Annuity Fees and Commissions
Hi there. Stan The Annuity Man, America's Annuity Agent, licensed in all 50 states. I'm wearing The Annuity Man ski jacket today. I know what you're saying. You're saying, "Wait a minute, Stan The Annuity Man, you got gear for everything." I really do. Now, I don't go skiing because that would be horrific to watch, but I do have an official The Annuity Man ski jacket. I know what you're saying. It's crazy. But I'm wearing this for a reason because today's topic is annuity fees and commissions and the truth behind all of that. So, what are we going to do? We're going to unzip the truth and get down to the real deal. By the way, I do have another Annuity Man shirt under this jacket, but everything's Annuity Man.
I know what you're saying: "Stan, that's repetitive. That's crazy." No, it's not. It's branding. Now, with that being said, I won't take the shirt off because you don't want to see that. There's no six-pack abs. I know what you're saying: "Stan, you look so young. Aren't those six packs there?" No, there's no six-pack abs.
So today, we're going to talk about annuity fees and commissions. You'll like this topic because no one talks about annuity fees and commissions, so let's go through them. Commissions with annuities: Once again, life insurance companies issue annuities, but commissions to us agents out here are built-in and hidden from you, so it's a net transaction. If you buy a $100,000 annuity of any type, you'll see $100,000 go to work for you.
Now, in a perfect world, I think we should reveal those. If you ask me what my commission is on something you purchase from us, we'll tell you every single product and carrier is different. Still, I'm going to give you the ranges of specific annuity types and the commissions.
One of the things that cracks me up all the time is I hear these statements from relatively smart people, I think, who are either journalists or advisors, and they'll say, "All annuities are expensive. The fees are ridiculous." And I'm like, "You're the dumbest person I know, and I know a lot of people." Because most annuities don't have any internal fees or any moving parts. Some of the more popular products sold with higher commissions do have internal fees, etc., but let's go through them, and I'm going to break them down on what are the annual fees and what's the commissions.
Single Premium Immediate Annuities, the most basic lifetime income stream annuity, and you start as soon as 30 days from the issue date up to a year. Commissions can range from one to 3%, typically on a range depending on the carrier commissions. No annual fees, no moving parts, no annual fees.
Deferred Income Annuities are the sister product of Immediate Annuities with income starting at over a year, 13 months, and out. The same chassis as an Immediate Annuity. No annual fees. Commissions can be anywhere from 2 to 4%, depending on the carrier. Again, all of this is built in; you never see it. Commissions are paid from where the annuity company pays their light, heat, and water bills. It's a one-time commission to the agent.
Qualified Longevity Annuity Contracts are the sister product of a Deferred Income Annuity used inside of an IRA, once again, two to 4% commission, no annual fees, and no moving parts.
So, we've gone through three products so far, types. Expensive? What are you talking about? There are no fees! It's a pure transfer of risk for lifetime income.
The fourth product, Multi-Year Guarantee Annuities, you can get them as short as two years in duration out to, say, ten years in duration, and those commissions, depending on that duration and the carrier, can be anywhere as low as a half of 1% to say up to 2%-ish, in that range. Again, there are no annual fees.
So, all those experts out there, "Never buy an annuity. Those are very expensive. Fees will kill you." I've just given you four that have no annual fees. Now, for all you maniacs out there that think you've hung the moon and a master of the universe, "Well, fees, Stan, I'm talking about the cost of losing opportunity." That's not a fee, player. We're talking about the product and the fee. The other thing that I like about the annuity industry coming from the brokerage world, UBS, Morgan Stanley, Paine Webber, and Dean Witter; that's how old I am. Annuity companies don't nickel and dime you. There are no IRA fees or transfer fees or all these little ham and egg fees, as I'll call them in the South. None of that exists.
So, we've done SPIAs, DIAs, QLACs, and MYGAs with no annual fees and the underlying commissions. Now let's get to the more complicated products, Indexed Annuities. With Indexed Annuities, there's a range depending on your buying duration. There are four and five-year Index Annuities that'll be a two to 3% commission. But the majority, vast majority, yes, for all you Index Annuity Kool-Aid drinkers out there that are going to yell at me, most of the chassis are seven to 10 years in length, and those commissions can go from anywhere from five to seven up to 9% commission. Currently, with Indexed Annuities, if you do not attach a rider to it, there are no annual fees. How about that? If you just buy a plain vanilla, I'm not sure there is such a thing, Indexed Annuity and there's no rider attached, there's no annual fee. Once you attach that Income Rider, then there's a fee for the life of the policy, and typically, that fee is around one and a half percent. It could be 2%, but the point is that the fee comes out of the accumulation value, not the income benefit value.
Lastly, and I don't sell this product, Variable Annuities. You can buy no-load Variable Annuities, so there's no commission and no fees. Those are great because you're not spending the money on all of that mortality and expense fees. The bottom line with Variable Annuities is that I don't sell them and have nothing against them. They were introduced in the 1950s for tax-deferred growth, but in my opinion, if you want to buy mutual funds, buy mutual funds; you don't need to do that. But the average annual fee of a Variable Annuity is around two to 3% for the life of the policy, and if you add little whistles and bells, it could be even more.
Again, annuity commissions are paid from the annuity company's reserves. It doesn't come out of your amount. It's a net transaction to you, and the simpler the product, the lower the commission; the more complex the product, the higher the commission; the longer the surrender charge on those complex products, the higher the commission.
In my opinion, Stan The Annuity Man, America's Annuity Agent, if you can explain it to a nine-year-old and they understand it, no offense to the nine-year-olds, the lower the commission, the more pro-consumer that product is.
So, there you go. Annuity fees and commissions, this is it. You got it all. You understand it all, and now you know why some people are trying to sell you some products without even hearing you on others. They're trying to maximize the commission. How could all of this be solved? Good question. First of all, I'm the annuities are of the industry. Stan The Annuity Man, I have a really good office. It's like a penthouse office. We'll put it here in Las Vegas, which is where my main office is, penthouse, and I'm going to say all annuity types have a low commission, and it's all the same. If we did that, we would clear up all the nonsense and all the agenda sales-driven stuff. But that's not going to happen because that makes too much sense.
Hey, thanks for joining me, and I'll see you on the next Stan The Annuity Man blog.
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