Shopping for an annuity may seem like an overwhelming and confusing task. But if you ask the right questions you can find an annuity that is right for you. In this article, we will go over the questions you should be asking and what type of answers you want to look for.
1. What Purpose Does This Annuity Serve Me?
The purpose an annuity serves and the type of annuity you will need depends on the stage of life you are in. If you are very near retirement and are looking for a consistent income source, you should investigate a fixed or indexed annuity. If you are still in the process of generating your retirement nest egg you most likely want to purchase an indexed annuity. Lastly, if your ultimate goal is to leave behind money for beneficiaries you will want to make sure the annuity you choose has a set death benefit.
2. When Will I Need to Access the Funds?
Most annuities have surrender periods during which you cannot make a withdrawal without incurring a penalty. If you are planning on accessing funds right away, you will need to find an annuity with a shorter surrender period. However, it is important to note that such annuities usually offer lower returns than those with longer surrender periods.
3. How Much Will I Pay in Fees?
Before you sign an annuity contract, you will want to make sure you fully understand the fees that are involved. Some companies will charge you upfront set up fees. Other companies will charge you an annual fee. Some companies will charge both. Some add-ons to your policy may also result in additional fees. Consult with the insurance agent helping you to make sure you understand the true extent of these fees and how they will affect your portfolio.
4. What Will My Surrender Fees Be?
The fee you may be subject to will differ from company to company. Oftentimes it will also differ between products. Generally speaking, each year you have your annuity your surrender charge will go down. If you have a set surrender period, your surrender fees will disappear once this period passes.
5. Are There Any Waivers Available That Will Allow Me to Withdraw Funds in an Emergency?
Each policy will have different emergency waivers that will waive surrender fees. Often these waivers include the onset of certain medical conditions or admission into a nursing home.
Shopping for an Annuity-Finding the Right One
When shopping for an annuity, if you ask the right questions you will be able to find the right one for you. It is also advantageous to find an insurance agent who has the proper qualifications to help you through the process.
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