transcript

You have an annuity but you don’t understand it. This video will help.

I don't sell annuities. I don't recommend them for the vast majority of my clients, although there can be cases where they make sense. But I have seen a lot of annuities over the years, and most of the time people don't know what they have or how to begin evaluating them, and I don't blame them. They can be really complex.

I come across a lot of people who just want out of the annuity. Many times it's because the person who previously sold them the annuity is now trying to push other products. But it could also just be that they've read about the high fees or they're just questioning if this was the most suitable product for them. Once you have an annuity, though, you need to slow down, be clear on what you have, and be really smart about that next move. This video is going to help you do that. Just see what you have, what options you have available within the product you already hold, and get the information that you need in case you do want to make a change.

#1 Obtain a copy of your most recent statement.

Determine the surrender charge.

First thing you need to do is grab your statement. So this comes out annually. It should be really easy to obtain. It's typically just 1-2 pages, and you want to look first at the account value, see that number, and compare it to the surrender value. I've also seen it listed as withdrawal value. If those numbers are different, that means there will be a surrender charge if you were to go ahead and liquidate that annuity. The surrender charge goes down over time and eventually gets to zero. We'll talk later about where you can get that information, but just knowing - do I have a surrender charge - is really helpful.

Determine the name and type of annuity.

Next, you want to look at the name of the annuity and the type of the annuity. Sometimes the type is not clearly listed on the statement, but even if you have the name, which will be there, you can google it and just see what that type of annuity is. The most common that I tend to see that people aren't happy with are the variable annuity and the equity-indexed annuity.

So just to give you some background there, on the statement, if it's a variable annuity, you will see some subholdings, some mutual funds listed there. If it is an equity-indexed annuity, you will see a reference to an index like the S&P 500 Index. You'll see words like point-to-point or participation rate. You know then, you've got an equity-indexed annuity.

Specify if it is a qualified or non-qualified annuity.

While you're on the statement go ahead and determine how this annuity is being held. Is it a qualified or non-qualified annuity? This tells you how it will be taxed and different details. So you need that before you go ahead and decide if you want to make any changes.

#2 Obtain a copy of your signed contract.

You have to get this to get a lot more detail and background on what you saw on the statement. So if you can't find it, contact the annuity company or the person who sold you the annuity because it is essential. It's many, many more pages than the statement.

Look for the surrender table or withdrawal table.

So if you did have a surrender charge on the statement, you want to look at that table to see when that surrender charge will go away.

Find the fees.

Then you want to look at the fee and expense table. That will go through the contract fee, M&E fee, different fees associated with the underlying investments. You can go ahead and add everything up that relates to you that you saw in the statement so that you can have a better picture of what this contract is costing you.

Look up any riders you are paying for.

This is where you will also find more detail on riders if those were selected or interest crediting options. Again, the statement is going to in many cases, just list something vague in terms of a rider, but the contract, you are be able to look up that specific rider and see exactly what it is and how it can help.

You also will see other available options. You can see payout tables, everything you need to be able to evaluate this annuity.

You now should have a good baseline about what you have and how to determine other options that are available to you.

#Start listing and evaluating your options.

You can look at do I want to liquidate this, annuitize it, take some amount annually, roll it over to another annuity that perhaps doesn't have surrender charges or has lower fees? Do you want to roll it over to a different investment product altogether? What are the tax consequences of each of these options? These are the things you can begin evaluating now with your partners, your advisors to determine what is the best option for you. And of course, keeping in mind, does this product help me meet my goal with this money?

My name is Linda Rogers, Owner of Planning Within Reach.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.