How To Buy An Annuity With These 5 Transaction Steps


Many investors wonder about the exact process of buying an annuity. This article goes in details as of the process you have to go through prior to sign your annuity contract. You may also read more about who can sell annuities or how an annuity contract looks like.


step 1

The very first step to buy an annuity is to buy with an agent or broker who will discuss your financial need. In an ideal world, the agent or broker will gather your personal information and build with you a retirement plan. The point is to help you through graphics and different scenario to choose the best product for you.


You can expect at least two meetings with your broker. The first meeting will happen to collect the information about your personal situation. An annuity is not something you buy in a heartbeat and should be part of a sound process. The second meeting will happen when the agent has run different scenarios and will offer you the proper annuity combination for your retirement needs.

step 2

Once you are comfortable with the concept of the annuity and you have selected the right product for your needs, you will complete an annuity application with your broker. At this stage, you sign to receive an annuity contract. It doesn’t mean that you need to buy it.


The annuity application is sent by the agent to the contract issuer for approval. This is often a Life Insurance Company who will analyze your information and offer you a contract.

 step 3

Once you have completed and sign your annuity application, the broker sends it for approval. The Life Insurance Company may take a few days or a few weeks to analyze your application. Since the amount of the annuity will be based considering your life expectancy, further examination may apply. This is where it could take a few weeks for the contract issuer to generate the annuity contract.

 step 4

Once everything is approved, your agent or broker will meet with you again to present the annuity contract. At this stage, if you still want the annuity, you will issue your check and enter in the contract.


This is the moment where the contract between the investor and the Life Insurance Company is valid. However, you still have 10 to 30 days to reconsider your choice and cancel the annuity contract. If it’s the case, you simply have to send the contract back to the issuer and reclaim a refund.

 step 5

At this stage, you have paid for the annuity and you are now the owner of the contract. It is recommended you keep your contract in a safe place. A safe-deposit box at the ban or with your will and other important paperwork in a lawyer office are mostly recommended. It doesn’t prevent you to keep it under your bed though!


If you are ready to start Step #1 and wish to speak with a broker but don’t have any, you can speak with an advisor for free here.

5 Points to Consider Prior to Buy an Annuity



If you are about to retire and you are looking for an additional income stream to support your life style, buying an annuity might be the best thing for you. However, annuities are more complex than most financial products. This is why it is so important to understand fully how the annuity works before entering in such contract.


In order to help you making your decision, we have highlighted the top 5 point to consider prior to buy an annuity:


#1 Don’t Invest if You Don’t Understand


Most annuity contracts show several pages of complex financial terms and it’s not always easy to navigate through this language when you are not familiar with it. An annuity contract can include several clauses that will enable the contract to become more flexible according to your need. This also means you will require additional information to understand it.


As a reference, you can check out our Annuities Explained section where you will find answers too many questions. Reading and doing further researches is your best ally to fully understand how annuities work. The information is there, it’s only a matter of taking the time to read it.


You can also contact an advisor for free and ask your questions directly. There is nothing better than a human voice answering an itchy question!


#2 Maybe You Need More than One Annuity


Depending on the structure of your financial plan, you may request different level of income stream at retirement. This may include that you will buy various annuities to meet your need instead of going for a simple life annuity. For example, you may want an annuity that will pay X amount per month while both your spouse and yourself are alive. In the event of one of you passes away, you may require a smaller amount of monthly payments.


You can build your custom annuity plan with a combination of deferred and immediate annuities. Before you make any purchase, take the time to define your need and plan how you can meet them with a “package” of annuities.


#3 The Devil is in the Details – Beware of the Costs


There is no free lunch in finance. Remember that line before you sign up for any financial products. When it’s too good to be true, it is because it is too good to be true! Annuities are no exception. It is wonderful to expect a monthly payment for the rest of your life, but this contract incurs costs as well.


We all expect the insurance company making a few dollars out of the contract. After all, we all need to pay for our bread and butter, right? But it doesn’t mean you need to be ripped by your life insurance agent who sells the annuity contract. Ask about the annual costs, fees and management expenses you might pay. This is definitely something to highlight with deferred variable annuities since they are linked to an investment in the stock market.


#4 Survivor Annuities are Best Value


If you purchase a life annuity based on your life alone, everything is gone once you pass away. This may complicate things for your surviving spouse… especially if you die at 65 and your spouse goes up to 90!


The survivorship option is often overlooked by investors while it should probably be the very first thing to look at.


#5 Don’t Put All Your Eggs in the Same Basket


When investors start learning about annuities, a part of them want to cash all their investments and buy a huge contract right away. They think there is nothing better than receiving a guaranteed pension for the rest of their life.


But what if you want to buy a new car, a boat or go on vacation?

What if you want to make money gifts to your heirs while you are live?

What if you need an extra $20,000 per year for medical support?


If you have frozen all your assets into an annuity, you will not be able to recuperate your money to receive a lump sum payment. Once the contract is bought, you are set to receive an amount each month but you won’t be able to withdraw $50,000 in one shot.


The liquidity of an annuity is not to be neglected.


You Don’t Have Questions? Think Again!


Buying an annuity could be the best or the worst financial move you will ever do. For some investors, it is the best product around as it ensures a pension for life. But it doesn’t meant that everybody should buy an annuity. If you don’t have any questions and you are ready to buy your contract, think again. Take the time to think about everything that could happen in your life and see if the annuity still stands.


If you are still unsure if you should purchase an annuity, you can speak with an advisor for free now.