You should review your annuity portfolio as often as you would your other investments.
Depending on the type of annuity, you should review it at least once a year. Of course, a major change in your family such as a serious illness, a new baby or even starting a business should trigger a call to your insurance agent or company representative to discuss changes in your financial planning. If you change your plans, find out whether this will cost you anything and if so, how much.
You can think of a lifetime annuity as investment vehicle that functions as a personal pension plan. Sometimes referred to as “single life,” “straight life,” or “non-refund,” these are a form of immediate annuity that provides income for your entire life. The payments can be increased to cover a second person. This is called a “Joint and Survivor” annuity. While most provide income for life, some may offer the option of payments for a fixed number of years.
Fixed annuities pay a “fixed” rate of return. When you receive payments, the monthly payout is a set amount and is guaranteed. Fixed annuities may be a good choice for:
Conservative investors who value safety and stability.
Those nearing retirement who want to shelter their assets from the volatility of the stock or bond market.
An important decision in purchasing an annuity is deciding how you want to be paid. You can select annuity payouts for a set period of time or continue for your lifetime. With some options, a beneficiary can be designated to receive payments upon your death. Here is a review of several of the options.
If you take money out of an annuity, there may be a penalty called a surrender fee or a withdrawal charge. This fee is higher if you withdraw funds within the first years of an annuity contract. The penalty, however, drops gradually each year. Since immediate annuities are purchased to provide income, they usually can’t be “surrendered” and will therefore not be subjected to a fee.
The annuity business, like the insurance industry itself, is very competitive. There are hundreds of insurers and many different types of products available to you. Before buying an annuity, contact your state insurance department to see whether it offers an annuity buyers guide for your state.
Annuities can be purchased through insurance agents, financial planners, banks and life insurance carriers. However, only life insurance companies issue policies.
Agents
Agents are insurance professionals who are licensed by your state insurance department. Some agents work exclusively for one insurance company, while others represent several.