When you get started on the course of wanting to buy an annuity to help yourself achieve some form of guaranteed income for life and also protect your loved ones, it’s important to know the problems and concerns about annuities and any financial plan that you may make. After all, the future is never certain. You can use all the stats you want to, but reality sometimes laughs at statistics.
Here are some things to watch out for if you are considering purchasing an annuity.
Determine If an Annuity Is Right for You
If you are not healthy, you may not want to buy an annuity because they are most valuable when you live a long time. In fact, for people who will not live past 60, there is no reason to buy an annuity. Slick insurance salespeople might try to convince you of their stability, and that part is true, but the benefits are only there if you live past 60.
Buying from the Wrong Person or Business
Make sure that you do some research on the best places to buy annuities. You don’t have to go directly to just any insurance agent. Check with your financial institution first. For example, credit unions like USAA offer their members generous options without too many fees, and their salespeople don’t get a commission but a salary.
Not Having a Thorough Understanding of Fees
There are going to be some fees, but you should seek to avoid high fees from unscrupulous salespeople. Instead, research what the fees typically range and then try to ensure they are the lowest you can get. Plus, always add up your total potential fees so you can get a more realistic picture of what fees cost.
Get an Understanding of the Jargon before You Shop
When you go talk to an insurance agent to buy your annuity, you will probably get overwhelmed with the lingo. They are going to speak jargon to you. It’s best for you if you research the terms beforehand so that you understand what they are talking about. This way you won’t need the agent (who is going to earn money from the sale, by the way) to explain it to you.
Consider Inflation When You Buy Your Annuity
It might seem like a great deal to put your million dollars into an immediate annuity so that you can get $65,000 a year for life while keeping your money safe and tax-deferred. However, will that $65,000 give you the kind of life you hoped for or do you need more than that to make it work for you based on predicted inflation and expenses you may have in 5, 10, 20 years or more?
Know Why You’re Buying an Annuity
It’s imperative that you truly understand why you want to buy an annuity and what you want it to do for you. That way, you can talk to the agent about what you want. For example, if you want to ensure your spouse has a lifetime income if you die, make sure to tell the agent that so that they can write a policy that offers what you want and need.
The truth is, if you really pay attention, do your due diligence, and know what your goals and objectives are for buying an annuity, you should be very successful in getting what you want. Do your research, choose the right place to buy, and know what you want. You’ll do great.