Before You Buy an Annuity, Here’s 8 Things You MUST Know!

We spend a lot of time talking about the ins and outs of annuities, but you should know: even with the right annuity for you and your retirement, you might still be missing out on some of the most important benefits from your annuity if you don’t understand how it’s designed.

In order to ensure your annuity works hard for you, and helps you do the things you’ve been looking forward to, we’ve identified 8 annuity essentials you’ll want to know.

Answering these crucial questions may put you on the path to finding the right annuity to help secure the future you dreamed of. They come in 3 categories so you can zero in on strategies for you and your situation.

First, Let’s Talk About Your Ideal Retirement

Not even the most experienced retirement income planning professional could tell you how your retirement will look without sitting down and getting to know you. There is no one-size-fits-all solution. Every person, every couple, is different. But we believe you deserve to have a retirement income plan built around you and your dreams.

These questions are designed to help you start thinking about how to design your retirement.

1. What Do You Want Your Life to Look Like in Retirement?

Close your eyes a minute and picture yourself spending your retirement exactly the way you want. What are you doing?

Are you on vacation in an exotic country? Are you opening that family business you’ve always wanted? Are you relaxing on your patio with a cup of your favorite tea?

Once you know what you want, you’ll have a much better idea of how much you’ll need to get there.

2. When Do You Want to Retire?

We don’t always get to retire when we want, but if you have an idea of your goal, the right retirement strategies can greatly increase your chances of being able to do what you choose to do when you choose to do it.

More often than not, your retirement date will have an enormous impact on the rest of your retirement, including when your occupational income will stop, the amount of your monthly Social Security benefit, and how long your savings will last.

3. What’s the State of Your Health?

Do you expect to live a long time? While you may not want to consider it, will you need dedicated health care at some point? Do you anticipate medical expenses, factoring in rising costs of healthcare, into retirement?

Financially speaking, one of the biggest concerns is the possibility of running short on money before you run short on time. It’s important to prepare your retirement income plan around the possibility of living a long life, as well as factoring in the costs associated with longevity.

Now That We Know Where You Want to Go,

Let’s Talk About Where You Are Right Now

The best way to secure the future you want starts with planning for it right now. The answers to these questions will help you understand if your current retirement income strategies will work for you, or if you could benefit from taking a second look into developing a more accurate trajectory and optimized blueprint.

4. How Does Your Current Planning Stack Up?

Once you’ve mapped out how you want to spend your retirement years, as well as how long you expect to live and what medical costs may crop up down the road, how does the amount you’ll need compare to how much you’ll have available based on your current strategies?

Don’t forget to account for inflation, market instability if applicable, and taxes.

If you have the right annuity for you and your situation, from a top-rated insurance company, you might be pleasantly surprised by the answer to this question.

5. Do You Need a Strategy to Fill in the Gaps?

After comparing the trajectory of your current path and the path you’d like to be on, are there gaps that a customized annuity strategy could help fill for you?

One of the great benefits of annuities is that they can provide guaranteed,* continuous income throughout the rest of your life** – meaning that they will continue to help cover that gap in your financial resources with the potential for growth year after year.^

Finally, What’s Your Annuity Doing for You?

Now that we’ve defined what you need from your annuity, let’s talk about whether or not an annuity you’re considering, will serve you the way it should.

6. Can That Annuity Grow Over Time?

Some annuities have more potential for growth than others. Annuities that provide greater growth potential do sometimes come with more risk. One of the most unique features of some annuities – fixed index annuities, in particular – is their ability to protect your principal from market risk while providing you possible interest growth at the same time.

It’s important to know how much room you want to give your annuity to grow – how much of your retirement funds should be exposed to market loss. This will depend on factors like your current age and how much reliable retirement income you already have set aside.

7. Are There Penalties Associated with Taking Extra Money From Your Annuity?

In many contracts, you can withdraw up to 10% per year in addition to any regular payouts, after the first year, without penalty.*** Of course, excess withdrawals can impact your future income and any death benefit available for your heirs. In other annuities, there may be charges and taxes due when withdrawing funds.

It’s important to know as soon as possible what a specific annuity contract will allow you to do. If you think liquidity could be an issue in the future, look for annuities that give you the option for voluntary withdrawals if needed.

8. Are Your Fees Eating into Your Income?

Every annuity has its own unique mix of fees particular to the insurance carrier offering it and the specific contract and riders you have purchased, but some fee structures can eat into your income more than others. Because fees can often directly affect your annuity check, your understanding all the fees associated with your annuity is most important before you sign anything.

To make sure you are aware of and understand all the fees associated with your annuity contract, we recommend you talk with one of our licensed annuity professionals who can help you take a second, closer look before you sign.