalty. We can still analyze the contract, but the actionable options may be limited until the surrender period ends.
- Households whose annuity is a small part of a much larger portfolio and whose fees are immaterial in context. Sometimes the cost of the analysis exceeds the cost of the problem.
Frequently asked questions
What is the difference between a fixed and variable annuity?
A fixed annuity guarantees a set interest rate for a set period, similar to a CD. A variable annuity lets you invest in subaccounts whose value rises and falls with the market. Variable annuities are more complex, carry higher fees, and expose you to market risk — but they can include optional riders that guarantee a minimum income for life regardless of market performance.
How much do variable annuity fees typically cost?
Variable annuity fees typically stack to between 2.5 and 4.0 percent per year when you add mortality and expense charges, administrative fees, subaccount expense ratios, and optional rider costs. On a $500,000 contract, that can mean $12,500 to $20,000 per year in total fees, most of which are deducted from the account value rather than billed separately.
Can I get out of an annuity I don't want?
Yes, but it depends on where you are in the surrender period. Most annuities charge a surrender penalty during the first several years — typically starting at 7 to 8 percent and declining to zero over time. After the surrender period ends, you can withdraw or exchange the contract. A 1035 exchange lets you move to a lower-cost annuity or a different product without triggering a taxable event.
Are annuities a good investment for retirement?
Annuities can serve a real purpose for households that need guaranteed lifetime income beyond Social Security and any pension. They are most useful for covering a specific income gap that the household cannot afford to leave to market risk. They are least useful when a simple bond ladder, a systematic withdrawal strategy, or a deferred Social Security claiming date could accomplish the same job for less cost.
What is a 1035 exchange?
A 1035 exchange is a tax-free transfer from one annuity contract to another, or from an annuity to a life insurance policy. It lets you move to a lower-cost or better-structured product without triggering a taxable event on the accumulated gains. The exchange must go directly between insurance companies — you cannot take possession of the funds in between.
Do you sell annuities?
No. We are a fee-only fiduciary firm and we do not sell insurance products or receive commissions of any kind. Our role is to analyze annuity contracts you already own, tell you whether they are earning their fees, and present the alternatives. If the annuity is doing its job, we will tell you to keep it. If it is not, we will show you the math.