What to Look for In Annuities
There are several factors you may want to consider when you are exploring the possibility
of buying an annuity. One of these factors is the current interest rate paid by
the annuity. Some companies will pay what's called a "first year bump," which is
an additional amount during the first year in which the annuity is held.
Another factor to consider is a guaranteed interest rate. This is an interest rate
floor beneath which the annuity is guaranteed not to fall.
Third, you'll want to pay attention to the surrender charges and the surrender period
of any annuity you consider. Most annuities will charge a penalty if you withdrawal
your money soon after placing it into the annuity. The period of time which you
must wait, and the amount you must pay if you withdraw early, may vary widely from
company to company and annuity to annuity.
Along these lines, you may want to ask about penalty-free withdrawals. Does the
company allow a portion of the annuity's principal to be paid out each year without
subjecting you to surrender charges? An annuity with penalty-free withdrawals
may be advantageous to senior investors because many seniors prefer (or need) investments
with a high degree of what's called "liquidity," meaning that they can access their
money readily, easily and with minimal cost.
Finally, you should research the financial strength and/or rating of the company
issuing the annuity. While annuities are historically very safe investments, you
still will want to investigate carefully and thoroughly the company from which you
purchase your annuity. How does their financial strength rate? You can find
this information by referring to services such as Moody's, A.M. Best or Standard
& Poor's.
This Web site is intended for general information purposes only. It does not nor is it intended to constitute legal, tax or investment advice. Alliance America is not a lawyer, registered investment advisor or investment advisor representative, and is not engaged in the practice of law or the business of investment advice.