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How to Shop for an Annuity Contract

Part of the Annuities For Dummies Cheat Sheet

If you've made the decision to look for an annuity contract, keep this list on hand and cover every option it gives, so you can be confident you're staying on top of the annuities game.

  • Find an annuity-savvy adviser. Income annuities aren't yet widely used, so not many advisers or brokers understand them. Try to locate a professional who does.

  • Look for a strong insurer. Always buy your annuity from a financially strong insurance company with "Superior," "Excellent" or "Strong" ratings from the major rating agencies.

  • Read the prospectus before you buy an annuity. Annuity contracts offer guarantees, and guarantees are always accompanied by complex exclusions and restrictions that may appear only in fine print.

  • Buy direct and saving money. If you're the self-reliant type, you can save big by purchasing your annuity direct from an insurance carrier or from a no-load mutual fund company like Vanguard or Fidelity.

  • Buy only what you understand. Some annuities are more complex than others. Don't buy one (or any other financial product) that confuses you. What you don't know may come back to haunt you.

  • Be wary of excessive fees. Variable annuities offer attractive options, but the options aren't free. Try to get the benefits you need at a reasonable price.

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