Variable Annuities Cost 2.5–3.5% Yearly—Hard to Beat an Index Fund

Variable annuities charge 1.0–1.5% annually just to insure your money, plus another 0.5–1.0% for guaranteed-benefit riders. That 2.5–3.5% drag means the fund's managers must beat the market just to match a cheap index fund—something few actually do. MarketWatch examined the trade-off in June 2026.