17 Great Tips for Buying Your Annuity
Consider any other expenses that you can anticipate that would require extra cash. These could include a dream vacation, for example, or helping a family member pay for education.
Tip #6 — Diversify your purchases. Hopefully you will look to highly rated insurance companies for your annuity purchase – and 99% of these have performed impeccably over the years through all kinds of economic ups and downs.
Nevertheless, your investment is not FDIC insured and can be vulnerable in the unlikely event that the insurance company goes bankrupt. For this reason, it is wise to spread your investment across two or three different companies and reduce your exposure in the unlikely event one company should fail.
We had heard about annuities and were investigating them for our IRAs. We also heard bad things about pushy brokers over the years. So when we went to the ImmediateAnnuities.com site we were skeptical about calling them. But whenever we called their staff was really friendly. They answered all our questions and one of their reps even told us that at our ages there was no advantage to buying the annuity with our IRAs. These guys are really honest!
Tip #7 — Don’t believe everything in the media. All writers have a point of view, and this is certainly true of financial writers. While some may have a goal of helping the consumer, many other stories you encounter will be sponsored by someone who is looking to sell a certain type of investment or even a specific company.
Sad as it is to say, some may even have a goal of scaring investors into or away from particular products. Take any ideas and concerns you may have to your advisor.
Questions to Ask — As you get closer to a plan to purchase an annuity, you will likely have lots of questions. I have clients come to me with a list of them. Do not hesitate to get the answers you need. Some of the more important questions to cover include:
Tip #8 — What type of annuity is right for me? There are a number of different types of annuities, and each is designed for a very specific purpose. Be sure you understand how they compare, and understand the reasons for choosing yours.
Tip #9 — How will the premium work? Is it a single or a flexible premium? Which is best for me? Typically, annuities are single premium purchases. However, you can buy a series of these annuities over time which would replicate flexible premium purchases.
Tip #10 — What is the initial interest rate and how long is it guaranteed? Interest rates are structured very differently across the various types of annuities. Be sure you are clear on what you are buying and about all the different ways it can change across the life of the contract.
Tip #11 — Will my beneficiaries receive a benefit in the event of my death? This is a critical question. When choosing to provide for beneficiaries, some build this into an annuity, others choose an annuity that does not include a death benefit but uses other types of investments to provide for beneficiaries.