Five questions to ask about an annuity.
A retirement decision deserves more than a headline rate. These questions can help you organize a conversation about whether a particular annuity fits your circumstances.
What job would this money do?
Identify the need first. Are you asking about income timing, future expenses, or another priority? Explain how the money fits alongside your other resources before discussing a specific contract.
What if I need it sooner?
Ask for an explanation of withdrawal restrictions, surrender charges, and what happens to any benefits when money is taken out. Consider what would remain available for unexpected expenses outside the contract.
What am I paying for?
Ask for the costs and optional features to be explained in writing. Separate the basic contract from any additional benefits, and clarify which terms or charges can change.
What would I give up by changing?
If an existing annuity is involved, examine that contract too. Understand its current benefits and any costs of leaving before comparing a proposed replacement. A new feature does not, by itself, establish that a change makes sense.
What exactly is guaranteed?
Read the guarantee in the contract rather than relying on a description. Annuity guarantees depend on the claims-paying ability of the issuing insurer and applicable contract terms. Discuss tax questions with a qualified tax professional.