- Purchase only through a reputable dealer, with expertise in these products.
- Purchase only from an insurance company with a strong financial balance sheet.
- Understand there is no official federal bailout fund for insurance companies -- only state funds that may "assess" other insurers in case of a company failure.
- Get a written explanation of all fees and charges.
- Use only if you understand "surrender charge period" and are sure you won't need access to your money before that period expires.
- Understand the risk of loss, as well what is, and isn't, covered by guarantees.
- Understand the difference between "withdrawals" and taking an "annuitized" stream of income.
- Understand what happens to the balance of your account if you die before taking out all your money.
Writing about tax-deferred annuities creates tremendous possibilities for misunderstandings and misleading uses of the information. So let me start with a series of warnings. Much like the label on your prescription medicine, these warnings inform you that the product within is designed to be a benefit, but only if you take it as directed, and avoid using it under the wrong conditions. Here's the warning label for these tax-deferred, variable annuities: