Are Indexed Annuities Good To Use For Retirement?

The short answer is yes! But be careful. You need to thoroughly understand what you are getting into so that there aren’t any problems down the road. Here are a couple of tips to make sure you are looking in the right places to get the details you need before you invest.

Surrender Charges

Surrender charges can be horrendous in any kind of fixed annuities and variable annuities as well. That is true unless you purchase them for the right reasons. If you invest for the right reasons, then surrender charges should never be any issue at all. In other words, you should never have to pay any surrender charges at all if you are investing for the right reasons.

Annuities are long term investments. Try to think of them as term investments or even life investments. The term would be until the surrender charge schedule has run its course and your charges are zero. This can be from 3 years to 20 years in some cases depending on which insurance company and which annuity you use at that company. There are pros and cons to longer surrender terms. Usually there longer the surrender charge, the more profitable your annuity will be because the insurance company will offer more benefits but that is not always true.

As a life investment there is no need to worry about the surrender charges at all because you have no plans to move the bulk of the funds. You also plan to take less than 10% out per year while the surrender charges are still in effect. The idea is to use your annuity for retirement income. So taking the principle would be a bad idea unless it was a major emergency.

One Benefit To Check Carefully

Any kind of bonus attached to an annuity has a lot details attached to being able to actually use the money. Some insurance companies will attach a longer surrender schedule to the bonus than your original money and earnings. And some companies will not allow you to ever take the bonus as a cash amount! Ask specifically how the bonus can be taken out and to be shown the details in a sample contract or other detailed document that describes the bonus.

Be careful here. If you are thinking you are getting a cash bonus you very well could be wrong. There is also a very good possibility that your broker or agent doesn’t truly understand the bonus so do not take their word for it no matter how long you have known them or how much you trust them. Be prudent in this matter because it is used as a selling point most of the time if it is a bonus indexed annuity.

These two tips should help to get you looking in the right places to make sure you are getting exactly what you need for your investment plan. When you invest in annuities for the right reasons they can be the best investment you have ever owned! If you invest for the wrong reasons they can be a nightmare of an investment. Be prudent and you will find the right annuity for you and your exact financial situation.

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