Today and every day for the next 13 years, another 10,000 Boomers will turn 65 and cross the retirement finish line. Are you one of them?
If so, then getting a reliable income might be on your mind. If you’ve heard people talking about the benefits of an annuity and you are shopping around, here is a quick read that will alert you to three questions you want to be sure to ask any financial adviser.
QUESTION #1: Is my principal guaranteed?
Your principal is the original amount of money you put into the investment, NOT counting any interest earned. A lot of financial advisors focus on the rate of return or the interest you will earn when they are trying to sell you a product or investment. Annuities are no exception. You might get dollar signs in your eyes and start to feel a little light-headed when imagining all the money you might earn, but STOP. Before you sign the dotted line, you have to find out if the principal is guaranteed.
Why is this important? As someone who is ten or fewer years away from retirement, your principal is what determines the amount of your monthly income, not the rate of return. What good is earning an 8 percent return if you lose 40 percent of your money the day before you retire? Get your free Variable Annuities report here.
QUESTION #2: What will my income be?
Another common industry practice in the world of annuities is to offer teaser rates and bonus amounts designed to get investors to sign right away. These bonus amounts might offer to increase your principal by as much as 10%, which might sound really awesome, only they don’t tell you that you can’t actually take this money out of your account. You might also be offered a high teaser rate of 8.25%, for example, only to find out that one year later, you’re locked into a dismal 3% rate of return.
Why this matters: While there are other reasons to purchase an annuity, most people who need them also need a reliable income. The way that an annuity calculates that income can get complicated, and many financial advisors don’t take the time to explain all the details there. You might not really care HOW the income is derived, but you always want to find out WHAT that final number will be. Any financial pro worth their salt can crunch the numbers and tell you, for example, that their $1 million annuities earning 8.25% will pay out $50,000 a year in income. Is that enough? Or can you do better? Get your 2017 Annuity Buyer’s Guide here.
QUESTION #3: Do you have other options you can offer me?
Your stockbroker or current bank or financial institution may be the worst place to shop around for an annuity. This isn’t an opinion – it’s just the nature of the industry. Large firms that handle investments suitable for 401(k)s and other long term savings plans are geared toward growth, not income. They will probably have an annuity option available for you when you’re ready to cross that retirement finish line, but it will likely be the variable kind of annuity. The variable annuity does NOT offer principal guarantees because it is a market investment, and as such, it might not offer you the most income for your hard-earned dollar.
Why this matters: There are more kinds of annuities than just the variable kind, from literally hundreds of different insurance companies offering thousands of different benefits, features, riders, and contract terms. A brokerage firm, on the other hand, can usually offer you five or six different annuity options at most, and the person selling them is not able to go outside their company or firm even if a better option exists.
At Annuity Gator, we specialize in the world of annuities, and our only loyalty is to YOU. Our team regularly reviews and reads the prospectus for different annuities offered by different companies on a daily basis, and we enjoy finding the perfect annuity to fit each individual. Shop around, compare, and test one annuity against the other to make sure that you are getting the most income and the best features that benefit YOU and not them.
Do you have an annuity question for us? Fill out our simple form or call us at (888) 440-2468 and one of our advisors will get back to you, no fees and no strings attached.