Insurance--Annuities
Shopping around for an
annuity
You should start
by figuring out how much money you have accumulated in other tax-deferred
savings plans or pensions before you purchase an annuity. Determine how
much money you will need to live within your retirement assets.
Look at the three types of annuities to see
which best fits your financial plan. Do you need a steady and guaranteed
investment? If so, you need to consider a fixed annuity. However, if you
are willing to ride out the risk of the stock market in order to make more
money, you might consider a variable annuity.
Calculate how long you will need to have
your money in a contract. Most annuities require you to keep your money in
the annuity for at least 10 years. You must also consider how long you
need to keep your money in to pay for the high fees associated with
annuities. On average, it takes 10 to 15 years of tax-deferral to make a
variable annuity a better choice than a mutual fund.
Look at the financial strength of the
insurance company or provider. Most states will protect you from the
insolvency of the annuity provider. However, there are limits to the
protection. Most states have a limit of $100,000 in protection for the
current value of the annuity, or $300,000 in lifetime benefits. This means
that if the annuity goes under, you are no longer assured your income for
the rest of your life.
Pay careful attention to the fee structure
of the contract. Fees vary greatly, so make sure that you compare several
different contracts for good value.
Often, annuities come with features and
riders that are beneficial. Some offer long-term care riders and others
give a bonus of up to 5% of your investment upon opening an annuity.
