What To Do Before Buying An Annuity


Before deciding to purchase an annuity, the person must first determine the need for it. If he’s nearing retirement age or is already retired, he needs a regular source of income. A fixed annuity can provide for this need. However, if he’s still young and saving for retirement, he can take advantage of an indexed annuity, a variable annuity, or a fixed annuity. If he wants to leave some wealth to his beneficiaries, he can consider a variable annuity with an attached death benefit.

If the person needs the money in the near future, he must first determine when he’ll need the money because an insurance company often charges surrender fees if an annuitant decides to sell annuity payments earlier.

Furthermore, he must ask his insurance agent about the annuity’s minimum guaranteed return. By knowing this, it is easier for the individual to plan in worst-case scenario. In addition, the person must learn about fees the insurance company charge for the annuity. He must also find out if the insurer charges upfront fees. In general, information about fees is found in the prospectus.

If the annuitant withdraws his money early, the insurance company usually charges surrender fees. In general, the longer the annuitant keeps his money in the annuity fund, the lesser will be the fees charged. The person must ask his insurance agent about surrender fees before signing up for an annuity fund.

Furthermore, an annuity can have an associated death benefit. A person must find out from his insurance agents the kinds of death benefits he can avail of. Lastly, he must learn about waivers he can take in he needs the money immediately. In some cases, an insurance company may waive the surrender fee in case of an emergency medical condition or if the annuitant has to be admitted to a nursing home.


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