My 4 Best Ideas for Annuity Buyers
Like any other product on the market, sales pitches for annuities (be they immediate, deferred income, secondary market, or any other annuity type) are designed to cast each company's product in the most persuasive light possible, highlighting the best features and leaving the rest for the fine print.
If you're not a financial expert, the details can be confusing; making a smart purchase decision can feel daunting at best.
Here are the 4 best pointers I can give to an annuity shopper:
1. Relax – Making sense of it all will happen over time.
Never buy something you don’t understand, especially if you're feeling pressured. Whether you call me or another trusted advisor, you can make a smart annuity decision, by taking more time. So if you're feeling overwhelmed it's just a sign you need to get more reliable information or assistance.
2. Focus on the contractual guarantees.
Many annuities are over hyped with sign-up bonuses and income riders that sound too good to be true. Like anything else in life, if it sounds too good to be true, well … you know the rest.
Always ask your advisor or agent to explain the contractual realities of the annuity policy, not the promises. Features that may seem exciting up front may cost you more in the end.
The important thing you need to know is how the annuity will work for you month after month, year after year. Don’t sign an application until you understand this.
3. Don’t get overwhelmed by interest rate forecasts.
Lots of people can guess about the direction interest rates are headed, but the truth is, no one knows for sure. Remember double-digit rates in the 80's? None of us would have expected rates to go as low as they have in recent years.
Base your annuity purchase decision on what you know to be true and look for a dependable and comfortable rate of return. Above all, do not feel pressured by a salesperson’s forecast of the future direction of interest rates.
4. Someone will always tell you what you want to hear.
You are a seasoned consumer and most likely have been filtering out sales hype all your life. Nevertheless, people get in trouble every day by putting common sense aside when shopping for something they don’t quite understand. This can be devastating when making an important investment decision.
Trust your instincts, and do not allow yourself to be persuaded by “what you want to hear.” If you are searching for that dream annuity product that is too good to be true, there are agents that will unfortunately validate that dream to achieve a sale.
Look no further than the annuity promoters who pitch double digit returns which contractually have no chance of ever happening. If this happens, move on to an advisor you can trust.