Consumer Tips for Buying Annuities

Before you buy an annuity consider these consumer tips:

1. Comparison shop
Have you considered all of your options? Because you will be holding on to your annuities for the long-term, you'll want to make sure the company you pick will be around at least as long as you will. Also, different annuities offer a wide range of choices, prices, features and flexibility.

2. Look at the fixed annuity's interest rates at renewal time
If the insurance company is offering bonus rates for only a set period of time, make sure the underlying interest rate and the company selling the annuity are financially viable. Once the bonus rate term expires, there is no guarantee that renewal rates will be competitive.

3. Understand the annuity's surrender fees
If the surrender fee is high (typical fees are around 6-7% and decline over a period of approximately five-to-seven years), you could feel locked into a contract from which it will be costly to escape.

4. For variable annuities, look at the track record of the funding options
Look for strong returns over a 3-5 year period or more. Research the rankings of various funding options on a regular basis. The history of various funding options also can be found in Morningstar and Lipper Analytical Services publications. Past performance is not a guarantee of future results.

5. For variable annuities, look for a range of funds to diversify your retirement savings as your needs change.

6. Check the insurance company's rating
The annuity contract is issued by an insurance company. Consider the insurance company's ratings in your decision to buying an annuity. Insurance rating companies include: A.M. Best, Standard & Poor's and Moody's. Morningstar and VARDs evaluate and report information on variable contracts. Variable annuities are rated by independent sources such as Lipper Analytical Services, VARDs and Morningstar. It's a good idea to choose an annuity from a company that gets high marks from at least two independent rating sources.