An Annuity that Works
I guess it’s not enough for me to just tell you what products to avoid. After a couple weeks of pointing out hidden issues and over-hyped contracts, a few people reached out to disagree or say they don’t want to hear about what doesn’t work. So again I will encourage any of you who can’t find what you’re looking for to hit the green button at the top right of the page that says “Newsletter” and you can search all my posts. There is all sorts of information about retirement planning, interest rates, annuity performance and so much more.
If you still can’t find it then ask a question, suggest a topic or start your own website. I will write about what I want to write about and if that means I’m not good at what I do then so be it. Most criticism comes from other advisors who don’t want to do their own work but it’s kind of forgivable if you consider where information comes from. Most advisors choose to trust someone else to recommend a product for your situation. I wrote about it last year so if you missed it hit the link below so I don’t have to explain it again.
If you didn’t see it the first time, I’m going to remind you of something that works well and point you to where I wrote about it. Before I get there I’m going to tell you all there is probably only one company that I’d recommend buying an annuity from right now. Others are fine and I have active contracts at a lot of insurance companies that are doing well but we are in the midst of unprecedented financial times. Midland National has far and above the best things going right now. This does not include variable annuities so let me disclaim that right now since VAs account for the majority of sales in the market.
If you read the above article, the reason makes perfect sense. Midland is a direct-to-agent company so there’s no marketing organization playing middle man. If you think that reduces costs and provides more benefit for the consumer then you’re on the right track. This isn’t the first time I’ve mentioned it but I will go into more detail this time. It started last fall when I compared index performance for several companies. Without saying which the best is I simply provided information for anyone who wanted an easier way to compare annuities.
In the article I left out one big thing. All the rates are subject to a cap, participation rate or spread and some require a two or three year wait to hit a reset. So only looking at the index will not give you everything and the numbers could be updated but it’s a good start.
In that article I wrote about the S&P MARC 5 index that Midland uses. As of the market close yesterday this index is up 13.83% for the year. Midland will give you a 95% participation rate with a one-year reset. That comes to a credit of 13.14% which is not just really good for an annuity, it’s really good for any investment in light of current events. One client has this contract who is set to renew next week. He’s going to be happy and there are several others that will follow throughout the year.
Let’s take this one step further. Coming next week, Midland is offering an OPTION for enhanced participation in exchange for an allocation fee. I capitalize the word option because you have the choice to use it, not like that product I wrote about a couple weeks ago. For a 1% fee the participation jumps to 140% and up to 200% for a two year reset. That’s 19.36% over the past year. Over the past two years the index is up 17.48% so if you took that option then you’re looking at a shade under 35% for two years.
It’s not just gonna blow other annuities out of the water, it will likely compete neck and neck with market returns but without the risk. If you look at how the index is managed it’s similar to a managed portfolio that you’d probably be paying close to 2% for someone else to do.
There are other indices available in the contract so you’re not limited to just that and options can be changed around every year to position for the most advantage. So you can get a really high participation rate with no fee or pay a fee and get an even higher participation rate. I like having options while I’m beating the hell out of bonds and not floating around with the stock market.
And that, ladies and gentlemen, is an annuity that works.
Have a nice weekend…