Last November, I received a call from a CPA who was concerned that a new client had not received a Form 1099-R after placing a $500,000 premium into an annuity. After contacting the annuity carrier directly, it became clear that the contract was not generating income—and with no income, there was nothing to report.
At the CPA’s request, I spoke with the client to help her better understand the situation. During our discussion, it became apparent that the annuity carried significant surrender charges, making any early changes costly and impractical. Given the structure of the contract and the early stage of ownership, no immediate adjustments were advisable.
Unfortunately, this type of situation is common. Over more than 30 years in practice, I have seen many instances where long-term financial products were purchased without a clear understanding of how they would function in real life, particularly during the early years of a contract.
At Fero Financial, our Intentional Ark framework emphasizes preparation before commitments are made. Just as an ark must be thoughtfully designed before the weather changes, long-term financial decisions benefit from careful evaluation, clarity, and coordination in advance.
Annuities can be appropriate in certain financial plans, but they are complex, long-term contracts that should be fully understood before signing. Seeking a second opinion, especially from a CFP® professional who follows a fiduciary standard, can help ensure that decisions align with broader goals and future flexibility.
The lesson is simple: be intentional. Build the structure first. And always verify before committing.
The Intentional Ark is a conceptual planning framework designed to illustrate the importance of preparation, structure, and coordination in financial planning. It is for educational purposes only and does not represent a guarantee of results or future outcomes. Investment strategies involve risk, including the possible loss of principal. Financial planning concepts should be considered in the context of an individual’s objectives, risk tolerance, and overall financial situation.
