Annuity Product Comparison
If you own a variable annuity — or were recently offered one — this comparison gives you a clear look at how a fixed indexed annuity differs in fees, risk, and income potential.
Both are annuities issued by insurance companies. But they work very differently — and so do the risks they carry.
Variable Annuity (VA)
A variable annuity invests your premium into subaccounts — essentially mutual fund-like investment options — whose value rises and falls with the market. You bear full investment risk.
VAs charge a layer of insurance-company fees on top of the underlying fund expenses. These internal charges — called M&E (Mortality & Expense) fees — typically run 1.0–1.5% annually, before accounting for subaccount fund costs.
Variable annuities are classified as securities. They require a securities license to sell and are primarily offered through brokerage channels as part of a broader retirement or investment account relationship.
Fixed Indexed Annuity (FIA)
A fixed indexed annuity credits interest based on the performance of a market index — such as the S&P 500 — without directly investing in the market. Your principal is protected from market loss.
FIAs impose a 0% floor — meaning even in a market crash, your credited interest cannot go below zero. You participate in index upside up to a cap or participation rate, depending on the contract structure.
Fixed indexed annuities are insurance products, not securities. They are typically distributed through independent agents and RIA-affiliated advisors. No M&E fee applies on standard indexed accounts.
10 dimensions that matter to a retiree evaluating these products.
The most important number most variable annuity owners have never seen is their total internal cost — the combined drag of M&E fees, administrative fees, fund expense ratios, and any elected rider fees.
For many variable annuities offered through brokerage platforms, total annual fees run between 2.5% and 4.0% per year. That means on a $300,000 account, you may be paying $7,500–$12,000 annually in internal costs — even in a flat or down market year.
Fees don't disappear in a down year.
If your VA drops 15% and you're paying 3% in annual fees, your net account value declines by roughly 18%. In a fixed indexed annuity, a down year credits 0% — you don't gain, but you don't lose either.
This is the structural tradeoff that's difficult to see in a prospectus but very visible in a fee breakdown. We walk clients through this comparison clearly before making any recommendation.
Typical Variable Annuity Fee Stack
Fee ranges are illustrative. Review your contract's prospectus for exact figures. Rider fees vary by carrier and elected benefit.
A Variable Annuity May Make Sense When
A Fixed Indexed Annuity May Be Better When
Free — No Obligation
We'll pull your contract details, calculate your actual fee load, and show you what a comparable fixed indexed annuity would look like — side by side. No commitment required.
Fixed indexed annuities are not the right fit for every situation. And switching from a variable annuity carries its own considerations. Here's what deserves careful review.
1035 exchange implications
Moving from a variable annuity to an FIA via a 1035 exchange can be done tax-free — but you must evaluate existing surrender charges, any built-up gains, and whether a living benefit rider you currently hold is worth preserving. Not every switch makes financial sense.
FIA caps and participation rates
Fixed indexed annuities do not give you full index participation. A cap of 8–12% means in a year the S&P 500 returns 25%, you receive the cap, not the full gain. This is the core tradeoff for the principal protection floor.
Surrender charges on both sides
Your existing VA may have surrender charges remaining. A new FIA will also have a surrender period — typically 5–10 years depending on the contract. You need to plan for your liquidity needs across both surrender schedules.
Not all FIAs are the same
Index options, caps, participation rates, and income rider terms vary significantly across carriers. A Midland National FIA has different contract terms than a North American or Athene product. We compare across all of them — not just one.
This is exactly why a second opinion from an independent, open-architecture specialist matters. We have no obligation to any single carrier — only to finding the right fit for your situation.
Whether you already own a variable annuity or are evaluating one, a 30-minute conversation gives you the full picture — fees, risks, alternatives, and whether a fixed indexed annuity changes the math.
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