5 Annuity Shopping Tips

Baby Boomers spend nearly a quarter trillion dollars annually on annuities and in so doing mitigate the fear of running out of money in retirement. But many are not careful buyers and sellers, unfortunately, often don’t properly weigh their particular needs. Too often, this means buyers are making poor choices in purchasing what is often one of the biggest investments of their lives.

                Here are five tips that potential annuity buyers should bear in mind before consummating a purchase:

·         Know why you’re buying an annuity. It is meant to supplement, not replace, a traditional portfolio, which has much greater liquidity. Because annuities commonly offer guaranteed lifetime income, they are meant to be an additional supplemental safety net.

·         Make sure the benefits of your prospective annuity fit your needs. If you are married, for example, you’ll typically want a joint annuity, not a single annuity, even though the former pays less. With a joint annuity, if one spouse dies, the other still receives lifetime income.

·         Shop for annuities with at least three financial planning firms and make sure at least one is independent. Independents are not “captive” to an insurance company or wire house and generally offer more products. Whichever annuity you ultimately choose, make sure the credit rating of the insurance company selling it is solid.

·         Verify that a financial adviser is indeed an independent. If he sells securities – specifically, mutual funds and variable annuities – he is associated with a broker/dealer or a registered investment adviser and is. In fact, independent.

·         Compare the major types of annuities. These are variable annuities, fixed indexed annuities, fixed annuities, deferred annuities and immediate annuities. Once you decide which one you want, compare three to four choices in each category.


Written by Steve Kaufman

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