Surrender charges on fixed annuities typically decrease over time.

• A. They increase over time
• B. They stay the same
• C. They decrease over time
• D. They are waived after a set period

Answer: (C)

Surrender charges are designed to recover the insurer’s costs when you withdraw funds early, so they are set up to be higher at the start and then decline over time. In most fixed annuities, there’s a surrender period—often several years—during which early withdrawals incur a charge that diminishes each year until it eventually disappears. This structure explains why surrender charges typically decrease over time. For example, a contract might start with a 7% charge in the first year and step down each year, eventually reaching 0% after the surrender period ends. They aren’t meant to rise or stay the same, and they aren’t simply waived after a set period; they simply end once the surrender window expires.