Variable Annuities Charge 2.5–3.5% a Year—Often Too Much to Beat Simple Index Funds

Variable annuities invest in the same stocks as cheap index funds but tack on 1.0–1.5% annual charges for insurance plus 0.5–1.0% for extra guarantees. That 2.5–3.5% yearly drag means your portfolio needs unusually strong returns just to match a plain index fund—something that rarely happens.