What to consider before buying an annuity

Find out if annuity is right for you.  We recommend you consult with a tax advisor or financial planner and ask the company to explain anything you don’t understand.

To find out if a certain type of annuity is right for you, think about:

  • Your financial goals - What are you trying to accomplish by buying an annuity?
  • Investment amounts - How much money can you afford to do without for a while?
  • Timing and length of investment - When do you want to start withdrawing money and what are the potential earnings?
  • Amount of risk you're willing to take - How much of your investment are you willing or able to lose?

Consult with your tax advisor or planner

Before you buy, check with your tax consultant or financial planner to identify any negative consequences of buying or switching to an annuity from another type of investment.

When giving you a recommendation, insurance companies and agents selling annuities must consider your financial and tax status, investment objectives and other reasonable information.

Know what you're buying

  • Compare similar annuities from several companies.
  • Ask for and read all disclosure information.
  • Verify your understanding of the contract. Ask the company representative to explain anything you don’t understand. 
  • Once you buy and receive the annuity contract, read and understand it. If you're unhappy or the contract isn't what you thought it would be, you have 10 days to return it to your agent or company for a full refund of your premium.
  • Check the company’s financial rating through a rating service.

Before choosing an annuity, ask:

    • What is the guaranteed minimum interest rate?
      Rates vary by company and type of annuity, so find out the exact rate you can expect to receive.
    • Can I withdraw part of my annuity?
      Ask how much you’re allowed to withdraw annually without a penalty. Be sure this amount is adequate to meet your needs. Have your tax or financial consultant advise you before making any withdrawals.
    • Will I get my money back if I change my mind?
      Check your contract. Most policies can be returned within 10 days of purchase for a full refund.

Updated 05/20/2014

See also

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