| As the celebrated baby boom generation rushes | | | | Some insurers also offer a bailout provision |
| headlong into middle age, more and more | | | | that allows policyowners to terminate their |
| attention is being paid to accumulation | | | | contracts, without incurring costly surrender |
| vehicles that can provide financial security | | | | charges, if the interest rate falls below a |
| during retirement years. Annuities are one | | | | stated rate. The best contracts offer a |
| such increasingly popular vehicle. | | | | bailout provision when the surrender value |
| | | | falls below the premium you have paid into |
| An annuity is, in its most simplistic form, | | | | the contract. |
| an insurance policy that pays you back while | | | | |
| you're alive. As the American population | | | | Rule of thumb #2: |
| continues to age and realizes that social | | | | |
| security and pensions may not be enough, | | | | Look for those hidden extras. Surrender |
| annuities are gaining increased recognition | | | | charges are just one example. For instance, |
| as a funding vehicle for retirement. | | | | an annuity with the highest rate may also be |
| | | | non-surrenderable for five or more years. |
| Unfortunately, as annuities gain in | | | | That means your money, with very few |
| popularity, so too does their complexity. | | | | exceptions, is locked in. |
| Much like adjustable rate mortgages -- where | | | | |
| what you first see, the initial interest rate | | | | Now if you're absolutely sure that you'll |
| -- isn't always what you get -- it pays to | | | | never need access to your money, that your |
| look at the fine print before plunking your | | | | financial and personal circumstances don't |
| hard-earned money down on an annuity. | | | | have a thread of a chance of changing during |
| | | | the next 1,826 days, then you'll take the |
| Paying for an annuity contract is simple | | | | higher rate in return for a non-surrenderable |
| enough: either through a single premium up | | | | clause. But if you're like most of us, look |
| front or through smaller periodic premiums | | | | our for surrender charges which can leave you |
| during the life of the contract. Earnings | | | | with little more than you put into the |
| are tax-deferred and payments are made in a | | | | contract. |
| lump sum or through installment schedules | | | | |
| that range from monthly to yearly. Sifting | | | | Rule of thumb #3: |
| through the fine print, though, is not quite | | | | |
| as simple. | | | | Your annuity contract is only as good as the |
| | | | insurance company behind it. Is the issuing |
| Rule of thumb #1: | | | | company strong and secure? The A.M. Best |
| | | | Company grades insurance companies on |
| If the initial interest rate looks too good | | | | reliability and strength. Best's Reports can |
| to be true, it probably is. Fixed annuities | | | | be found in most libraries. Look for a |
| often offer extremely attractive initial | | | | company which has a financial strength rating |
| interest rates, then are adjusted to | | | | of at least B+ or higher. It is also a good |
| prevailing interest rates. | | | | idea to find out how the company has treated |
| | | | its policyholders in the past. While not a |
| But did you know that insurance companies can | | | | guarantee, a company's past performance can |
| readjust your fixed rate, too? It only | | | | be a good indicator for how it may perform in |
| stands to reason that an insurer can't pay | | | | the future. |
| you eight percent while it's earning less | | | | |
| than that on its investments. Look for an | | | | Annuities no longer have to be a mystery. By |
| annuity's guaranteed interest rate. | | | | asking the right questions, you can find one |
| | | | that is right for you. |