8 Common Mistakes Annuity Buyers Don't Know They're Making
The right annuity can bring you financial security and peace of mind. This is why it pains me to speak with people who have made hasty or badly-advised annuity purchase decisions.
By working with the right agent – one who is truly invested in helping you make the very best choice for your future – you can avoid these 8 common pitfalls:
1. Buying an annuity you don't fully understand.
If you don’t understand it, don’t buy it. It's just that simple. Believe it or not, I speak to people every day who try to explain to me what they think a particular annuity will do for them -- based on what an agent or friend told them. Yet, they're often just plain wrong.
The annuity they have in mind does not accomplish what they think it does. So my Number #1 suggestion is: Find someone who is willing to spend the time to make sure you completely know what your annuity will and will not do!
Some types of annuities are simple and straightforward, others are very complex, with many bells and whistles. Please be sure you know what you are buying.
2. Not understanding the differences between the various types of annuities.
Annuities come in all shapes and sizes. Some can be cashed in, others cannot. Some pay you income immediately, others are designed to grow for years before withdrawals are taken out.
So before you rush into a decision, be sure you understand the type you are buying and whether it is right for you.
While this may seem overwhelming, the good news is that knowing what's available ensures that you will get the benefits you seek. Find someone who will take the time to match the right annuity to your needs.
3. Not understanding the terms of your annuity contract.
Every annuity comes with brochures and disclosure statements that explain the terms. Be sure you understand them before you buy. If some of the terminology is confusing or foreign: ask.
This is an important decision, and you should take the time to be sure you fully understand what you are buying.
4. Not asking the right questions.
This tip is related to the previous suggestions. I always try to reassure potential clients that there are no “stupid” questions when it comes to annuities. Whether you have worked in finance all your life or whether it sounds like mumbo-jumbo to you, ask every “what if?” you can imagine.
This is how your annuity will help you sleep well at night. What does your annuity promise? Can that change? What happens when events change in your life? Is there any flexibility? How do you get at your money? And at what cost?