Understanding the Fine Print in Annuities

What You Need to Know About the Fine Print in Annuities

One of the most important things we do is help our clients to make clear, confident financial decisions—especially when it comes to annuities. We’ve seen firsthand how overwhelming annuity contracts and illustrations can be, and we want to walk you through what really matters beneath the surface. Let’s break this down together.

Why Annuities Can Seem Confusing

If you’ve ever felt confused by an annuity proposal, you’re not alone. Between the industry jargon and complex illustrations, it’s easy to feel uncertain. But we want you to know this: much of that confusion is avoidable with the right guidance. Unfortunately, some companies rely on this complexity to sell products that may not be in your best interest. That’s why we always start with education.

The Foundation: Know Your Annuity Types

Before diving into the details of any annuity, we make sure our clients fully understand the five main types of annuities, along with the five major types of income riders. Each one is designed to meet different needs, so we focus on what suits your goals—not a one-size-fits-all solution. When you understand the core mechanics, the rest of the contract makes a lot more sense.

Let’s Talk About the Fine Print

Here’s what we want you to look out for when reviewing an annuity illustration:

• Surrender Charges: These are not a penalty for working with an advisor or buying an annuity—they exist to support contractual guarantees like lifetime income, higher caps, or fixed interest rates. Most annuities also allow you to withdraw 5–10% of your funds annually without penalty.
• Fees: Contrary to what you may have heard, not all annuities have fees. Many fixed indexed annuities (FIAs) and MYGAs are completely fee-free. If a product does have a fee, it’s usually tied to an optional rider—like a guaranteed income or death benefit feature—and we’ll always make sure you understand the trade-offs before moving forward.
• Income Riders: Think of these as a hybrid pension. If your goal is to secure guaranteed income for life, these riders can make that possible. They’re optional, and we’ll only recommend them if they align with your long-term goals.
• Cash Value vs. Income Value: This is one of the biggest sources of confusion. Bonuses and roll-ups often apply to your income value, not your cash value. It’s critical to understand this distinction before making a decision—we’ll explain exactly how it works using your own numbers.

What We Watch For

When we review annuity illustrations with clients, we always look for red flags that might be easy to overlook. For example:

• Overly optimistic hypothetical returns: Some agents use the last 10–12 years of market history and project them forward for 30 years. That’s not realistic. We focus on the contractual guarantees—what the insurance company is obligated to deliver, no matter what happens in the market.
• Buried minimum guarantee pages: These are the most important pages in the contract, but many agents gloss over them. We’ll walk through those pages with you so you know exactly what’s guaranteed.
• Proprietary or low-volatility indexes: These can actually work in your favor if structured correctly. We’ll help you understand whether an index offers real long-term potential or just sounds flashy.
• Online Calculators: They’re easy to use, but rarely reflect up-to-date rates or actual contract terms. That’s why we request personalized, accurate illustrations tailored to your situation—not generic online estimates.

Bottom Line: Transparency Is Non-Negotiable

We believe you deserve full clarity and control over your retirement income plan. That’s why we take time to walk through every detail of your annuity strategy—how it works, what it costs (if anything), what’s guaranteed, and what’s possible. Annuities can be a powerful tool, but only when used appropriately and with complete transparency. Let’s continue this conversation and make sure your retirement plan is built on clear terms, real numbers, and long-term peace of mind.

Let’s take the guesswork out of annuities—together.

If you’re ready for a side-by-side breakdown of your options or want help evaluating a specific annuity proposal, we’re here to help. Just let us know.