Common Annuity Mistakes
Larry Carlin
Providing Peace of Mind for Families and Businesses. We help you Avoid Financial Disaster by helping you become debt free, providing protection against loss, increasing income and protecting your assets
Annuities can be addition to your retirement portfolio for those who are looking to generate guaranteed retirement income. On the negative side, annuities if used improperly in your retirement portofolio can be cause headaches. Here are 3 common mistakes with annuities:
1. Know the costs: Annuities have all sorts of customization options known as "riders" that you can attach to a contract to expand or restrict a policy's benefits. These can guarantee an income for life without having the annuitize, add long term care features, enhance the death benefit, among many others. These typically come at costs in addition to the base contract costs. These can add up so make sure you know and understand the costs associated.
2. Understand the Time Horizon: It is never wise to put funds for shorter term needs or meant to used for emergency fund into an annuity. Make sure you maintain adequate liquidity as annuities typically charge hefty penalties for violating early withdrawal terms. Also be aware of the liquidity provisions, as annuities may allow for a free withdrawal, allowing you to take an amount out that is not subject to penalities.
3. Understand the Risk and Growth Potential: You can't expect to match market growth using Fixed or Fixed Index Annuities, and you can't expect protection from market losses from a Variable Annuity. While a Variable Annuity can match market returns, Fixed or Fixed Index annuities will protect you protect losses which is important in your retirement plan the closer you get to retirement.
When you are evaluating if an annuity would be right for you, it's important to find an educated, unbiased opinion. Feel free to contact me for a review or evaluation of your situation.