What to Consider When You Compare Annuities
Before you buy any financial product, it pays to shop around. This is also true of annuities. You should compare annuities, just as you would compare the rates and term of bank CDs. In today’s competitive financial market, it pays to take a few minutes to get interest rate and benefit comparisons.
While rate comparisons for fixed annuities seems logical, if you buy a variable you should also compare annuities. Not all variable annuities are the same either. Of course, immediately you notice if there are different funds on the interior, but some of the other differences may not be as transparent.
Other differences on variable annuities are living benefits, death benefits, benefits charges, investment returns and free benefits such as automatic re-balancing. The living and death benefits of variable often sound the sound but many times, they are quite different. For instance. Some policies offer guarantee that you’ll always receive your principal back if you leave your funds in a specific length of time. Others offer that same guarantee but they include a guarantee of growth every year besides. Some of the guarantees cost a fraction of a percent while others cost more.
In order to compare annuities, you need to know what you want your product to do. Of course, everyone wants 25 percent a year growth guaranteed but we all know that’s no possible. You must look realistically at your situation and decide what’s important to you.
If access to your funds is important, you need to have an annuity that allows you to remove a portion every year. Some annuities offer a ten percent cumulative withdrawal right. This is perfect for the person that worries they might need the funds. If you don’t take the money out of some policies, the ten percent transfers to the next year making twenty percent available if you need it.
When you compare annuities, decide how long you’re willing to tie up your money. Almost every annuity has a surrender period. The surrender periods vary from one year to longer. Some annuities, particularly those with a high up front bonus rate, have much longer and higher surrender periods and surrender fees. The surrender fee is the percentage of money you pay if you take your funds out too early.
Look for annuities that offer the longest rate guarantee if you select a fixed annuity. When you compare annuities and look at the rates, a high rate that lasts just one year may not be as good as a slightly lower rate that lasts several years.
No matter what type of annuity you select, know what options are the best for you and then look at those first when you compare annuities. Each person has different unique needs and desires. Knowing what you need is always the first step when you compare annuities.
Jonathan Tyler discusses and writes on the topics of annuity insurance and more generally offers advice on the topic of retirement. His writings attempt to be unbiased and straightforward, providing potential investors with applicable information. If you are looking to compare annuities or just looking for general information about your options, come visit us.
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