What Should You Ask Before Buying an Annuity?
On the show, I shared a review of two variable annuities owned by a woman who wanted help planning her retirement withdrawals. The fee layers we discussed added up to 3.65% annually. That is a meaningful cost, and it illustrates why I want people to understand what they own. Actual fees depend on the contract and the balances used to calculate them.
Before buying an annuity, ask for a complete explanation of its costs and benefits. Depending on the product, expenses may include insurance charges, investment expenses, and optional income features. Fewer explicit fees do not eliminate other tradeoffs, such as limits on interest or restrictions on withdrawals.
Next, ask what income is guaranteed, when it begins, and what conditions apply. A figure used to calculate lifetime withdrawals may differ from the cash available in the account. A withdrawal percentage is not an investment return. Guarantees also depend on the insurance company's financial strength and claims paying ability.
Ask how much access you retain to your money and how additional withdrawals affect the benefits. If you already own an annuity, compare the value of keeping it with the full cost of replacing it. Surrender charges, a new restriction period, tax considerations, and benefits you would lose all belong in that comparison.
Finally, ask how the contract fits your written retirement income plan. The woman in our conversation wanted a clear explanation of how her money would support her retirement. That is a reasonable thing to expect. If you would like help understanding your annuity or the questions to ask, reach our team at LegacyRetirementGroup.com.