Annuity Scams- Part 1

Lets set something straight right away- Annuities themselves are not bad. Most people have a negative image of them due to bad agents.

annuities pros and cons

There’s no need to fear getting an annuity for your retirement, so please keep it in mind. Instead, focus your worrying on things like Social Security or Medicare, things that actually face major crises.

Choosing an annuity as a retirement investment vehicle is a science. There are a lot of things to look into in order to figure out how suitable a purchaser is for a particular annuity. Then comes product selection. If you are deemed suitable for an annuity, you’ll move on to product screening. And, it many ways, it really is.

You’ll find that selecting products brings out a lot of sleazy salesmen. When you buy an annuity, someone will get commission for it, so reconcile the fact that people will be fighting over you to get your money. That’s just the way it is. Just concentrate on what you need and you should be fine. Here is a quick list of the things to look for so you can avoid the purchase of an inferior product.

Surrender Charges – The majority of deferred annuities don’t have any upfront fees whatsoever so the way that the insurance companies protect themselves from a loss so what they will do is charge you a fee if you happen to cancel your contract prematurely. Longer surrender schedules will cost the company more money. Most of the time this is linked to upfront bonuses and higher than average agent commissions. You’ll get the short end of the stick. Simply ignore products that have surrender schedules lasting longer than seven years. You’ll be able to find good products with long schedules, but the longer contract should be justified. Research very thoroughly!

On a side note, make sure you clearly understand any additional restrictions placed on the surrender of a contract. Some contracts state that you can only surrender early if you take installments over a certain period. Contracts like these will also impose the same restrictions on your heirs if you should pass away prior to the expiration of your schedule. Avoid any such contract at all costs. There is no academic benefit to annuities like this. You should maintain as much control as you can over your money, after all it is yours.

Interest Rates – Make sure that you know how the interest rates factor into your contract. Important rates to know about are premium bonuses, guaranteed minimums and the yield to surrender.

annuity advice

Premium Bonuses- Many companies lure investors with lucrative one-time bonuses. These almost never work out to your benefit. This raises the cost of placement for the company and leads usually leads to a longer surrender schedule. This is a trap, so don’t fall for it. Turn around and walk the other way.

Guaranteed Minimums – This is an interest rate that will stay the same no matter how bad the market gets. Don’t settle for less than 3%. If a company pays out less than that, this means one of two things. Either they are trying to cut costs or they don’t have a clear enough picture of their future financial performance. You want to look for a good strong company that survived 2008′s financial meltdown and expect business to run normally in the present and future. Your money is deserving of nothing less than the best.

Yield to Surrender- This number is the cumulative rate of return that you should expect once your contract expires. This is the part where the useless bonus rate is shown for what it is and your solid minimum guarantee will shine through. Don’t trust bonuses, as they don’t work for you later on, but good minimums can tell you what to expect.

Credit Ratings- Annuities are supposed to be a safe investment. It should go without saying that you want to place your money with the most stable company you can find. Turmoil in any atmosphere will weed out the weakest players and further strengthen the most stable. Find those companies. You can trust them with your money.

This is about all you need to know about annuities. Those areas are exactly where you will run into trouble. Captive agents really have no choice but to sell you specific products and commission fueled agents will most times ignore various potential pitfalls. Just keep in mind what we’ve told you, and you’ll be fine. Keep in mind, it is just an annuity, and there is nothing to fear.

Make sure you check out AnnuityStraightTalk.com for the tools that will enable you to make a more informed decision about Annuities.

I want you to have all the tools and knowledge possible before making a big financial decision. Check out the resources at www.AnnuityStraightTalk.com – annuity scams