Five hidden annuity fees can cost retirees about 3% annually

AOL reported that retirees often face five costly annuity fees that are not clearly listed on statements. These fees can include charges for mortality, administration, riders, and subaccounts, which together may total about 3% annually on the contract value.

For example, on a $250,000 annuity contract, these fees could amount to roughly $8,000 each year. Rider fees are particularly notable because they are charged on a "benefit base" rather than the account value, allowing them to increase through roll-ups even if the account value declines.

Surrender charges are another fee retirees should watch for, as they allow insurers to recoup agent commissions. Withdrawing more than the free amount during the surrender period can trigger these penalties and may also result in a 10% tax.

Households aged 55 to 69 hold a significant portion of the money subject to these fees, with about $8.5 trillion in annuity holdings, indicating the broad impact of these charges on near-retirees and retirees.