If you’re approaching retirement, it is possible that you’ve been asked to buy an annuity from a bank. Your local banker has access to your account information and balances, so they may be suggesting that you “put some of your excess cash to work.” But before you purchase a bank annuity, it is absolutely essential that you understand how the product works, and how it may – or may not – fit in with your specific financial needs and objectives.
Why You Need to Be Cautious When Buying an Annuity from a Bank
Annuities can be purchased from a number of different sources. These include insurance companies (which is where annuities originate from,) as well as from investment firms and banks.
While the representatives who offer these products are required to obtain certain licenses – as well as to complete regular continuing education – that doesn’t necessarily mean that they’re all experts when it comes to recommending annuities.
In addition, the word “annuity” can refer to a wide array of financial vehicles – and not all of these will be a good fit for you. In fact, going with the wrong annuity could even be a detriment to your retirement portfolio. Plus, given the possible surrender charges, taxes, and penalties, it can also be very expensive to get out of.
With so many different variations of annuities today, it is recommended that you work with an annuity specialist. That way, you can ask questions and compare different options in order to narrow down which annuity is best for your particular short and long-term financial goals.
Items to Consider Before Purchasing a Bank Annuity
Just like making any other major financial decision, there are some important factors to consider before you purchase an annuity from a bank. These should include the following:
- Type of annuity
- Risk tolerance
- Time frame until retirement
- Goals for the annuity (such as tax-deferred growth, income, or both)
- Fees/surrender charges
- Other features (such as a death benefit, penalty-free withdrawals for long-term care needs, etc.)
- Financial stability of the offering insurance company
- How it compares to other annuity alternatives
- Your understanding of the annuity
- How well the advisor understands the annuity, and whether or not they can answer all of your questions and concerns
Where to Find More In-Depth Details About How Annuities Work
At Annuity Gator, our mission is to educate people – both consumers and financial professionals – on how annuities work, and on whether or not these financial vehicles make sense in a particular portfolio.
If you would like to learn more about a bank annuity and/or other annuity-related information, please feel free to reach out to us directly and chat with an annuity specialist. You can call us at (888) 440-2468 or send us an email to our secure online contact form with any questions or concerns that you have. We look forward to providing you with additional annuity education.