More than 40 percent of people in the US don’t feel prepared for retirement. Many want to buy an annuity and would like more information about them.
Annuities seem simple on the surface, but there are many factors to consider when buying one. Here are some questions to ask when buying an annuity.
1. What If Circumstances Change?
Understanding when to buy an annuity is key to your success. You might change your mind about the annuity purchase or become unable to make regular payments in the future. It’s good to know the steps involved in canceling your contract.
There may be penalties or other costs to exit. They’re called surrender charges and can be pretty significant. Read the fine print and clarify the total cost if your circumstances change and you can’t continue.
2. What Type Of Annuity is It?
Generally, an annuity is a contract with an insurance company used to save for your retirement. There are many types of annuities to choose from, and it takes a lot of research to understand them. Do some research at trkingim.com for more information about the different types of annuities.
Understand what you will get for the money you invest. The three main types of annuity are: fixed, indexed, and variable annuities. Indexed means the payout will change with inflation.
3. How Secure is The Company?
As your agent about annuities held with their highest-rated annuity company. Investigate the insurance companies’ financial strength and compare their reputation.
You don’t want to purchase an annuity only to have them fail before you have a chance to use it. Annuity contracts with a private company aren’t insured like savings in a bank.
4. What’s In It For You?
When someone recommends an investment product, it’s good to understand that they may benefit if you choose to purchase it. Always ask them where their compensation comes from.
Brokers who recommend annuities receive a commission from the annuity company. You don’t pay the commissions directly, but the annuity contract includes the fees and other expenses. These fees cover the amount the sales agent earns.
5. Do You Offer Other Options?
Annuities aren’t the only product available for your retirement income. Your financial advisor can show you other products such as mutual funds or pension plans. Ask them who should not buy an annuity to see what they say.
There are advantages and disadvantages to every product, so you’ll have to weigh your options. There is always a balance between risk and your expected rate of return on any product.
Consider fees, how accessible the funds are, and the tax effect of your purchase. Be sure to ask what happens to your investment product after your death.
Buying An Annuity
There are a lot of questions to ask before buying an annuity. Now that you understand the process, you’ll be able to make the right decision for your situation.
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