Pennsylvania Insurance Commissioner Teresa D. Miller wants consumers to educate themselves about annuities before making a purchase. (Photo: Pennsylvania Insurance Department

Pennsylvania Insurance Commissioner Teresa Miller is urging consumers, particularly seniors, to educate themselves about annuities to protect their retirement income. Miller launched the campaign Sept. 8 at Foxdale Village Retirement Community in State College, Pennsylvania.

The education campaign includes a consumer guide that provides information about annuities, including the fact that money is locked up for a specified period of time and surrender charges may apply. Miller also encouraged consumers to take advantage of the mandated free look period, which allows them to review and understand the terms of their annuity contract and cancel the contract for a refund if they change their mind. Consumers should make sure they are aware of the free look period deadline when they make an annuity purchase, Miller wrote in a press release.

“Make sure you ask about the surrender charges, and before buying an annuity, decide whether you can afford to keep the money in the annuity for the entire surrender charge period,” Miller wrote. ”Annuities can help provide income over a long period of time, and can be part of a retirement income plan. But, consumers, especially seniors who will be depending on this income stream, should consult trusted family members or financial advisers, and get answers to all their questions, before making any purchases.”

The guide includes do’s and don’ts for consumers to understand before purchasing an annuity. The do’s include:

    • Read the materials. If you don’t understand something, find someone you trust and ask.
    • Understand that money put in an annuity is typically “locked up” for a period of time specified in the annuity, often five to ten years. If you withdraw some or all of your money during the specified time period, you will have to pay a penalty called a surrender charge. Annuities are not for short term goals.
    • Ask about these surrender charges. Do you intend to keep the annuity for the entire surrender charge period? Usually, the closer you are to the end of the time the money must be “locked up,” the smaller the surrender charge.
    • Pay attention to optional features offered with annuities, and get information about additional fees associated with adding benefits.
    • Use the free look period all annuities have. Read and understand the terms of the contract. If you decide the terms are not favorable, you can cancel the contract and receive all of your money back. This only applies during the free look period, so make sure you know when this period ends.

The don’ts include: 

    • Be pressured into thinking you need to buy an annuity today or right now. Don’t feel obligated to buy because someone gave you a free lunch, dinner or gift.
    • Make your check out to the agent or producer, only to the company issuing the annuity.
    • Accept verbal assurances; always verify policy terms in writing.
    • Work with an agent unable or unwilling to provide credentials.

The guide instructs consumers about how to verify a producer’s license.

Education campaigns such as these may be a response to recent fraud involving annuities. Recently in Oklahoma, a former annuities agent received a prison sentence for convincing several clients to turn in their old annuity contracts and buy new contracts without notifying them of surrender charges.

See also:

Indexed annuities sales fall short of record: Wink

More Americans are dying in poverty

Americans want solutions that can increase income in retirement

 

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