Some annuities with surrender charges offer an immediate bonus to investors as incentive. However, the surrender period is often extended to eight to nine years instead of seven.
On average, bonus annuities add 3% to 5% to your investments. So for a $100,000 premium payment, an additional $3,000 to $5,000 will be included in the account balance.
Typically, you can withdraw up to 10% to 15% of your investment per year without a penalty. Any amount withdrawn greater than this will trigger surrender charges. This penalty applies during the surrender period, which is longer than non-bonus annuities.
An important note: agents or brokers may not volunteer to present you with bonus annuities as they get lower commissions from them. Be sure to ask whether there are bonus annuities available to you.
Finally, compare the fees of the bonus annuity with those of the company’s non-bonus counterpart, as some will simply increase their fees in order to pay for the bonus.