Hi! Thank you for writing! To give specific advice, Scott is right that we'd need more information. But we can talk in general about some of the risks that annuities of all kinds tend to have in common. If you define "risk" as the possibility of losing money, then we can talk about the risk that an annuity might lose you money, that an annuity might not make you as much money as an investment of similar risk level, and that the fees that can be associated with an annuity that are not as often associated with other investments can cost you money.
All investments carry a level of risk. Make sure you consider the financial strength of the insurance company issuing the annuity. You want to be sure the company will still be around, and financially sound, during your payout phase. Variable annuities have a number of features that you need to understand before you invest. Understand that variable annuities are designed as an investment for long-term goals, such as retirement. They are not suitable for short-term goals because you typically will pay substantial taxes and charges or other penalties if you withdraw your money early. Variable annuities also involve investment risks, just as mutual funds do.
All investments come with fees – they are products sold by companies that need to make a profit on their sales. Annuities are a type of investment with a number of fees you might not be aware of. They can include:
· Surrender charge. This fee is a penalty for making an early withdrawal above the free withdrawal amount, usually a percentage of the amount withdrawn.
· Mortality and expense risk charge. This charge is equal to a certain percentage of your account value, typically about 1.25% per year. This charge pays the issuer for the insurance risk it assumes under the annuity contract. The profit from this charge sometimes is used to pay a commission to the person who sold you the annuity.
· Administrative fees. The issuer may charge you for record keeping and other administrative expenses. This may be a flat annual fee or a percentage of your account value.
· Underlying fund expenses. In addition to fees charged by the issuer, you may pay fees and expenses for underlying mutual fund investments.
· Fees and charges for other features.Additional fees typically apply for special features such as guaranteed minimum income benefits or long-term care insurance. Initial sales loads, fees for transferring part of your account from one investment option to another, and other fees also may apply.
· Penalties. If you withdraw money from some annuities before you are age 59½, you may have to pay a 10% tax penalty to the IRS on top of any taxes you owe on the income.
I hope this info helps a bit! Please write back with additional questions. Thank you!