Top 3 Warning Signs When Buying an Annuity
Multiple studies show that Americans’ number one retirement fear is running out of money. In fact, some studies show that almost 60% fear running out of money more than death.
Yet many Americans are unwilling to consider annuities, which could provide lifetime income and alleviate the fear of outliving retirement savings. Annuities are useful financial tools that have been around for decades, but annuities can be confusing and the annuity industry is full of abuses targeting retirees.
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3 Red Flags to Avoid When Buying an Annuity
When it comes to annuities, many Americans understandably have negative views. Generally, there are three practices that frequently raise concerns for consumers:
1. Unfair Sales Practices
There are many examples of state and federal regulators that have taken action against insurance companies, broker-dealers and insurance agents for what the regulators view as unfair sales practices. Some common complaints involve allegations that consumers are being pushed into products that are either not right for them or that they do not need.
2. Failing to Put the Customer First
Insurance agents are paid commissions by the insurance company and earn more money if they can sell more products, sometimes with additional costly contract features. This means that the agent may not always be putting the customer’s interest first.
3. Complicated or Unfair Terms
Some view elements of the annuity contract itself as inherently unfair. One common concern is what happens if you die early. In many cases, the annuity contract may allow the insurance company to pocket the amount you paid to buy the annuity without paying out anything to your beneficiaries. If you do want to pass on the value of your annuity, the insurance company may let you, but could charge you extra.
Concerned About Existing Annuities? New Ones Are Being Built.
Companies like Kindur, have built a new annuity product with a structure that attempts to avoid the historical problematic practices that plague the industry. With the partnership of a leading insurance company, a new kind of fixed annuity was specifically created for those approaching retirement.
Modernization of the Annuity
1. Eliminating Agents & Upfront Commissions
Annuities can now be purchased online. This means you can purchase from the comfort of your home when you are ready. No insurance agent, no uncomfortable conversations, and no pushy sales pitches.
In many cases, it is not clear how much an agent will receive for selling you an annuity or if they are better compensated for selling you additional features. Elimination of the upfront commission allows transparent pricing that is prominently disclosed to the customer.
2. Fiduciary You Can Trust
Purchasing an annuity from a company registered as a fiduciary ensures that the company will act only in your best interests.
4. Standard Features for Retirees
Creating a simple annuity product that’s easy to understand, can help meet the needs of modern retirees. By making features such as guaranteed lifetime income and the ability to pass on the contract value to your beneficiaries standard, these annuities cut down complexity.
While annuities are not right for every person or every situation, when used as part of a holistic retirement plan and a balanced portfolio, they can be a helpful tool for getting through retirement without running out of money.
Take the first step to securing your retirement. Check out this annuity calculator to see how much guaranteed income you can generate from a fixed annuity.
This information is intended to be educational and is not tailored to meet specific investment or insurance needs. Before purchasing an annuity, carefully review its investment objectives, terms, risks, charges, and expenses.
Kindur does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Kindur cannot guarantee that the information herein is accurate, complete, or timely. Kindur makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. You should consult an attorney or tax professional regarding your specific situation.
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