subject: Getting A Better Deal On Retirement Annuities [print this page] Financial experts now recommend annuities as viable investments with which you can fund your retirement. Although these tools have improved immensely in recent years, there are still some pitfalls you can encounter which may prevent you from getting the most out of your investment. For one thing, you might purchase an annuity that costs you more than you expected.
When it comes to buying annuities, you'll see that many of these come with "extras" that can significantly increase what you'll shell out for them. Fees, riders, pricing, and other features do vary between products and providers, but avoiding these extras will help you get the best rates.
The annuity's prospectus will show the fees associated with a variable annuity. These charges usually include M&E, or Mortality and Insurance Expense, plus fees for the investment. Fixed annuities usually don't quote direct fees - the costs associated with the investment are reflected in the payment or yield of the product. A good guideline to follow when examining a potential annuity for value would be that yield matches the issuing company's quality. Closely study your contract and make sure that M&E fees are reasonable, since all contracts for variable annuities charge these to cover benefits such as the basic costs of insurance and lifetime benefits offered in the contract. You also need to have a firm understanding of the company's basis for fee calculation.
Surrender charges are common fees assessed for annuities that have been withdrawn from excessively in the initial years of the product. There are insurance providers who require the annuity owner to pay high surrender fees for a long time, which they may use to cover big sales commissions. Avoid paying more than you bargained for when you withdraw from your annuity early own by knowing the details of your annuity's surrender fees.
by: Carina Smith
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