What to understand before considering an annuity

Start with the purpose of the money

What do you want this money to do, and when might you need it? Those questions should come before a product comparison. Make a note of the goals and questions you want to discuss.

Ask about access to funds

Request an explanation of when withdrawals are available, whether surrender charges apply, and how the contract treats early access. Review the specific contract rather than assuming all annuities work the same way.

Understand costs and conditions

Ask which fees, expenses, rider charges, and other adjustments may apply. Ask which values or benefits are guaranteed, who stands behind a guarantee, and which conditions you must meet to receive it.

Review the full picture

Annuity products differ. A conversation should cover the contract’s features, limitations, and tradeoffs, together with the other resources you expect to use. Discuss tax treatment with a qualified tax professional before deciding.

Questions to answer before signing

• When would income begin, how long would it last, and what happens at death?
• How much money could I withdraw without a surrender charge, and for how many years would charges apply?
• What fees or rider charges apply? Could a market value adjustment affect withdrawals?
• Which amounts are guaranteed by the insurer, and which depend on future rates, an index, or market performance?
• Could the contract lose value, and how would inflation affect the buying power of its payments?
• How would this fit with money I need for emergencies? Ask a qualified tax professional about withdrawals and any tax penalties.

Further reading

• Texas Department of Insurance: Annuities guide
• NAIC: Life insurance and annuities resources

This guide is general information. Plan and contract details vary; review the documents that apply to your situation.