An annuity is a long-term investment that can serve as your primary retirement account or as a supplemental retirement account. Money in an annuity grows tax-deferred and can be invested in a variety of fixed or mutual fund accounts. Although this is a long-term investment, check on your annuity at least annually to make sure that your investment is performing according to your expectations and to make sure the insurance company is still a financially strong institution.
It is important to review a fixed annuity annually at the anniversary date. Fixed annuities guarantee a fixed rate of return for a one year period, with the rate adjusting each year. Compare your annuity with other fixed annuities to determine if the company is maintaining competitive rates. Don't forget that most fixed annuities will offer you a bonus percentage in the year you purchase the annuity that disappears at the first renewal period. You won't be able to bargain for a better rate in a fixed annuity but you should be aware of your annuity performance.
Variable annuities invest in mutual fund sub accounts. There are usually a variety of subaccounts for you to create a portfolio with a mixture of risk levels. You should check these subaccounts quarterly, or more often in times of market turbulence. You will have the option of moving your subaccounts within the annuity selections with no charge or penalty if you are dissatisfied with the mutual fund returns.
While it probably isn't worth moving a annuity that is still in the surrender period: the first years of the contract where you will be penalized for taking money out of the contract--you may want to move money from a poorly performing annuity to one that is much more competitive and in line with current market rates and returns.
You can compare annuity returns and rates at websites such as AnnuityFYI.com that lists several annuities side-by-side.
Insurnace Company Solvency
Annuities, both fixed and variable, are offered through insurance companies. One of the things you need to keep tabs on is the solvency and strength of the insurance company holding your assets. Annuities are not backed by FDIC insurance, they are backed by the insurance company holding them. Solvency refers to the ability of an isurance company to pay a large majority of claims if a major catastrophe occurred and there was an influx of claim or payment requests.
Insurance companies are rated by third party companies such as Moody's, Standard & Poors and A.M. Best. You should keep your money with a company that is considered "investment grade" with A, AA, or AAA ratings. These are the strongest companies and considered the safest. Insure.com has a search component that allows you to type in any insurance company and see its latest ratings as well as any upgrades or downgrades it may have received.