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Read this before purchasing an annuity.

Purchasing an annuity is a major financial commitment much like buying a house. You might have your annuity longer than your house! As long as you understand the fine print and the annuity is a great fit it can be one of the smartest financial decisions you could possibly make! I am pro annuities for the right situation! Just be sure to understand what you are purchasing.

When you purchase an annuity be sure to:

1. Understand the surrender charges. Surrender charges can extend for as long as 15 years in some cases and can be very expensive. Purchase an annuity that matches your schedule so that money will be free when you need it.

2. Know your time horizon for investing. When do you need money out of the annuity? How much will you need? Annuities that you purchase are meant for long term investing.

3. Know the rating of the insurance company before purchasing an annuity. If a higher rated company is offering a comparable product then choose the company with the highest rating.

4. Know why you are purchasing an annuity. Is it for safety, income, or growth? Is it for security, tax deferral, or a guaranteed income stream? Is it for other guarantees? Does it really fit into your investment plan? Are you using the annuity in place of other fixed income investments or as a growth investment? Why the annuity versus other investments?

5. Thoroughly understand the differences between a fixed and variable annuity. A fixed annuity cannot decrease in value but a variable annuity can decrease with the stock market. They both have certain guarantees so be sure to understand what you are purchasing. Can it go down in value? Why do you need to purchase an annuity that has the ability to lose money in uncertain economic conditions?

6. Understand how this annuity is going to affect your taxes when you take money out. Annuities are taxed differently than other investments and be harsher or even better in some cases. Is your annuity held in an IRA? Also, if you are passing this annuity down to heirs then why are you purchasing an annuity instead of life insurance that would likely pass tax free? If you are passing the money to heirs and that is the only purpose then single premium life insurance may be a whole lot better if it is possible obtain.

If you are looking at purchasing a variable annuity:

1. Why are you purchasing a variable annuity that can lose money? If it is for the past performance you should know that the sub accounts/investment options rarely ever perform the same two years in a row. Chasing returns is a losing strategy. You need to know your reasons for purchasing an annuity. Be sure it is right option for you.

2. Before you purchase an annuity be sure that you can afford to have your investments down when you need the money. That could be very bad for income generating purposes. If you think that may be a problem then do not purchase variable annuities.

If you are looking at purchasing a fixed annuity:

1. Check the surrender charges once again. Usually they are higher and longer on fixed annuities than any other kind of annuity. Think long term commitment. Study the schedule to be sure that when you need money it will be available with no charges.

2. Fixed annuities have amazing guarantee options. If you want one of these guarantees be sure to understand it entirely. What happens when you take money out? Look for the penalties not the process of taking money out. You can also compare options with other companies. There are so many now, some other insurance company could have a better option to fit your situation.

The last absolutely vital task is to check is the dollar amount of your states insurance guarantee. Run a Google search for (your state) insurance guarantee. Do not go over that amount with a single insurance company ever.

Be certain to get all of these questions answered when you purchase an annuity. Most importantly, do not be pressured or pushed into making any decisions. There is no reason at all to rush through the decision making process with such a long term investment and such a big decision like purchasing an annuity.

For step by step help on how to purchase an annuity visitKeith’s Annuity Help Now website or request his 7 Free Annuity Tutorials that teach exactly how to set up your retirement accounts to never go down again while filling up your bank accounts with the cash you need for a safe and secure retirement.

Tags: Life Insurance, annuity, Personal Finance

Tags: annuity, estate planning, finance, help, how to, Insurance, investment, investments, Life Insurance, money, Personal Finance, retirement planning, Taxes