Annuity Commissions and Fees
Fixed Index Annuities and Hybrid Annuities
Yes, annuities with more complex features, such as fixed index annuities or hybrid annuities, and especially those with long surrender periods (greater than 10 years) can earn an agent up to 10% in the first year!
Some index or hybrid annuities companies also pay an agent a “trail” commission. He or she may earn a smaller percentage initially, but continue to receive a "trailer" each year for the life of the annuity. This could be for as long as 20 to 30 years.
Agents Just Love to Sell High Commission Annuities!
It’s no surprise nearly 75% of the annuities promoted by agents and stock brokers are the more complex type that pay a higher commission. If an agent tells you that only a hybrid annuity will work in your situation and doesn't offer you immediate annuity or deferred income annuity options, beware!
We had heard about annuities and were investigating them for our IRAs. We also heard bad things about pushy brokers over the years. So when we went to the ImmediateAnnuities.com site we were skeptical about calling them. But whenever we called their staff was really friendly. They answered all our questions and one of their reps even told us that at our ages there was no advantage to buying the annuity with our IRAs. These guys are really honest!
There are some big marketing outfits constantly advertising huge "8% annual returns." These are usually hybrid annuities, and the public is unaware of the large commissions some agents are making on these sales.
And in addition to the commission the agent earns, the insurance company may also be charging you an annual rider fee in your hybrid annuity.
Along with index annuities and hybrid annuities, the bad rap for high commissions and fees also belongs to the type called "variable annuities", which are similar to mutual funds. Variable annuities typically charge annual management fees and mortality fees, which can range from 0.50% to 4.00% a year. On top of that, in the first year the broker or agent may earn up to 8% commission which reduces the amount left over for investment, plus an annual trail commission.
Putting annuity commissions in perspective
When buying your annuity there should be no surprises about the commissions your agent will earn. When you buy your annuity through our firm, we are straightforward about your costs and the commission we earn. We take pride in being honest and transparent.
I hope I've answered your questions about annuity commissions. If not, let me know what I left out. I'd also be happy to discuss your retirement plans with you. You can reach me at 800-872-6684. I promise there will be no sales talk.