How to evaluate any annuity before buying.
Every annuity is a contract with tradeoffs. This checklist covers the questions to ask, the fees to find, and the documents to read before signing.
Surrender charges and liquidity
Find the surrender schedule, free-withdrawal amount, and any market value adjustment. Match the term to your known spending needs.
Insurer financial strength
Guarantees are only as strong as the company behind them. Review independent ratings from A.M. Best, S&P, Moody's, or Fitch.
Tax treatment
Growth is tax-deferred until withdrawal. Non-qualified withdrawals are taxed on earnings first. Qualified withdrawals are fully ordinary income. Pre-59½ withdrawals may incur a 10% federal penalty.
Fees and riders
Look for mortality and expense charges, administrative fees, subaccount fees, income-rider charges, and enhanced death-benefit costs. Ask what each fee buys.
Crediting method
For indexed products, confirm the index, cap, participation rate, spread, and floor. Compare the same term across carriers.
Death benefit and payout options
Understand what beneficiaries receive and how each payout option changes the monthly amount. Life-only is not the same as joint life or period certain.
If you do only one thing
Read the contract and the illustration in full before purchasing. If the advisor cannot explain every fee, rider, and surrender charge in plain English, pause until they can.