Teresa Miller spoke at the Foxdale Village Retirement Community, urging people to understand their finances.
Pennsylvania Insurance Commissioner Teresa Miller spoke to seniors at the Foxdale Village Retirement Community located in State College. Miller focused on the importance for consumers, especially seniors, to take the time to understand annuities. She said this was vital to enabling them to protect their retirement incomes.
The insurance commissioner spoke about how people should be educating themselves about this important point.
“Annuities are designed as long term investments to provide income over a period of years, and people often buy annuities to help manage their income in retirement,” said the Pennsylvania insurance commissioner. She added that “Annuities should not be purchased to reach short term financial goals.”
During her talk, she encouraged consumers to take the time to learn about annuities so they understand what they are purchasing. The reason is that this type of investment typically locks money away for a specific period of time, which is usually between five and ten years long. A charge is applied to consumers who withdraw those funds ahead of the completion of the designated period. This penalty is not a small one.
The Pennsylvania insurance commissioner pointed out that the charge can notably reduce the value of the annuity.
Miller cautioned consumers to ask questions with regards to surrender charges (the official name for the fees for early funds withdrawal). She warned people to make sure they will be able to afford to have the money locked within the annuity for the entire period of the annuity in order to be able to confidently avoid those surrender charges.
Annuities are meant to function as long-term investments. However, there are also other forms of immediate annuities that can provide payments right away following a purchase. This can be an option for some people who are seeking an income right away. That said, the Pennsylvania insurance commissioner also cautioned about that form of savings. She pointed out that surrender charges can apply there, too, if withdrawals are made above a set limit. Finally, there are deferred annuities which have payments that begin on a set date in the future, typically upon retirement.