5 Questions to Ask Before Buying Any Annuity

Buying an annuity is a significant financial commitment. The contract can last a decade or more, involve a substantial sum, and have real implications for your retirement income and estate. Before signing anything, five questions should have clear, complete answers — from any advisor, not just Marc.

Question 1: What Is the Carrier's AM Best Rating?

Your annuity is only as safe as the company behind it. Ask for the insurance carrier's AM Best rating before anything else. Anything below A- warrants serious hesitation. If the advisor cannot immediately provide this — or seems reluctant to discuss carrier financial strength — treat that as meaningful information about how they operate.

Question 2: What Are All the Fees?

MYGAs typically have very few fees. FIAs can have more layers: optional rider fees, administrative charges, and sometimes spread charges embedded in the crediting method. Ask for a complete list of every fee, expressed as an annual percentage of your account value, in writing. If the answer is vague or incomplete, ask again.

Question 3: What Is the Full Surrender Charge Schedule?

Surrender charges penalize early withdrawals beyond your annual free withdrawal allowance. Ask for the complete schedule — year by year — not just the starting rate. Understand your free withdrawal percentage (commonly 10% per year). Make sure the term aligns with your realistic timeline for needing access to the funds.

Question 4: What Happens When the Term Ends?

Many buyers focus entirely on the initial rate and forget to ask about renewal. For MYGAs, the renewal rate is set by the carrier and is often significantly lower than the initial rate. Understand your options at maturity: Can you withdraw penalty-free? Is there a window period — and how long is it? What is this carrier's historical pattern on renewals?

Question 5: How Is the Advisor Compensated?

Annuity advisors are typically compensated by the carrier through a commission built into the product — not charged directly to you. However, commission rates vary between products, and a higher-commission product is not always the best fit. Asking how the advisor is compensated on a specific product is fair, reasonable, and entirely appropriate. A transparent advisor will answer clearly and without defensiveness.