If you are thinking of purchasing an annuity, read this first.
Purchasing an annuity is a major financial commitment much like buying a house. You might have your annuity longer than your house! As long as you understand the fine print and the annuity is a great fit it can be one of the smartest financial decisions you could possibly make! I am pro annuities for the right situation! Just be sure to understand what you are purchasing.
When you purchase an annuity be sure to:
1. Know the surrender charge schedule. Surrender charges can sometimes last for 15 years and can be very expensive. Purchase an annuity that coincides with your schedule so that money will be free when you need it. Otherwise you may pay major penalty fees when you need money the most.
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 go down in value? 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. You need to have a reason to purchase an annuity. Be sure it is right for you.
2. Variable annuities can go down. They can be down when you need to take money out. That would mean you would have less money working to recover from the downturn and taking money out would be a bad idea. If that could be a problem then do not invest in variable annuities.
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.
One last absolutely vital thing to check is the dollar amount of your states guarantees. Run a Google search for (your state) insurance guarantee. This is how I found my state's guarantee. Do not go over that amount with a single insurance company ever.
When you purchase an annuity be certain to get all of these questions answered. Most importantly, do not be rushed or pushed into making any decisions. There is no reason to rush through the decision making process with such a long term commitment like purchasing an annuity.
For step by step information on how to purchase an annuity please visit Keith's Annuity Help Now website or sign up for his 7 Free Retirement Annuity Tutorials that show 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.
Orignal From: How to Purchase An Annuity- Vital Information
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