Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Need-to-Know Tips for Buying Annuities… And Knowing When They’re Not For You

Personal_Finance / Pensions & Retirement Jul 31, 2014 - 09:46 PM GMT

By: Don_Miller

Personal_Finance

You're probably something of an expert in your own field—and that field probably isn't insurance or annuities. How, then, can you work through the minefield of clauses, guarantees, and pages of small print? Here are nine ways to start.

While you may feel uncomfortable doing this, you're the one putting down thousands of dollars, and you have every right demand this. Remember: caveat emptor! It's the buyer who must beware; you must protect yourself. Ultimately, the language in the annuity contract is what matters, but it doesn’t hurt to memorialize your verbal agreement with the agent in writing.


Hopefully your agent is totally honest and will help write the agreement, and both parties can sign and date it. If the agent starts to waffle, trust your instincts.

  • Tip No. 1 – Buy an annuity only for the contractual guarantee. You're only guaranteed what's written into the contract. The language must be simple to understand. If you don't understand it, don't sign it.

    For example, one contract I've seen said: "If I paid them a $100,000 premium, the annuity would pay me $587.97 for the rest of my life. Furthermore, if I did not receive my $100,000 in payouts, my total payments would be subtracted from $100,000, and the difference would be paid to my beneficiaries."

    The language was plain, simple, and easy to understand. There were no "if the investment does well" or "maybe" and "depending on" clauses in this deal.
  • Tip No. 2 – Protect yourself against default by the insurer. At a minimum, the insurance company should be A rated or higher by all rating agencies. In addition, many states have a fund that insures annuities up to a certain point. If your state has a $100,000 per policy limit, and you wanted to spend $200,000 on annuities, you're better off with two separate $100,000 policies. While annuities seem low risk, many people who had annuities written by AIG were quite concerned when the company went under.
  • Tip No. 3 – Demand full disclosure of fees. Many variable annuities can have management fees as high as 3%, but the fees are often hidden. There is, however, a simple way to make them very clear. Insurance agents often have a program that can project the yield from the variable component of the annuity based on any number that they put in. Ask the agent to run the projection at 0%.

    In many cases you will find they have built fees into the system; they want to charge you to manage your money even if it's held in cash. When the projection is set at 0%, you can see how much smaller your funds are getting as a result of the fees. If the agent will not or cannot run the numbers at zero, then you have good cause for concern.

    And remember, if you're interested in investing, there are cheaper ways to go about it than paying a middleman at an insurance company.
  • Tip No. 4 – Avoid a "captive" agent. Instead of buying directly from the insurance company (a captive agent) consider dealing with a general agent who represents several companies. The agent can shop prices and coverage and get the best package to suit your needs.

    If you are dealing with a captive agent, then you might consider talking with several agents and getting quotes from them. Make sure the comparisons are apples to apples, assessing like features of each company. Avoiding captive agents won't guarantee you an agent with your best interests in mind, but it sure does improve the odds.
  • Tip No. 5 – Consider taxes. While no one I know enjoys paying taxes, keep them in perspective. The right product with a safe company should be the first issue you deal with. However, the tax structure for each product is slightly different. The agent should be able to easily show you your liability per payment.
  • Tip No. 6 – If it sounds too good to be true, it normally is. You may have heard of annuities offering great yields – well above what you could expect to earn in the current market. Much like credit cards offering big rebates, when you read the small print, you are likely to find it's only for a short period of time or there's some other limit on it. Don't get caught up in the hype. The better it sounds, the more due diligence you should do.
  • Tip No. 7 – Get the agent to sign on his promises. When both parties finally come to agreement, you (the party writing the check) should look at the other person and say something to the effect of: "To protect both of us, let's agree upon what we agreed upon." Write the date and the names of the parties, and then start numbering the points. For example:
    • Agent Mr. Smith says the fees are 0.5%, and there are no other hidden fees in the product.
    • While there is a variable component in this annuity, I am guaranteed a minimum of 5% yield on my investment.
    • The variable portion of this policy is indexed to the Consumer Price Index.
  • Tip No. 8 – Demand a quote for a single premium immediate lifetime annuity with a death benefit, and compare it to the other options. The monthly income for the single premium life annuity should be your base number, as it’s one of the simplest annuities out there. As the agent starts to add "smoke and mirrors" to the equation with additional features, compare the payout to your original single premium immediate lifetime annuity.
  • Tip No. 9 – Compare one annuity feature at a time. Don't let the agent bamboozle you with multiple new features at once. If he wants to sell you an inflation rider, a death benefit, and a ramp-up period, don't compare this annuity to the basic one.

    Instead, ask for a quote with just the inflation rider feature. Compare it to your basic single premium annuity. Then, tell him to give you a quote for an annuity with just the death benefit feature. Once again, compare it to your basic annuity and evaluate the difference. This way, you can tell how much each component costs. The agent won't be able to bundle a bunch of features to confuse you.

The Miller’s Money Forever team and I want to un-complicate annuities. The topic is filled with exceptions and complications, and this short list can't cover every piece of minutia in an annuity contract. However, anyone who owns an annuity and anyone who's ever considered buying one should read our comprehensive special report, The Ultimate Annuity Guide. It's one of the only resources out there written by financial educators who do NOT sell insurance or annuities, and it's chalked full of vital information written in easy-to-understand language. Download your copy of The Ultimate Annuity Guide today.

The article 9 Need-to-Know Tips for Buying Annuities… And Knowing When They’re Not For You was originally published at millersmoney.com.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules