There are two kinds of annuity fees. There are the ones the life insurance company charges you for taking care of business. And then there are the ones either the government or the life insurance company slaps you with for breaking the rules.

Taking-care-of-business fees. Many variable annuities charge certain fees for a percentage of your annuity's value each year. Fixed and equity-indexed annuities may charge a one-time fee and commission up front.

Breaking-the-rules fees. Annuities are designed to encourage long-term savings. When you attempt to take money too early, you pay an early withdrawal charge. This may be in the form of a 10 percent penalty to the U.S. government if you take income before age 59 1/2. Or, it might be a surrender charge to the life insurance company if you try to take income in the first few years (whatever the life insurance company calls its "surrender charge period").