5 Keys to a Better Annuity
So you're thinking more seriously about buying an annuity. But you're also concerned that you may not know what to be looking for to make the right choice.
Especially when, if you're like most of my clients, buying an annuity will be one of the biggest financial transactions you'll ever make, with lifetime implications for your income and financial security.
There is every good reason to tread carefully before taking the step to buy.
So what 5 key tips should you keep in mind when moving forward? Here's what I've learned from thirty years of advising clients on how to shop for their annuities:
1. Take your time
You are making an important financial decision, so don’t be in a rush. If a salesman pressures you to hurry, it’s a good signal to take a step back and reassess. Never react to this kind of pressure, and take as much time as you need to feel you’ve made a balanced, well-reasoned choice.
2. Remember, if it sounds too good to be true…
By this point in your life you know the value of this old adage. When people get scammed, it’s usually because greed trumped common sense.
If an annuity offer you're reviewing sounds too good to be true, it probably is. Watch out for payouts and terms way more generous than anything else you’ve found.
If you can’t understand how the insurer can make money on the product as it is described to you, it’s an indication that you should have your guard up. At the very least, more research is required.
3. Use the internet wisely
On the one hand, the internet makes it so much easier for you to find information about annuities than used to be true in the 80s and 90s; on the other, with every new internet annuity site there seems to be more and more unreliable and just plain mis-information out there. Be sure you know the pedigree of the site before you start to believe what you read.
Check out the audited customer reviews of a site, and don’t hesitate to speak with the site’s customer representatives if you have questions. If you are consulting media reports about annuities, remember that boring doesn’t sell, and so often I find writers giving extreme opinions and hype just to get people's attention. I'd say you can use this type of information to craft your questions to ask an agent, but don’t simply rely on it to be "the truth".
4. Be completely sure you understand what you’re buying
Annuities continue to evolve, and many companies are offering products and features that are extremely complex. It’s very important that you understand your annuity.
Not only will this give you greater peace of mind, it might also save you from an unexpected unpleasant surprise some day. Never hesitate to ask as many questions as you need to have answered.
We wanted to establish a bit of extra income. There was a good recommendation about ImmediateAnnuities.com on CNN. We also liked that we could see excellent reviews about them on Google. They were very thorough from our first inquiry to when we decided to buy our annuity from Mass Mutual. They always answered our questions promptly and followed up with the insurance company, too. We have been receiving our monthly payments since last November and couldn’t be happier. What more can we say?
If you are working with an honest and caring agent, he or she will be pleased to help. Finally, give the annuity you’ve selected the common sense test. If something doesn't feel right, trust your instinct and learn more.
5. Consult with an annuity specialist
When annuity shopping, people often wonder if they should do it themselves or speak with a specialist. The advantage of speaking with an annuity specialist is that he or she will have years of experience and usually will be representing multiple companies, helping you to compare diverse options.
The right specialist can show you how annuities from different insurers compare and isn’t restricted to offering you products from just one company. More options help increase your confidence that you’re making the right choice.
However, if he or she starts to pressure you or you’re not satisfied with the answers, move on. There are plenty of professionals who understand the value of helping you make the best choice – even if that sometimes means no choice at all.