11. Annuity Rollover Fees
Annuity rollover fees are a hidden cost that many retirees might not notice. Not all annuities are created equal. Some might be tied to mutual funds — which are tied to the sometimes-volatile stock market — and others function through an insurance brokerage, promising fixed rates and guaranteed minimums.
Follow Your Annuity Guidelines To Avoid Fees
If you’ve decided that it’s time to jump ship from your current provider, be sure you’re following the guidelines so you don’t get slammed with hidden annuity rollover fees, as well as other costs like higher expense ratios or administrative fees that you didn’t have before.
The IRS allows for tax-free exchanges of annuity contracts as long as they fall under the same tax status. For example, a simplified employee pension or a savings incentive match plan for employees can be rolled over into a traditional IRA because they’re both tax-deferred.
12. Surrender Fees
If the IRS doesn’t hit you with extra charges for rolling over your annuity, it doesn’t mean you’re home free. Companies might charge a surrender penalty if you sell or withdraw money from a variable annuity. Annuities are often structured in a yearly format, with the surrender penalties decreasing over time.
How To Handle Surrender Fees
This information is typically located toward the front of your policy, so before you make a switch, be sure to consult your plan. Very few annuity providers charge no surrender fees, so you should expect to pay them and, if possible, budget for them in advance.
13. Inactivity Fees
Beware of being nickeled and dimed by your low-cost brokerage. There might be hefty fees associated with inactivity — it’s one of the reasons why a low-cost brokerage might not be the best option for your investments.
Keep Your Investments Active
If you’re not trading frequently, you might see charges for inactivity and maintenance — which could land around $50 to $200 — in addition to existing fees to access data, trading tools and more. So, make sure you’re engaging in enough trades to be considered active.
14. 401(k) Administrative Fees
Many employers offer a 401(k) matching benefit, but it might be costing you. Although the most generous companies foot the bill for administrative fees associated with managing your retirement plan, others might decide to opt out — which leaves you as the account holder to pay up.
Find a Retirement Plan That Works Better For You
If the management fee isn’t covered, consider getting out once your company match maxes out and taking your hard-earned dollars elsewhere, such as an IRA.
15. Beneficiary Fees
This fee won’t affect you directly, but it’ll hit your beneficiaries hard once you’re gone.
If there are any funds left over in your IRA after your passing, you might choose to help your children or grandchildren out as a final gift. However, the cash doesn’t come without a cost. When an IRA gets distributed after death, the beneficiaries are often hit with a tax burden — one that they are sometimes unprepared for.
List a Trust as an IRA Beneficiary
Naming a trust as a beneficiary of your IRA could help safeguard your children who are disabled, minors or otherwise susceptible to creditors, according to CNBC. However, this isn’t an easy thing to do, so make sure you consult professionals like an accountant or an estate-planning attorney before attempting it.