Three Tips For Choosing Annuities

Retirement planning is imperative for any person who desires to secure their financial future far beyond their working years. While there are a number of options, those individuals who have decided to rely on an annuity to meet this need have made a wise choice. If you are considering investing into an annuity, here are a few tips that can help you along the way. 

Double-Check Your Contract

It's imperative that people understand the terms of their annuity contract.  These documents are vast, including information about the participation rates, rate guarantees, cost of living riders, death benefits and a host of other contractual obligations. It's not to say that the contract terms are bad, the reality is that everyone has different financial needs.

If you don't double-check your contract, you could be agreeing to terms that you can't afford to fulfill. In addition to the above-mentioned details, you also want to make sure you understand the annual percentage rate during periods of active payment and the surrender charge.

Don't Work Alone

Don't enter into the world of annuities on your own, you need to be working with a licensed professional. Adhering to this statement is important from the very beginning when you are selecting an insurance company. How secure your annuity is will be dependent on the strength of the insurance company backing it.

Choose an insurance company with a less than stellar reputation or forecast and you could be unsuccessful. Contact a professional to assist you with selecting a company, determining what type of structure will best meet your needs and help you review your contract.

Consider Several Accounts

Don't assume that you have to invest all your money into a single annuity contract. In some instances, it's a financially wiser decision to invest in several smaller contracts. Take a contract with an annuity premium of $300,000, for example.

Instead of requesting a single $300,000 contract, ask for three $100,000 contracts. Structuring the contracts in this manner gives you greater control over your money. When you're ready to start collecting income, instead of having to tap into the full $300,000, you can initiate payment on just one of the smaller contracts, leaving the rest of your money untouched. 

Annuities can be a powerful investment tool. Make sure you are taking your time during the selection process to choose both a company and contract term that is best suited to meet your long-term needs.