Annuities have long been a way for investors to get a steady stream of income, but there’s a catch. Often they have to pay a commission to purchase this type of insurance. After all, annuities can be complicated and getting accurate pricing information from all the providers can be difficult, leaving investors with little options other than an insurance agent, broker or, financial advisor if they want to buy an annuity. That, however, is changing. Websites are emerging to provide investors with real-time quotes, leveling the playing field for those who are looking for an annuity but don’t want to overpay for it.
Tantalizing for sure, but before you join the DIY annuity crowd, you have to learn the ropes. From the type of annuities to where you can purchase them directly here’s what you need to know.
Learn The Ropes Before Going It Alone
Annuities can be complex to regular investors, largely because there are a lot of different ones and a lot of industry jargon attached to them. There are fixed annuities, variable annuities, inflation-adjusted annuities and guaranteed lifetime ones. There’s also different ways to get paid out—whether you are collecting for your lifetime or a predetermined period. (Read more, here: An Overview Of Annuities.)
Take fixed annuities for starters. It gets you the same payout for a predetermined period while inflation-adjusted annuities make sure your payout keeps up with inflation. With a variable annuity, the monthly payout is based on the performance of the underlying stocks and bonds it's invested in. A guaranteed lifetime annuity gives you income throughout an investor’s life.
Brokers Aren’t the Only Game in Town for Annuities
When it comes to purchasing, annuities investors don't only have to rely on brokers, insurance agents and financial advisors to do their bidding for them. Sure, most investors turn to those professionals, but there are alternatives ways to purchase an annuity, which will lower the commission you have to pay. Investors can use online annuity brokers, which charge a fee but typically not as high as with a broker. They shop for the right annuity based on the investor’s investment needs, with an eye toward keeping fees down. Mutual fund companies including Vanguard and Fidelity Investments sell no-load annuities or ones without commissions direct to consumers. While both are more direct ways to purchase annuities it doesn’t happen on a wide scale, largely because it's hard to compile real-time quotes from all the different providers of annuities. (Read more, here: Passing The Buck: The Hidden Costs Of Annuities.)
Websites Are Popping Up To Provide Real Time Pricing
Companies are stepping up to make it easier for consumers to purchase annuities directly on a much wider scale. They are launching online services to provide customers with real-time quotes and information to make an informed decision when it comes to purchasing an annuity. One of the most recent is Annuities.direct, a website that provides instant live quotes on 99% of the annuities companies quoted, cutting out the need for agents. It puts the investors in the driver seat because they don’t feel pressured by a sales pitch or confused into purchasing an annuity that isn’t right for them. Investors can shop for single premium immediate annuities (SPIAs), deferred income annuities (DIAS), qualified longevity annuity contracts (QLAC) and multi-year guarantee annuities (MYGA). Increasingly employer-sponsored retirement plans are including annuities in their plans, giving investors another way to access this investment product. (Read, more: 5 Mistakes To Avoid When Shopping For An Annuity.)
The Bottom Line
For people nearing retirement, annuities can be an attractive way to ensure they have a regular stream of income when they need it most. But not every annuity is the same, making it more complicated for investors who often rely on a broker or advisor to purchase their annuities for them. Ultimately, the internet is leveling the playing field, making it easier for regular people to get real-time quotes and purchase annuities direct.