How to Purchase An Annuity – Read This Now
Before purchasing an annuity, read this.
Purchasing an annuity is a major financial commitment. When you sign the contract it is almost like buying a house. Be sure to understand what you are getting into before you sign. As long as you understand the details and the annuity is a good fit it can be one of the best decisions you could have possibly made! I am definitely pro annuities! Just be sure to understand what you are getting.
When learning how to purchase an annuity there are certain details to keep in mind. Be certain to:
1. Understand the surrender charges. Surrender charges can extend for as long as 15 years in some cases and can be very expensive. Purchase an annuity that matches your schedule so that money will be free when you need it.
2. Learn and study your investment time horizon. When will you need money from the annuity and how much will you need? Annuities purchases are long term investing.
3. Check the insurance companies rating before purchasing an annuity. If a higher rated insurance company is offering an annuity that is basically the same then choose the company with the highest rating.
4. Be sure to know why you are purchasing an annuity. Is it for safety, income, growth, security, tax deferral, a guaranteed income stream, or to reduce your social security taxes? Is it for other guarantees? Does it really fit into your financial plan? Are you using the annuity in place of other fixed income investments or as a growth investment? Why the annuity versus other investments? Do you understand why it is the right investment?
5. Understand the differences between a fixed and variable annuity. A fixed annuity cannot go down in value. A variable annuity can go down with the stock market. They can both have certain guarantees so be sure to understand what you are getting. Can it go down in value? Why do you need to purchase an annuity that can lose value?
6. Understand how this annuity is going to affect your taxes when you take money out. Annuities are taxed differently than other investments and be harsher or even better in some cases. Is your annuity held in an IRA? Also, if you are passing this annuity down to heirs then why are you purchasing an annuity instead of life insurance that would likely pass tax free? If you are passing the money to heirs and that is the only purpose then single premium life insurance may be a whole lot better if it is possible obtain.
If you are purchasing a variable annuity:
1. Why are you purchasing a variable annuity that can lose money? If it is for the past performance you should know that the sub accounts/investment options rarely ever perform the same two years in a row. Chasing returns is a losing strategy. You need to know your reasons for purchasing an annuity. Be sure it is right option for you.
2. Also before you purchase an annuity be sure that you can afford to have your investment down when you need the money. If not then do not purchase variable annuities. If you had to take money out when your investments were down, it would be much more difficult to recover from your losses.
For purchasing a fixed annuity:
1. Check the surrender charges again. They are usually higher on fixed annuities than any other kind of annuity. Be sure that when you need money it will be available with no charges.
2. Fixed annuities have amazing guarantee options. If you want one of these guarantees be sure to understand it entirely. What happens when you take money out? Look for the penalties not the process of taking money out. You can also compare options with other companies. There are so many now, some other insurance company could have a better option to fit your situation.
The last absolutely vital task is to check is the dollar amount of your states insurance guarantee. Run a Google search for (your state) insurance guarantee. Do not go over that amount with a single insurance company ever.
Be certain to get all of these questions answered when you purchase an annuity. Most importantly, do not be pressured or pushed into making any decisions. There is no reason at all to rush through the decision making process with such a long term investment and such a big decision like purchasing an annuity.
For step by step help on how to purchase an annuity visitKeith’s Annuity Help Now blog or sign up for his 7 Free Annuity Tutorials that teach exactly how to set up your retirement accounts to never go down again while filling up your bank accounts with the cash you need for retirement.