If you’re shopping for an annuity, the biggest annuity mistakes usually don’t look like “mistakes” at the time. They look like convenience: trusting one quote, signing fast, and assuming everything was explained.
But annuities are long-term contracts. When you buy the wrong one—or buy the right one the wrong way—you can lock yourself into surrender charges, surprise adjustments, or an income plan that doesn’t protect your spouse.
If you want to do this the right way, this article will explain the different outcomes, and what you can do to avoid these.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
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Mistake #1: Not Researching What’s Actually Available
Most people come to me after they’ve only seen one or two annuity options.
That’s usually because:
- A friend/advisor only has access to a limited set of carriers, or
- Their broker “approved” list is small, or
- They’re steering you toward a product that pays them more.
A product can be “good” and still be the wrong choice because you never saw the alternatives.
💡 Pro Tip: Research first, then talk. If you already know what’s out there, it’s much harder for anyone to sell you a “mystery annuity” you don’t fully understand.
👉 Want a no-pressure comparison of what’s available? Schedule a call here.
Mistake #2: Buying an Annuity Without Understanding Surrender Charges
This one shocks me: people sign an annuity contract and don’t realize it has surrender charges.
Surrender charges are normal because annuities are built for long-term benefits like:
- lifetime income,
- guaranteed rates,
- principal protection,
- or enhanced growth features.
But here’s the key: if you might need to take the money back out early, surrender charges matter.
Most annuities allow some free access, like:
- interest-only withdrawals, or
- 10% per year penalty-free withdrawals.
Anything above that can trigger charges.
👉 Before you buy, make sure your “emergency access plan” is crystal clear. Schedule a call with me.
Mistake #3: Ignoring the Market Value Adjustment (MVA)
This is the part many advisors never explain well: some annuities also have an MVA if you surrender early.
An MVA can be:
- positive (a credit) if rates dropped after you bought, or
- negative (an additional penalty) if rates rose after you bought.
So even if you understand surrender charges, the MVA can change what you actually get back.
💡 Pro Tip: Ask this exact question before you sign: “Does this annuity have an MVA, and can it add to my surrender cost if rates rise?”
Mistake #4: Not Protecting Your Spouse With the Right Income Option
If you’re married and your spouse depends on your retirement income, this mistake can be devastating:
Choosing single life income when you should have chosen joint life income.
Why? Because with some income designs, the account value can decline over time as income is paid out. If you pass away and it’s single-life, your spouse may lose the income stream, and any meaningful death benefit (if the account value has been depleted).
Joint income is designed so if you die first, your spouse keeps receiving income for life.
✅ Single-life can still make sense in certain cases (like when a spouse is much younger, or when you’re using other assets/life insurance for protection). But it should be a deliberate plan—not an accident.
👉 Want to sanity-check the right income option for your household? Schedule a free consultation call.
Mistake #5: Paying Fees for Benefits You Don’t Need
Fees aren’t automatically “bad.” Fees are only bad when:
- you’re paying for something you don’t use, or
- you don’t understand what the fee is based on.
For example, income riders often charge around ~1%—but the charge may be based on the income benefit value, not the cash account value. That’s because the income benefit value is what the insurer uses to calculate your lifetime payout.
So the real question isn’t “Are there fees?”
It’s: “What am I getting for the fee, and do I actually need it?”
If you don’t need maximum lifetime income, you may not need that rider.
If you do want the highest paycheck for life, the fee can be worth it.
💡 Pro Tip: Don’t compare annuities by fee alone. Compare them by net outcome: income, guarantees, access, and the plan for your spouse.
Mistake #6: Buying the Wrong Type of Annuity (Especially the Wrong “Growth Story”)
The most common “wrong annuity” problem I see is when someone unknowingly buys a contract with:
- high internal fees, and/or
- risks they didn’t understand, and/or
- an illustration that looked amazing… but reality didn’t match.
Two frequent culprits:
- Variable annuities sold as “safe and growing” (while the fees quietly eat the results).
- “Growth annuities” using a fancy index you’ve never heard of, with performance that was heavily back-tested and marketed like it was guaranteed.
If you don’t understand why the annuity should perform, you’re relying on hope—and hope is not a retirement strategy.
👉 Want to compare straightforward, transparent options with contractual guarantees? Schedule a call.
Conclusion
Before you buy any annuity, make sure you can answer “yes” to all of these:
- I’ve compared multiple carriers/options, not just one.
- I understand surrender charges and how long they last.
- I know whether there’s an MVA, and how it can affect my value.
- I have a spouse plan (joint income, insurance, or other assets).
- Any fees are tied to benefits I truly need, not “nice-sounding extras.”
- I can explain what I’m buying in one sentence (growth, income, or both—and how).
If you want help with this, that’s exactly what I do. I’ll show you what’s available and help you decide what’s best for you—without pressure.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have