11 questions to ask your insurance company.
Before you keep, exchange or surrender an annuity, get these answers in writing. They're the same questions we send insurers in every review.
What is my current benefit base, how is it calculated, and how much guaranteed income would it pay if I started this year?
Guaranteed income is calculated from the benefit base, not your account value. You need a dollar figure, not a percentage.
Red flag: You can't get a straight dollar answer about your guaranteed income.
What did I pay in total charges last year, in dollars, broken out by insurance, administrative, rider and investment option fees?
Fees are quoted in percentages and spread across several line items. Adding them up in dollars shows the real cost.
Red flag: Your rider fee is charged on a benefit base much larger than your account value.
What is my surrender charge today, when does it end, and how much can I withdraw each year without a charge?
The date your charges end is the date your options open. The free-withdrawal amount tells you what you can reach now.
Red flag: A market value adjustment applies that no one mentioned.
Can my income increase after it starts, and under what conditions?
A fixed income loses purchasing power over a long retirement.
Red flag: Your income is level for life with no way to increase it, and you're planning on decades of withdrawals.
What are the issuing company's current financial strength ratings?
Every guarantee depends on the insurer's ability to pay claims.
Red flag: Recent downgrades, or ratings you can't find.
For a variable annuity: what are my investment options' expense ratios and allocation limits? For an indexed annuity: what are my current caps, participation rates and spreads, and when can they change?
These terms decide how your money actually grows, and insurers can change crediting terms over time.
Red flag: Caps or participation rates have dropped since your first contract year.
Is my contract qualified or non-qualified, and what is my cost basis?
Taxes affect what you keep from every withdrawal and every exchange decision.
Red flag: No one has told you how much of a withdrawal would be taxable.
What is my current death benefit, and how would a withdrawal change it?
On some contracts a withdrawal reduces the death benefit by more than the amount you take out.
Red flag: The death benefit shrinks faster than your withdrawals.
When are my rider step-up or re-election windows, and what changes if I reset?
A reset can lock in gains, but it can also raise your rider fee.
Red flag: A reset increases your fee without a matching benefit.
If the market fell 20%, what would happen to my account value, my income guarantee and my death benefit?
Knowing which values are guaranteed, and which aren't, tells you what risk you're actually carrying.
Red flag: You aren't sure which of your values are guaranteed.
If I were buying today, would I choose this contract for my current goals?
Contracts are chosen for the life you had when you bought them. Ask whether it still fits the life you have now.
Red flag: The original reason you bought it no longer applies.
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