Avoid Regret When Buying an Annuity

How to Avoid Regret When Buying an Annuity — A Conversation With Your Advisor

“I want to make sure you understand your options so that you’ll never regret your decision.”

I say that often to my clients, because unfortunately, too many people come to me after buying an annuity they don’t fully understand. One client—let’s call her Betty—purchased an annuity with the wrong type of income rider. It wasn’t her fault—she simply didn’t know there were different types of annuities and income riders, and the one she bought didn’t fit her needs.

So today, I want to walk you through five simple steps you can take to avoid that kind of regret. If you follow this process, you’ll feel confident, clear, and in control of your annuity purchase, just as you should.

Step 1: Learn the Key Terms

Before you buy any annuity, it helps to understand the basic language you’ll see in these contracts. You don’t have to “master” annuities, but it’s good to know the difference between terms like:

• Riders (income riders, death benefit riders, inflation riders)
• Fees vs. spreads
• Caps vs. participation rates
• Cash value vs. benefit formula value
• Contractual guarantees vs. hypothetical guarantees

Knowing these terms will make the next steps much easier.

Step 2: Understand the Purpose of Each Annuity Type

There are five major types of annuities: Single Premium Immediate Annuity (SPIA), Deferred Income Annuity (DIA), Multi-year Guaranteed Annuity (MYGA), Fixed Index Annuity (FIA), Variable Annuity (VA), and Hybrid Pension Annuity. Each one serves a different purpose.

Just like buying a car—you wouldn’t buy a sports car to haul lumber—you want to match the annuity type to your specific financial goals. Unfortunately, many clients buy an annuity that sounds good without truly understanding if it fits their needs. That’s where regret happens.

Step 3: Choose the Right Specialist

This step is crucial. Not all financial advisors specialize in annuities. Some are limited to what their firm allows them to sell. Others don’t work with enough carriers to give you real options.

When choosing an advisor, ask questions—just as you would when hiring a contractor or a doctor. Look for experience, expertise, transparency, and access to a wide range of annuity products. You want someone who puts your goals first, not someone pushing a product.

Step 4: Compare Purpose, Not Just Numbers

Before asking for rates or quotes, first compare which type of annuity best matches your needs. Don’t get caught up in the numbers too soon. Once you know which type of annuity suits your situation, then it makes sense to compare specific products and illustrations.

Step 5: Request an Illustration—At the Right Time

Only after you’ve done steps 1 through 4 should you ask for a detailed illustration (quote). At this point, you’ll understand what you’re looking at, what the numbers mean, and how the product fits your retirement plan.

Final Thought: Two Big Questions to Ask Yourself

Even after going through this process, most clients still ask me these two questions before deciding:

1. Do I really need an annuity?
2. Is now the right time to buy one?

Both are great questions—and that’s what I’m here to help you figure out.

If you’d like, we can walk through this five-step process together, and I’ll answer any questions you have. My goal is simple: I want you to make this decision with clarity and confidence, knowing exactly why you’re choosing the product you’re choosing—and with zero regrets down the road.