For Seniors: Quick Tips for Protecting Your Finances—Part 3
Saving and Investing
If you're considering an annuity, understand the potential pros, cons, and costs. You've probably seen or heard promotions for annuities, which are financial products tied to a contract between a consumer and an insurance company. Insurers sell annuities, but so do other financial institutions, including banks. You buy an annuity by making either a single payment or a series of payments to the insurance company. In return, the company promises to make payments to you, either as one lump sum payment or a series of payments for a specified time period. Because there are different types of annuities and a mix of potential benefits and risks, it's important to learn as much as you can before investing.
"Remember, even if purchased through an insured bank, annuities do not qualify for FDIC deposit insurance or any other comparable protections under federal law," advises Jan Templeman, an FDIC consumer affairs specialist. "So unlike FDIC-insured certificates of deposit (CDs) and other deposits, your right to receive payments on an annuity is likely to depend almost entirely on the stability and strength of the insurance company offering the product."
Know if you've agreed to let your bank cover certain overdrafts. You have a choice whether or not your bank will charge you a fee, perhaps $30 or more, to cover everyday purchases you make with a debit card when you don't have enough money in your bank account to cover the cost of the purchases. And, you can change your mind on this decision at any time. Consumers who have agreed to be covered by an overdraft program are more likely than consumers who don't to pay costly fees and face the possibility of having the bank account closed.
"Not being opted in to an overdraft program would mean that debit card purchases would be declined if you didn't have enough money in your account, but on the other hand, you would avoid paying a sizable fee for making that purchase," said Luke W. Reynolds, chief of the FDIC's Outreach and Program Development Section. He also noted that your ability, under the law, to decide whether to opt in to an overdraft program only involves everyday debit card payments, such as at a store, and does not apply to checks you write or recurring bills charged to your account.
Another way to avoid overdrafts is to keep tabs on your account balance before using your debit card or writing a check. In addition, you can also ask your bank to link your checking account to savings to cover any overdrafts, perhaps for a small fee.
Look into discounts and other deals. "For consumers over a certain age, some financial institutions may offer breaks on the cost of bank products and services," said Mary Bass, a senior community affairs specialist with the FDIC. But even if your bank offers a special deal for seniors, you may be able to do better elsewhere or with another type of account at that bank. "Comparison shopping is key," Bass added. "Banks and other businesses may negotiate with respect to fees or other account terms, so ask questions and show them what is being offered by competitors. You might be able to get a better deal than what is advertised."
U.S. Federal Deposit Insurance Corporation. (Updated 2014, February 14). For seniors: 15 quick tips for protecting your finances. Retrieved November 8, 2016, from http://www.fdic.gov/