Fixed vs Variable Annuity Cost Calculator
Variable annuities carry total annual fees of 2.5-4%+ (vs 0.5-1.5% for fixed annuities) — driven by M&E charges, rider costs, and subaccount expense ratios. This calculator surfaces the full annualised cost difference over a typical 20-year retirement payout horizon.
Variable Annuity Fee Structure
Three main fee layers: Mortality & Expense (M&E) charges typically 1.10-1.40%, subaccount expense ratios averaging 0.85-1.10% (similar to high-cost mutual funds), and optional rider fees of 0.50-1.40%. Total: 2.5-4%+ annually — among the highest-fee retail investment products.
Fixed Annuity Simplicity
Fixed annuities credit a stated rate (4-6% typical 2026). Total cost is built into the spread between the insurer's investment return and your credited rate — typically 1-2% effective fee. Much simpler and lower cost than variable, but no equity-market upside participation.
Surrender Charge Trap
Both annuity types impose surrender charges if withdrawn early — typically 5-9% in year 1, declining to 0% over 5-9 years. Surrender + 10% pre-59.5 penalty + ordinary income tax can mean only 60-70 cents on the dollar comes back if needed early.
Source: FINRA Investor Alert on Variable Annuities; NAIC Annuity Disclosure Model. Last updated: May 2026.