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7 Questions You Should Ask Your Agent About Annuities

By    |   Monday, 04 May 2015 11:20 AM

An annuity offers people a steady flow of income without concerns about market fluctuations, which affect stock and mutual fund portfolios. The annuity is set up through an insurance company on the promise of guaranteed distributions at a certain time over a number of years.

Immediate annuities include a lump sum payment that provides monthly or annual income for periods ranging from five to 30 years. Deferred annuities are similar to other retirement plans that feature tax-deferred investments that can be withdrawn later.

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There are a variety of annuity plans that include different features to match the individual investor's needs. Here are seven questions you can ask an agent about annuities:

1. What is the insurance company's credit rating?


Insurers promise "guaranteed" income during the life of the annuity. However, companies can go belly-up. It's important to find out about the strength of the company for the future through rating agencies such as Moody's and A.M. Best, according to certified financial planner, Craig W. Lemoine as reported by Forbes.

2. How much does the annuity cost in fees?

Depending on the annuity, fees may be charged for administrative duties, insurance death benefits, optional benefits for guaranteed minimum returns of lifetime withdrawals, asset management, or no-penalty for early withdrawal provisions due to illness or disability.

3. Are the payouts adjusted for inflation?

Inflation-adjusted annuities are usually available, but you may pay a higher initial premium, according to Forbes.

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4. How much will you receive with your annuity payments?

The amount varies, depending on age, the state where you live, your initial investment, type of annuity and even gender, according to NewRetirement. Insurers base their figures on the law of averages for outcomes. Also, insurers will charge different prices for the same products, so you might shop around.

5. Can you change the plan later?

An annuity is usually a one-time deal and it's difficult to make changes. You might be able to purchase more income later on. You also won't be able to cancel the plan after the contract has been signed. However, ask if termination or refunds are allowed under certain circumstances, such as disability or financial disasters.

6. What happens to the annuity when you die?

Some insurers offer features on certain annuities that pay you or the beneficiary until the investment has been paid out.

7. Can a spouse be included in the annuity?

Annuities usually make payments during the lifetime of you and your spouse.

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An annuity offers people a steady flow of income without concerns about market fluctuations, which affect stock and mutual fund portfolios. The annuity is set up through an insurance company on the promise of guaranteed distributions at a certain time over a number of years.
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2015-20-04
Monday, 04 May 2015 11:20 AM
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