Five Tips for Women Looking at Annuities

Throughout history, women have outlived men.  But financial planning for women simply hasn’t caught up with that of men.  Generations ago, not many women were working, so it makes sense that they were doing less financial planning.  Over the past couple of generations, many more women are in the workforce and spending more time on their own financial planning.  Married couples should make sure that both spouses have a good retirement plan in place and single women need these plans just as much as single men do.  In “The boomer woman’s guide to annuities,” Marketwatch’s Melody Juge offers great advice for comparing annuities for your financial plan.  Many baby boomers are looking for investments with little risk.  Annuities are worth considering for risk averse men and women approaching retirement

First of all, you need to ask yourself a few questions about purchasing an annuity product.  What specific benefits do you want from an annuity and is that the only place to get those benefits?  Are you purchasing an annuity because your portfolio needs one and have you done the correct research necessary?  Make sure to speak with an advisor about the costs and benefits of an annuity product so that you know an annuity is right for your individual plan.  Oftentimes, annuities are the right product to meet an income need in retirement, whether bought with a 401k transfer or an inheritance.

Next, you should determine exactly what you want from an annuity so you can make an educated decision about the type.  There are many different annuity products, such as indexed, fixed, and variable.  Meet with an expert to find out which annuity meets an income need, a need for tax deferral, or the desire to replace bonds or CDs in your financial plan.  If you are looking for guaranteed monthly income to supplement Social Security payments, what time frame will you need to receive the income payments over?  Some annuities pay over your lifetime while others are used for short term purposes.  You should also take into consideration the surrender charges with annuities so that you use only money that you won’t need immediate access to in the case of an emergency.

When looking at the specific annuity product and all of the extras that it may have to offer, keep your list of needs handy.  By shopping based on the list of needs that you want an annuity to meet, you won’t be sold extra riders that you don’t need.  Everything you add to an annuity costs money, so only add the specific benefits for which you are looking.  You are able to stay in control of the annuity process when you know exactly what you are looking for.

The author cautions against making direct comparisons between different types of annuities.  Indexed, variable, and fixed annuities can offer very different things, so it can be detrimental to make direct comparisons.  Instead, find the answers to some basic questions for each type of annuity you think might work for you.  Look for the surrender charges, surrender time period, whether there are annual fees and how much they cost.  Also ask how much you can withdraw yearly penalty-free.  Be sure to know all of the fees, what they are for, and if the added benefit is really of use to you.

Since most annuity products are not sold directly to the public, you will likely need a registered advisor to help you select an annuity.  Advisors can have many different types of licenses, so the article describes the licensing requirements to sell fixed annuities, indexed annuities, variable annuities, and life insurance.  As  much as you need to do your research on the types of annuities, you will want to know about the advisor you select and their qualifications as well.  It sounds like a lot of work and research to find the right annuity for your retirement, but it is worthwhile when you find a product that will alleviate your financial concerns.

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