What hidden costs may be associated with the annuity?

Commissions. If the commission is paid in a front-end load, this can reduce the amount of your initial investment. A no or low-load annuity contract is preferable.
Penalties. The surrender charges usually only apply for the first 7 years, starting at 7% the first year, declining 1% per year until after the 7^th year, when these surrender charges no longer apply.