If you watch cable TV, listen to the radio, or surf the internet, you will be inundated with annuity sales pitches that sound appealing on the surface. Local bad chicken dinner annuity seminars and face-to-face sales presentations can even be more fantastical and high pressure, so it's important to know how to filter the sales pitch to get to the truth.
Annuities Are Contracts
Annuities are contracts issued by life insurance companies. It's a legal agreement between you and the issuing carrier, and the contractual guarantees are backed up by the full faith and credit of the specific company. Regardless of what an agent tells you or promises, you should base your decision on what is written in the annuity policy.
Ask for a Specimen Policy
Most agents will not offer this service, but every one of them can provide you a specimen policy of the annuity you are considering. You can read the exact policy you will own before completing the paperwork. In addition, all agents can provide the actual annuity application that you will sign before you sign it.
Never hesitate to ask for copies of a specimen policy or the application. Both can be provided via a PDF through email, or a mailed hard copy. If an agent claims they cannot provide this paperwork, then you need to find a new agent.
Own Annuities for what they "Will Do."
You should always own an annuity for what it will do, not what it might do. In other words, own annuities for their transfer of risk contractual guarantees.
Never allow an agent to convince you to buy an annuity for hypothetical, theoretical, back-tested, non-guaranteed or hopeful return scenarios. Don't buy the agent's dream sales pitch; rather, buy the contractual realities of the policy.
Every proposal that is generated by an annuity carrier has a page that shows "guaranteed" returns. That is the only page you should look at, even if you are purchasing a variable or indexed annuity that has unknown future returns the agents seem to focus on. With annuities, always buy a worst case scenario.