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Tags: AM Best | Annuities | Deferred Annuity | Treasury Department | 401 k

Choosing an Annuity: How Not to Outlive Your Money

Joe Stark By Friday, 13 February 2015 11:54 AM EST Current | Bio | Archive

Baby boomers are at or nearing retirement age. They have lived through periods of market fluctuation, making them nervous about their finances. They worry about outliving their money after they retire. There is no foolproof method and guarantees can be hard to find in the financial world, but annuities are currently one of the few reliable sources of lifetime income for retirees.

What is an annuity?

An annuity, simply described, is a contract you form with an insurance company. You pay the company a certain amount of money, either in a lump sum or in periodic payments, and the company pays you back in regular income. The income payments can be for life or a specified period of time. An immediate annuity will begin paying you approximately 30 days after you hand over your money. A deferred annuity will begin paying you at a future date.

Can an annuity be part of my 401(k) plan?

Yes. The Treasury Department recently released guidelines that expand the way annuities can be used inside a 401(k) plan. According to the new guidelines, employees can channel part of their nest egg into an annuity and be “guaranteed income for life* while retaining other retirement money in more liquid or flexible financial vehicles.”

Questions to ask before purchasing an annuity:

Communication with the agent you are working with is key to being happy with the annuity you choose. There are some questions you need to be sure to ask:

  • What is the history of the company insuring the annuity? Is there a chance it will go bankrupt and you will lose your money? Ask what the company’s AM Best rating is, or if it is rated by other ratings services.
  • What different types of annuities are there, and how do you choose which is the best one for you?
  • If it’s a variable annuity, how will your money be allocated into the available sub accounts?
  • What if you have an emergency? Can you borrow against the money you have built up in the annuity?
  • What are the fees for purchase and administration of the annuity? Are the administrative fees subject to increasing over time?
  • Ask for an example of how the value of the annuity you are thinking about will be calculated in one year, and in 10 years.
  • What is absolutely the worst thing that can happen?
  • When it’s time to turn on income, will the annuity payments be adjusted for inflation?
  • Is there a surrender fee if you withdraw your money early?
  • If you change your mind in the next few years, what happens?
  • How long is the free look period?
You need to have the information concerning how the annuity will work and the benefits you will receive from it in writing. If you do not understand any term of the contract, or have any other questions, you need to ask.

There are so many different types of annuities available to you, and so many different ways you can structure an annuity, you should be able to find the right one that will meet your needs and provide you the reassurance that will come with knowing you will have lifetime income after retirement.

Let Crown Atlantic help you protect your future. Click on the button below or contact us by going online to CrownAtlantic.com/Protect or calling 855-221-5546 to speak with a professional annuity agent today!

Joe Stark is the CEO of Crown Atlantic Insurance, LLC in Boca Raton, Fla. Stark is an insurance industry veteran with more than 25 years of experience. For more of his reports, Go Here Now.
*Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company; they are not insured by the FDIC.

Annuities are long-term insurance contracts designed for retirement. As a result there may be fees or penalties for early withdrawals, including surrender charges, and if taken prior to age 59 1/2, withdrawals may be subject to a 10 percent federal additional tax.

A fixed indexed annuity is not a registered security or stock market investment and does not directly participate in any stock or equity investments, or index. The applicable index is a factor that in part determines the interest to be credited.

© 2023 Newsmax. All rights reserved.

There is no foolproof method and guarantees can be hard to find in the financial world, but annuities are currently one of the few reliable sources of lifetime income for retirees.
AM Best, Annuities, Deferred Annuity, Treasury Department, 401 k
Friday, 13 February 2015 11:54 AM
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