12 May Major Mistakes to Avoid When Buying an Annuity
When buying an annuity there are two groups of people. Those who don’t have a clue and those who think they do! People who don’t have a clue (or work with someone who is not an expert) end up realizing they bought a bad annuity right away, a year in, five years in or even 20 years after the purchase. An even worse off group are the folks are those who think they’ve been educated enough but they fall way short. Basically, in the world of annuity buying, if you are not an expert you are an amateur. If you are not a surgeon you wouldn’t perform surgery and if you are not an astronaut you can’t command the International Space Station. If you are not an annuity expert don’t go it alone.
Below are the top mistakes individuals make when they’re buying an annuity:
Not having a clear understanding of why they’re buying the annuity in the first place
– Not clearly understanding the annuity being bought happens very frequently. When this occurs, the annuity purchase may benefit the agent or advisor selling it more than the purchaser.
Buying the wrong type of annuity
– There are hundreds of insurance companies and thousands of annuity products. Not all annuities are created equal, and the ones that work best for one person may not work at all for another. You need to fully educate yourself on what annuities are and understand everything about any plan you may be interested in.
Buying an annuity from an insurance company that has poor financial strength
– Since the guaranteed annuity payments are guaranteed by the financial strength of the insurance company it’s important to partner with a financially strong insurance company.
Not shopping around
– Committing to one insurance company or a financial advisor (agent) without comparing all the other options is like going to one airline site and hoping to find the lowest fare to a particular destination.
Not understanding what you’re paying in annuity fees
– Costs and fees vary from one annuity to the next and from one company to another, and if you’re not educated the agent or company your working with might not be inclined to tell you. When it comes to fees, most people don’t have a clue.
Buying an annuity that does not align with your goals
– Make sure that the annuity you pick is aligned with your overall financial needs. Explore all your options to make sure neither you nor your family will be shortchanged.
Buying an annuity without having a comprehensive income distribution plan
– Before you buy an annuity make sure it’s part of your overall income distribution plan. Make sure you define all of your income sources and harvest income properly from those sources so you don’t run out of money during retirement.
Buying an annuity with a high bonus or a high guaranteed income roll-up
– We’ve seen too many instances where an annuity with a high bonus or high guaranteed income increase may not offer the highest guaranteed monthly income.
Choosing the wrong annuity payout option
– Annuities offer multiple payout options from single life, joint life, or specific payout dates just to name a few. For example, one annuity could be the best for a single payout but subpar if the joint life payout is chosen. Here again, there are a myriad of options that need to be thoughtfully considered not haphazardly decided.
If you need help with an annuity purchase you’ve come to the right place. We are expert annuity purchasers, we have the relationships with the best carriers to curate the options and we are masters at providing the top three options that match the purchaser’s goals.
Contact us today if you have questions.