The best way to compare Annuities is to use an Independent Annuity Agent who can shop the market for you.
It is important to use an independent agent, an not one that works directly for just one insurance company.
Also, many websites now allow consumers to comparison shop annuities. However, there are many many annuities on the market. So this can be difficult for the average consumer to comparison shop.
Websites such as http://FixedAnnuity4Me.com , actually do the comparison shopping for you, and just show the best annuities on the market, not all of the annuities on the market. This is one of the best ways to comparison shop for Annuities.
President, Insurance Associates Agency Inc., West Chester, OH
An annuity is two things: 1) It is a systematic way to accumulate money; and 2) It is a systematic way to distribute (pay out) money. When you evaluate the options, these two functions are primary to understanding what you are looking at with any annuity. I will confine my answer to helping set the table for you to be able to compare one annuity to another.
As a method of systematically accumulating money in an account, you need to be at work but your money also needs to be at work. The interest rate paid on your growing fund accumulation is how your money is considered to be working for you so one of the most important things to compare would be the rate of interest to be paid on your accumulations. Ask and know if there is a minimum rate of return. Beware: Proposals can propose rates of interest to be paid that may never come true so understanding the minimum rate of interest helps. It may also help to compare the performance of the annuity in terms of interest rate paid over time. Good companies can provide you a historical log of the rates they have paid on their accounts. You should also understand what the penalties to the interest accumulation occur when your decide to move the money to another provider. These are referred to as surrender charges or early termination fees. Commonly there are surrender charges for five to seven years so you should ask and know how you will be treated if you decide to move your money into another direction. Also, ask what other charges your account may be subjected to during the life of the annuity prior to making any distribution choices.
Years from now you will have choices as you decide how to turn your accumulated account into a stream of payments (or outright surrender). If you choose to surrender the account, know and understand what types of surrender fees might apply. Don't forget, you'll probably face a sizable taxable event if you surrender the account for cash on the gain above basis in your account. Legitimate rollover of the funds can avoid the tax and penalties under most circumstances. Depending on the type of annuity, all the money may be subject to taxation and if you surrender prior to 59 1/2 years of age, there is a 10% surtax collected by the government above and beyond all other tax calculations. Now, if you "annuitize" the account with the carrier handling your account, you are choosing to leave it with your annuity provider for the promise of a periodic stream of payments into the future. In most instances, once the account is annuitized, it can no longer be surrendered for cash. At this point you have selected a stream of payments for some period of time and based upon certain events in your life or your spouse, and based upon an assumed interest rate. These funds, as they are paid out, will also earn additional interest gains that are considered into the payout formula before determining the value of each monthly installment distributed to you from your account. This interest rate is usually fixed but modern variations do exist to have the interest rate move with market changes.
Generally, the payout period is your lifetime, often with a minimum period of ten years. It can be longer if chosen. This would lower the monthly periodic installments because of the longer guarantee. You may also choose to have the annuity pay beyond your life and for the life of a spouse and this will further reduce the monthly payout because it is based upon a longer life expectancy of two lives. The topic of distribution is too involved to provide much meaningful help but this should help you spur a reasonable conversation about annuities and help you compare one to another.
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It is important to use an independent agent, an not one that works directly for just one insurance company.
Also, many websites now allow consumers to comparison shop annuities. However, there are many many annuities on the market. So this can be difficult for the average consumer to comparison shop.
Websites such as http://FixedAnnuity4Me.com , actually do the comparison shopping for you, and just show the best annuities on the market, not all of the annuities on the market. This is one of the best ways to comparison shop for Annuities.
As a method of systematically accumulating money in an account, you need to be at work but your money also needs to be at work. The interest rate paid on your growing fund accumulation is how your money is considered to be working for you so one of the most important things to compare would be the rate of interest to be paid on your accumulations. Ask and know if there is a minimum rate of return. Beware: Proposals can propose rates of interest to be paid that may never come true so understanding the minimum rate of interest helps. It may also help to compare the performance of the annuity in terms of interest rate paid over time. Good companies can provide you a historical log of the rates they have paid on their accounts. You should also understand what the penalties to the interest accumulation occur when your decide to move the money to another provider. These are referred to as surrender charges or early termination fees. Commonly there are surrender charges for five to seven years so you should ask and know how you will be treated if you decide to move your money into another direction. Also, ask what other charges your account may be subjected to during the life of the annuity prior to making any distribution choices.
Years from now you will have choices as you decide how to turn your accumulated account into a stream of payments (or outright surrender). If you choose to surrender the account, know and understand what types of surrender fees might apply. Don't forget, you'll probably face a sizable taxable event if you surrender the account for cash on the gain above basis in your account. Legitimate rollover of the funds can avoid the tax and penalties under most circumstances. Depending on the type of annuity, all the money may be subject to taxation and if you surrender prior to 59 1/2 years of age, there is a 10% surtax collected by the government above and beyond all other tax calculations. Now, if you "annuitize" the account with the carrier handling your account, you are choosing to leave it with your annuity provider for the promise of a periodic stream of payments into the future. In most instances, once the account is annuitized, it can no longer be surrendered for cash. At this point you have selected a stream of payments for some period of time and based upon certain events in your life or your spouse, and based upon an assumed interest rate. These funds, as they are paid out, will also earn additional interest gains that are considered into the payout formula before determining the value of each monthly installment distributed to you from your account. This interest rate is usually fixed but modern variations do exist to have the interest rate move with market changes.
Generally, the payout period is your lifetime, often with a minimum period of ten years. It can be longer if chosen. This would lower the monthly periodic installments because of the longer guarantee. You may also choose to have the annuity pay beyond your life and for the life of a spouse and this will further reduce the monthly payout because it is based upon a longer life expectancy of two lives. The topic of distribution is too involved to provide much meaningful help but this should help you spur a reasonable conversation about annuities and help you compare one to another.