Another charge you should be prepared for is a
surrender
fee,
which you’ll have to pay if you wish to
withdraw all of your money, or a substantial part of it, in the
early years of the contract. For example, if you terminated your
contract in the second year and wanted to withdraw $40,000, you
might owe a 6% surrender fee, or $2,400. In the third year, the
charge might be 5%, and then continue to drop until it disappeared
entirely after the seventh (or tenth) year.
Although the fee is in place to dissuade you from
a hasty choice to withdraw money saved for retirement, it can
also penalize you for a rational change of plans.
Add-ons
Some variable annuity providers offer the option of adding contract
features, known as enhanced benefits, for an additional charge.
For example, you might choose
Stepped-up
death benefits, which bump up the guaranteed death
benefit to reflect portfolio gains
Guaranteed
minimum annual interest earnings
Guaranteed
minimum income benefits if you annuitize
Long-term
care protection
In each
case, you must decide if the additional protection is
worth the extra fee.
