A Guide for Making Safe and Informed Choices on Annuities

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About Michael Masor

Michael specializes in protecting his clients’ finances and guiding them to reach their goals. As the owner of Clearwater Financial Group, proudly independent, he contracts with multiple companies to provide the best products to his clients.

Annuities may serve as a powerful financial tool for those looking to secure a stable, long-term income—often in the context of retirement. While they offer the prospect of guaranteed income and tax-deferred growth, their complex nature makes them vulnerable to misunderstandings. Unfortunately, this complexity provides fertile ground for unscrupulous brokers and agents to exploit the uninformed consumer. Older Americans are particularly at risk, given their immediate need for retirement income solutions.

Understanding the basics of an annuity is the cornerstone of making an informed decision. These financial instruments come in different flavors—fixed, variable, immediate, and deferred—each with unique rules, fees, and risk factors. The benefits and drawbacks of each type may be intricate. Therefore, it’s crucial to familiarize yourself with the terms and conditions. This preparation will enable you to have a meaningful discussion with a financial advisor and make it easier to identify if something is wrong.

Working with a reputable and trustworthy financial advisor is vital when considering such a significant financial decision. Research is your ally in this stage. Look into the advisor’s certifications, scrutinize their track record, and read unbiased reviews online. Consider also seeking referrals from people you trust—friends, family, or colleagues who have had positive experiences with financial advisors. An advisor’s willingness to discuss their fee structure openly and their ability to prioritize your needs over selling a particular product is a good sign that they have your best interest at heart.

Equipped with a foundational understanding and a trusted advisor, you should ask the right questions. Inquire about any potential fees associated with the annuity, whether there are penalties for early withdrawal, and how the annuity aligns with your overall financial goals. Your financial future is at stake, so don’t hesitate to ask for clarification on anything that sounds ambiguous. If the advisor avoids your questions or provides unsatisfactory answers, that is a major red flag.

One hallmark of a trustworthy financial relationship is transparency. Your advisor should provide detailed disclosure documents outlining all terms, conditions, fees, and potential risks associated with the annuity. Never rush through these documents. Take your time, read them meticulously, and don’t hesitate to seek a second opinion from an independent financial consultant or a knowledgeable family member.

Beware of any high-pressure sales tactics, which may indicate that the advisor is more interested in earning a commission than safeguarding your financial well-being. If you ever feel rushed to make a decision, or if returns sound too good to be true, it’s prudent to step back and reevaluate.

After investing an annuity, it’s not a ‘set it and forget it’ scenario. It’s vital to keep monitoring your investment. Financial markets fluctuate, life circumstances change, and your needs evolve. Periodic reviews may help you decide whether your current annuity aligns with your long-term objectives or if adjustments are necessary.

In the unlikely situation of becoming ensnared in a fraudulent scheme, you do have legal options. Contact your state insurance department, the Financial Industry Regulatory Authority (FINRA), or the Securities and Exchange Commission (SEC). Reporting may help you recover your losses and safeguard others from being defrauded.

While annuities may offer a solid foundation for financial security, particularly in retirement, like any investment you need to understand your product, how it works, and how you garner your returns. Trying to educate yourself, carefully selecting a reputable financial advisor, maintaining vigilant oversight of your investment, and knowing your legal rights may make all the difference in ensuring that you’re making a sound choice rather than falling victim to a less-than-acceptable product.

  • Educate yourself on the basics of annuities and work only with reputable, certified financial advisors. Do your research.
  • Ask probing questions about fees, withdrawal penalties, and how the annuity fits into your overall financial plan while being wary of high-pressure sales tactics.
  • Continuously monitor your annuity investment and know your legal recourse options if you suspect you’ve been subjected to fraud.

Many people have learned about the power of using the Safe Money approach to reduce volatility. Our Safe Money Guide is in its 20th edition and is available for free.  

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Safe Money Guide – Annuity.com

About Michael Masor

Michael specializes in protecting his clients’ finances and guiding them to reach their goals. As the owner of Clearwater Financial Group, proudly independent, he contracts with multiple companies to provide the best products to his clients.

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Annuities are a safe and reliable investment. They can transform your savings into a more predictable income. Speak with one of our qualified financial professionals today to find out how an annuity can offer you guaranteed monthly income for life.

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Content in our posted articles is deemed to be accurate but topics, facts and laws can change. It is always a good idea to verify facts before making decisions. Always seek authorized and professional advice regarding financial decisions which includes investing, annuity purchases, tax planning, changes in a financial portfolio and retirement planning.

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