A lot of investors who have been sold annuities believe that it doesn’t matter what happens in the market because they’ve been guaranteed a specific rate of return. When it comes to the guarantees of most deferred annuities there are a couple of things you should keep in mind. There are usually two circumstances under which the guarantee actually becomes a guarantee. Tom explains these scenarios in this week’s video.
Often you’ll find that an annuity becomes guaranteed when the owner annuitizes the contract. Another way of explaining annuitizing is that he or she surrenders the deferred annuity and its value to the insurance company. In return they receive their guaranteed percentage or whatever the contract describes. Another way that annuities become a guarantee are when the owner dies. Their beneficiaries will receive the guarantee under this circumstance.
It’s important to completely understand how the many features of these complicated investments work. It’s a shame that many people are sold these products before they entirely understand what they’re getting into. Ask every question that comes to mind when you’re considering an annuity, or any type of investment.
Make sure to watch this week’s video to hear Tom explain more about annuity guarantees.
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