Now that you’ve decided an annuity might be right for you, it may be tempting to shop by comparing rates. However, some financial products, like annuities, can’t be judged based on rate alone. Although rates are one important factor, choosing an annuity based solely on the rate may not be the best way to get the right one for your needs.

Let’s take a closer look at what to consider when choosing an annuity.

Start With Your Goals Based Financial Plan

There are many different types of annuities, and different annuities may be able to solve the same financial objective. Yet, we believe that one of the primary use cases for annuities is to create a guaranteed stream of lifetime income in retirement to supplement Social Security or a pension.  Make sure the annuity you choose is the right annuity for the goal you are trying to accomplish.  Accumulation Annuities should not be used for income and visa-versa.

Balancing annuity expenses and benefits

A Knight financial professional can help you evaluate the benefits of an annuity relative to its costs, the specifics of your financial situation, and the type of income and survivor benefits you’re looking for. They’ll take into account the financial risks and realities you may face in the future, like how many years you have until retirement, as well as unknowns, such as how many years you’ll live.

They’ll also consider factors like:

The amount of money you’ll invest in the annuity

The type of account you’ll use to fund it

The amount of income you’ll need in retirement

Your risk tolerance

Using these variables and more, your financial professional can then consider specifics, like the payout rates for your age, to determine which annuity may be the best fit for you.

They may then be able to show you a more detailed projection with a customized annuity illustration – a tool that takes into account many factors of your specific situation.

Not all annuity providers are created equal

One of the most important things to consider when shopping for an annuity is the financial strength of the insurance company underwriting it. Issuing companies are rated by independent organizations such as A.M. Best, Moody’s and Standard & Poor’s, to provide a gauge of their financial ability to honor contractual obligations. It is easy – and essential – to find out the rating when comparing products.

Reputation is another consideration; is the brand one you know and trust? An annuity may offer elevated benefits, but having confidence in the company that offers it can be even more valuable.

What to consider when choosing an annuity?

Once you have decided to add an annuity to your portfolio, consider all of the factors – including benefits – that ultimately contribute to which annuity is best for you:

Start by defining your goals

Focus on product specifics like income growth rates, income payout rates, expenses, fees, and charges

Assess the stability and financial strength of the company issuing the annuity

And remember:

Don’t play the numbers game – the rate is not always the best way to judge an annuity

seek out an expert – talk to a Knight financial professional who has experience with annuities and get all the facts – not all annuities are created equal.