Annuity questions, answered straight.

They are backed by the financial strength of the insurance company that issues them, not by the FDIC. That is why the company's financial strength rating matters, and why North Carolina participates in a state life and health guaranty association that provides a layer of protection, subject to limits, if an insurer fails.

The bigger risk for most people is not the company failing. It is buying the wrong contract for their situation, or locking up money they turn out to need.

In a fixed or fixed indexed annuity, you do not lose account value because the market fell. You can lose money by surrendering early and paying a surrender charge, and rider fees can reduce your account value over time. Variable annuities, which I do not offer, do carry market risk.

It depends entirely on the type. Fixed annuities and MYGAs typically have no explicit annual fee — the company's compensation is built into the rate it offers you. Indexed annuities are similar, but optional riders carry an annual charge. Surrender charges apply across the board if you take out more than your penalty-free amount during the surrender period. Ask for every cost in writing before you sign.

Growth is tax-deferred while it stays in the contract. How withdrawals are taxed depends on whether you used qualified money, such as an IRA rollover, or after-tax money. With after-tax money, gains generally come out first and are taxed as ordinary income, with your original principal returned tax-free. With qualified money, withdrawals are generally fully taxable. Withdrawals before age 59½ may carry an additional 10% federal tax penalty. This is general information, not tax advice — check your situation with your tax professional.

Usually some of it. Most contracts allow a penalty-free withdrawal each year, commonly a percentage of the account value, and many waive surrender charges for events like nursing home confinement or terminal illness. Beyond that, surrender charges apply until the term ends.

For deferred annuities, the remaining account value generally passes to your named beneficiary, usually without going through probate. For immediate annuities, it depends entirely on the payout option you selected. Naming and periodically reviewing your beneficiary is one of the highest-value ten minutes in your whole financial life.

Sometimes, but not for the tax deferral. An IRA is already tax-deferred, so “tax-deferred growth” is not a reason to move it. The legitimate reasons are the guarantees: principal protection or lifetime income. If someone leads their pitch with tax deferral inside an IRA, ask more questions.

The insurance company pays the agent a commission, generally built into the product rather than deducted from your deposit as a visible fee. You should still ask directly. Anyone unwilling to discuss how they are compensated is telling you something useful.

Most contracts have issue-age ranges, and some income features have minimum ages. Practically, immediate annuities are most often purchased at retirement age or later, and deferred contracts are frequently bought in the years leading up to it.

Life insurance protects your family against you dying too soon. An annuity protects you against living longer than your money. Same industry, opposite problems. Plenty of households need both.

Maybe, but be careful. Replacing one annuity with another — a 1035 exchange — can be perfectly appropriate, and it can also be a way to generate a new commission at your expense. Before replacing anything, get in writing: what you are giving up, any surrender charge on the existing contract, and a specific, concrete reason the new one is better for you.

No. Variable annuities are securities products that require a securities registration. I work with fixed, fixed indexed, and immediate income annuities only.