Four Annuity Buying Tips
Annuities are financial tools that can strengthen your retirement plan even more. It’s a good way to secure a steady source of income in retirement. Though purchasing this insurance contract is a smart move, you need to proceed carefully.
If you are about to purchase an annuity, here are four tips to help you.
1. Know your needs.
Every major purchase will be always grounded on what your needs are. When it comes to purchasing an annuity, you need to know how much income you expect it to generate in retirement. Look at important factors such as your age, proximity to retirement, and other income sources that you can tap once you retire.
When you know how you want an annuity to work for you, you can integrate it better to your plan and it strengthens your strategy even more. It also allows you to know which type of annuity to purchase.
2. Shop around.
And when you do, it’s best to take your time. Annuities are not a one-size-fits-all product. Yes, it’s major purpose is to provide you an continuous stream of income in retirement, but it also comes in many forms that are suited to meet particular situations.
Explore all of these while having your needs in mind. Are you near retirement? If so, an immediate annuity may work best for you. Do you want to have control over how to invest your money? If so, a variable annuity may be a more suitable choice for you.
3. Understand the fine print.
Before you purchase an annuity contract, you need to have a full grasp of what’s written in it. Of course, the last thing you would want is to encounter unpleasant surprises in the future, only to realize that it was stated in the contract all along.
Read through it and understand every area of the contract such as how your payouts will be computed and fees associated with it. Don’t hesitate to ask questions, especially during the buying process. If there’s an area that is challenging to understand, consult a professional and have them explain it to you.
4. Buy from a reliable insurance company
Your annuity will only be as good as the insurance company whom you entrust your money to. So before you do business with them, make sure that they are financially strong to provide you with annuity payouts in the future.
Check their ratings to know how well they perform in the market. Independent organizations such as A.M. Best, Fitch and Standard & Poor’s rate insurance companies, and you can use their findings to determine how strong an insurer is.
Incorporating an annuity into your retirement plan is a smart move, but it requires making a series of smart decisions during the purchasing process to make it work to your advantage. These four tips will help you with that.