What You Need to Think About When Looking for an Annuity
Annuity refers to a financial product that's responsible for paying out fixed payments to a person. Furthermore, retirees primarily use these products as an income stream. The written agreement between you and an insurance company that outlines both parties' obligations in an annuity agreement is called an annuity contract. If you find yourself shopping for an annuity, it's best to enlist financial advisors' help to help you make a wise decision.
What Do You Need to Think About When Shipping for an Annuity?
Understand What a Surrender Period Is
Annuity contracts may contain terminology and concepts that are unfamiliar to an average person. One of these terms is called the "surrender period." You need to know that this refers to the specific period during which you, the annuity owner, can withdraw all of your money without having to suffer a penalty.
Watch Out for Multiple-Tier Contracts for Withdrawing Cash
In case you're not aware, Tier 1 allows you to withdraw money over a lifetime. On the other hand, Tier 2 may be enacted if you, the annuity owner, would prefer to take out all of your money as a lump sum. In this case, the annuity seller may potentially reduce the value of your benefits by 10% to 10%. It's essential to keep an eye on multiple-tiers and the corresponding penalties that can be triggered if you should decide to liquidate your annuity.
High Teaser Rates
Some annuity sellers present high teaser rates to draw in buyers. Unfortunately, these high rates will eventually be followed by much lower rates for the annuity contract duration. It's best to require the annuity seller to give you full disclosure of the rate that you'll have to pay for the life of the annuity.
Looking for Seasoned Financial Advisors?
Since annuity contracts can be complicated, it would be easier to make a wise decision with the help of the seasoned financial advisors at 1879 Advisors. Schedule an appointment with us today.