17 Great Tips for Buying Your Annuity

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Tip #12 — What are the withdrawal rules and surrender fees? Simply put, understand what will happen if you choose to get out of your annuity. Immediate annuities and deferred income annuities are typically irrevocable purchases and offer very limited liquidity besides your regular monthly payments. Deferred and fixed indexed annuities frequently allow a penalty-free amount to be withdrawn each year before they mature.

Tip #13 — How will the interest earnings from the annuity be taxed? Of course, your accountant is the best person to ask for tax advice and to help you understand this piece of annuity-buying strategy. Your advisor can lay out the differences between the various annuities to get you started.

I contacted Immediate Annuities.com to buy one of my immediate annuities. They were prompt, very responsive, paid attention to detail, understood my objectives, and were superb when it came to staying on top of seeing the funds transfer and issue of new policy documents through to completion.

Dr. David Babbel Professor Wharton School

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Tip #14 — How are the companies I am considering rated? You should buy from a company with high financial ratings. This will help ensure that your money is safe and that your investment will continue to provide for you.

The “After” List — Once you’ve purchased an annuity, your work is almost done. But here are a few more important things to remember:

Tip #15 — Your annuity policy offers a limited time money back guarantee. If you have “buyer’s remorse” for any reason, you have 10 to 30 days (depending on the contract and your state of residence) to change your mind. This is called a “free look” period and it is backed up by state law. Most annuities offer a full refund during this period.

Tip #16 — Understand your contract. Before you sign a delivery receipt, be sure you read and understand absolutely everything about your annuity. If there are sections that are not clear to you, ask your advisor to explain them or have another person you trust help you review them. Be sure that the contract reflects your expectations about the annuity you are buying.

Tip #17 — Review your annuity annually. Often, you can exchange your deferred multi-year and fixed index annuities if you are not happy with their performance or if circumstances in your life change. You cannot do this with an immediate or deferred income annuity.

While there may be fees or tax consequences associated with this, there are times when making a switch can be the best choice. After your purchase, mark your calendar to contact your advisor for a yearly review.

Many people have found that owning an annuity provides a more secure financial future. But, as with any major purchase, you need to thoroughly understand what you're about to buy.