Cut Out the Middleman: Commission-Free Annuities Explained

In the past, annuities have often been misunderstood as complex investment vehicles. After all, they’re known for their high commissions and opaque fees. Furthermore, these commissions often line the pockets of salespeople. As a result, returns can be substantially eroded.
In recent years, however, a new breed of annuities has emerged: commission-free annuities. DPL Financial Partners, a leading provider of commission-free annuities, has sold more than $2 billion in no-load annuities, more than doubling its sales in 2022.
Although annuities can be tailored to suit your needs, they’re complicated products with some pitfalls. Most notably, they’ve traditionally come with high commissions.
The commission depends on the annuity type and the total value of your contract. Most annuities, however, have higher commissions when they’re more complicated. In the case of a 10-year fixed index annuity, the commission ranges from 6 percent to 8 percent. An immediate annuity with a single premium typically carries a 1 percent to 3 percent commission.
Many retirees may be better off saving for retirement with low-cost index funds within an IRA. In addition to IRAs and 401(k)s, annuities can be considered by high earners seeking to maximize retirement contributions.
For potentially lower costs, consider annuities offered by companies like Fidelity or Vanguard.