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Questions To Ask Yourself Before You Buy An Annuity
- Who’s selling the annuity? Will they be able to make good on their promises? Credit ratings matter. Consumers have little other objective information to determine the likelihood they will receive their promised benefit in the future. So it makes sense to ask for the exact rating of an insurance company.
- How much will the annuity cost annually? Annuity contracts are generally more expensive than mutual funds. The richer the guarantees carried by a contract, the higher the corresponding costs will be. In addition to these fees, variable contracts will also charge direct or indirect asset management fees.
- If you invest $100,000 today, what will the value of the contract be after 1 years if the market stays flat, increases, or falls? This question is much trickier than it may appear! Consider all fees, and in the case of equity index annuities, the formulas that might be applied to calculate total return. If you cannot answer this question about an annuity contract with absolute certainty, you should pass.