Annuities are a great solution for guaranteed lifetime income and other contractual guarantees, but you want the right one for your situation. How do you navigate an annuity market with thousands of annuity products – and sometimes inferior choices, at that?
It starts with finding the right annuity expert advice – or in other words, professional guidance for your situation to locate the best-fitting annuity just for you. In this article, we will go over different things to keep in mind as you search for expert annuity advice that is right for your circumstances.
Why Is Finding the Right Annuity So Important?
It’s crucial that you find the right type of annuity to fit your situation, because not all annuity products are created equal. Some annuities are “proprietary” products that have low growth potential and expensive guarantees. Others may be more suited to someone with different financial objectives than you.
There are literally thousands of annuities to choose from in the marketplace today. The many guarantees and benefits that they collectively offer can make even seasoned annuity owner shake their head in confusion.
Locating the Right Annuity Expert
Of course, a sensible solution is to find an experienced financial professional who can answer all your questions. But even here, you should be choosy about which advisor or agent you confide in.
Some financial advisors are very averse to annuities in general. They may try to steer you away from them to other products that don’t offer contractual guarantees. If some guarantees in your retirement plan are important to you, it’s good to keep that possibility in mind.
In that case, you will want a financial professional who truly understands your situation and can direct you to the proper-fitting annuities that you need to achieve your financial goals. Let’s now go over what to look for in order to find the correct annuity expert advice for you.
What Can Expert Annuity Advice Do for You?
In a nutshell, the right annuity advice will help you find the best annuity product in the marketplace that meets your needs. An annuity expert will be familiar with all the different types of annuities and which ones focus more on a given objective, such as growth or income.
If your goals call for a simpler annuity, you don’t need extra bells and whistles that come with some annuities and their rider benefits. That can lead to excessive fees, costly charges, or unnecessary features with your annuity (example: some bonus annuities).
An experienced, impartial annuity expert will be able to find an annuity that matches your financial needs, without adding any additional riders or charges to the contract.
They should always be around to answer your questions, regardless of how long ago they started your annuity contract. They won’t sell you an annuity and then disappear.
Ask your annuity agent for client testimonials so you can get an idea of the sort of guidance and the service that you might receive.
What Does Proper Annuity Expert Advice Look Like?
Your annuity agent should be straightforward and clear. They will be able to clearly explain if a specific annuity option is or isn’t right for you. If you already have an annuity and are thinking about alternatives, they can already give you input on that.
That includes whether your annuity in is worth staying in or not. You can ask them to analyze the value of the benefits you are receiving versus the fees that you may be paying for those benefits. Keep in mind that if a specific benefit has been accruing for some time, such as a guaranteed payout being delayed and growing larger, it may be hard to beat.
If you are paying more than the benefits you are getting are worth, your annuity agent will inform you of this shortcoming. Should you be genuinely getting your money’s worth, then they will tell you to stay put instead of trying to recommend a new contract.
Independent Annuity Advice vs. Captive Annuity Advice
Finally, it’s generally better for an annuity agent to be independent and not limited to a few insurance companies. A good annuity agent will have multiple companies that they can shop around with so that they can get you the best deal possible given your financial circumstances.
A financial advisor who works for a broker-dealer may only have access to two or three different annuity companies, which drastically limits the nature and scope of the products that they can offer.
The Difference-Making Advantage of Strong Knowledge
The right agent will also have strong knowledge about annuities in general and will understand their benefits as well as limits and drawbacks.
For example, say that you need the money from your annuity within the next five years. A good agent will either tell you to find another type of investment or else put you in an annuity with a five-year maturity period (or shorter).
A good annuity advisor will know that no one product can do everything. Most annuities are designed primarily for either income or growth with protection, but not both.
For example, variable annuities aren’t appropriate for people seeking to protect their money from market losses. On the other hand, fixed index annuities are probably not a good choice for those wanting the maximum possible amount of growth over time.
Experienced annuity agents also know in which areas that various life insurance companies are competitive with their annuity products. Some carriers will offer high guaranteed income payments, for instance, while others have a history of high renewal rates for earning interest.
Ask your financial professional about these features, especially the ones that are most important to you for your personal goals.
Ask the Right Annuity Questions
If you are shopping for an annuity and don’t know where to start, here is a list of questions that you can ask your financial professional to narrow the field down.
Always ask these questions before starting an annuity contract. The answers can have a substantial impact on your retirement budget for years to come.
– How long does the back-end surrender charge schedule last?
This is an important question because this feature determines how liquid your money will be. Most annuities have up to ten-year surrender charge schedules, but some do go longer. Also, be sure to find out how much you can withdraw from your contract each year without having to pay a back-end surrender charge.
– What kind of fees am I paying?
If you invest in a variable annuity, there is a chance that you could be paying as much as 3% per year in annuity and investment fees. These fees will pay for the management of your mutual fund subaccounts and the insurance features of your contract.
Most fixed annuities don’t have fees. That is also the case for many fixed index annuities, although some also have fees for guaranteed income riders, or fees that allow you to benefit from higher growth potential linked to a given financial index.
In some cases, these fees can be justified, while in other cases they can’t. Ask your financial professional for a breakdown of any and all fees as well as charges that are associated with any annuity that you are considering.
– How can I receive income from my annuity?
In the past, you had to “annuitize” your contract in order to receive a guaranteed income stream. But that is no longer the case.
Many annuities, such as fixed index annuities, now offer guaranteed income riders that can be turned on and off at the annuity owner’s discretion. This means that you can still access the principal in your contract just by turning the rider off. This innovation in annuity payouts has made these contracts more attractive for many retirees.
– How safe is my money?
If you start either a fixed or fixed index annuity, then your principal is guaranteed by the insurance company that issues the contract. Your financial professional should be able to tell you what their financial strength rating is.
Companies such as Fitch’s, Moody’s, Standard & Poor’s, and A.M. Best assign financial strength ratings based on the insurance company’s financial condition and level of cash reserves. You should probably stick with a company that is rated at least in the B-levels to avoid the possibility of your insurer becoming insolvent.
A-rated insurers are generally lower risk, but B-rated insurers often offer superior rates or levels of growth to stay competitive.
– What will happen to the money in my annuity if I pass away?
The answer to this question will depend on your choice of annuity payout, although most will give remaining money not paid to you to your beneficiaries. Talk to your financial advisor about your options if this is a concern.
Your financial advisor can help you to choose the right beneficiary when you start your contract. You can change your beneficiary at any time and also name contingent beneficiaries if you choose. Your money will directly to your beneficiary without going through the probate process.
– What will happen to the money in my annuity if I become disabled or incapacitated?
Most annuity contracts today will waive any surrender charges if you become unable to perform at least two out of the six activities of daily living. Your annuity may also return money to you if you become disabled or go into a nursing home.
Ask your agent what the insurer’s policy is for the annuity that you are looking at buying.
Final Thoughts on Finding Annuity Expert Advice
There are many factors to consider when you decide to buy an annuity. But having the right annuity expert can greatly simplify the process for you in most cases.
At SafeMoney.com, our independent financial professionals are specially trained in annuities and can answer the questions that you may have. Don’t let the many annuity choices available stop you from taking the next step in your preparation for a secure retirement.
Looking for someone to assist you? Get started by using our “Find a Financial Professional” section, where you can connect with someone directly. You can request an initial appointment to discuss your goals and situation. Should you need a personal referral, please call us at 877.476.9723.