4 Questions to Ask When Buying an Annuity

Investing in an annuity can provide you with some benefits as an investor. When you are ready to purchase, there are some things that you will want to talk to your insurance agent about first. Here are a few questions to ask when buying an annuity.

1. What Is the Term of This Annuity?

Before agreeing to purchase an annuity, you need to make sure that you know how long the term is. Some annuities are designed to last until the day that you die. Other types of annuities will only provide you with payments for a certain amount of time after you retire. This means that you need to pay attention to the length of the terms of a you do not outlive your retirement benefits.

2. What Is the Interest Rate?

You also need to pay special attention to the interest rate that is being offered for the annuity. You want to try and secure the highest interest rate that you can for your annuity. Some annuities will pay you the interest rate that is available whenever you purchase. Other annuities will allow you to average the interest rates over the entire term of your annuity. Make sure that you understand how the company is coming up with the interest rate that they are giving you.

3. What Type of Annuity Is This?

You will need to make sure that you understand what type of annuity you are dealing with. You could potentially be purchasing a fixed annuity, a variable annuity, or even an equity indexed annuity. With a fixed annuity, you will be receiving a fixed rate of interest and a fixed payment once you retire. This provides you with a lot of consistency in your retirement planning. With a variable annuity, the interest rate that you receive will vary depending on how your investments perform. With an equity indexed annuity, the performance of the annuity will depend on the performance of a financial index such as the S&P 500. With equity indexed annuities, you will typically have a maximum and a minimum rate that you could potentially earn. Make sure that the agent specifies which type of annuity you will be purchasing.

4. Why Should I Invest with Your Company?

Ask your insurance agent why you should be dealing with their company. When you invest in an annuity, you will be giving your retirement money to an insurance company. They will be taking care of it for you and then provide you with a monthly payment during your retirement years. This requires a lot of trust on your part. Therefore, you want to make sure that you are dealing with a reputable company that will be around when the time comes for you to retire. Insurance companies can still go out of business so you want to make sure that you are dealing with one of the best companies in the industry.

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