Annuity Rescue: How to Save Yourself a Bundle
By: Steve Hood | Posted: 21st May 2007
Is Your Annuity Really Working For You?
Annuity expenses have a significant impact on your potential returns!
Tax-deferred investing
• An income stream in retirement.
• Insuring your principal in case of death.
• Unlimited contributions.
For all these reasons and more, annuities offer a world of promise for investors in search of growth and/or income investing opportunities.
Unfortunately, annuity purchasers don't always spend enough time understanding the real costs of the annuities they purchase.
Do you know whether your annuity is low cost or high cost? Or the effect these costs may have over time?
First, it's important to understand that every annuity carries an administration charge known as M&E (mortality and expense). There are also costs associated with the mutual fund investments found within the annuity. In addition, most insurance companies charge a surrender penalty of 5% to 10% if an investor wants out of the contract before a designated period of time is up.
The bottom line: annuity expenses can have a substantial impact on your potential returns. In fact, your investing success and the resulting stream of income at retirement are greatly affected by the administration fees of your annuity - similar to the mortgage rate of your home loan.
To see what difference lower fees can make on the potential growth of your annuity policy, visit one of our favorite tools: the Ameritas Annuity Cost Comparison Calculator http://ameritasdirect.com/services/lowfees.htm
To compare costs accurately, enter your current annuity expenses, an investment amount and time horizon, and other expense assumptions you'd like to consider.
Keep in mind that all variable products have some investment risk, including possible loss of principal. Also, investment returns will fluctuate over time due to market activity and an underlying portfolio's objectives - so that investor shares, when redeemed, may be worth more or less than their original cost. Also, if you're considering switching annuities, be aware that there may be penalties and surrender charges which can be substantial.
It's your money. Ensure that your annuity is working for you and your retirement nest egg, not for the insurance or fund company.
About the Author
Occupation: Investment Advisor
Steve Hood is a financial advisor with more than a quarter century of experience, concentrating in pre and post retirement planning and investment management. He specializes in helping his clients find quality investment and insurance programs, and builds and manages "All Weather" investment portfolios.
For further information contact Steve at LifePlan Financial Advisors, Inc.
541 549-1154 or http://www.allweatherinvestors.com
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Tags: favorite tools, significant impact, time horizon, investment risk, mortgage rate, insurance companies, income stream, investment returns, original cost, cost comparison, case of death, administration fees