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