I’ve been hitting this from several different angles all year so I figured it’s time to look at some real contracts. This is how I work with the numbers to determine unequivocally which is the best path for each individual who asks me for help. Aside from safety, guaranteed income is the biggest reason people buy annuities so I’m going to start with a new contract that is very competitive and will no doubt be the top choice for many who want the simplicity of a guaranteed paycheck in retirement.
For years I have said that the best thing about Nationwide is the Peyton Manning commercials. I’m a big fan of the quarterback but have not been impressed by the insurance company’s index annuity options. Still it is a fine company with solid financial ratings and I’m not one to hold a grudge when a good product comes along.
The Nationwide Peak 10 has been around for the better part of a year so I’ve known about it for a while but it was only available through certain sales channels that I couldn’t get. The first time I heard of it was earlier this year when a guy told me about the contract during an appointment. He said it had a 10% bonus, immediate income and joint life payout at age 65. You all don’t see this stuff as much as I do so may not recognize right away that it’s a pretty good deal in today’s market.
Based on our conversation I determined that the product was indeed the right option for this guy and I didn’t have anything better. So, I told him to buy it from the advisor that showed it to him. No one should be scared to make an appointment with me because I have plenty to offer to the right people but I know my strategy is not a fit for everyone. I tried to get access to the contract, which was possible, but in its current form was not available in a few of the states where I do much of my business.
I put it on the shelf and told a few people about it when it was the right fit but I’m not into income riders, as many of you know. Nationwide has now expanded the distribution and opened it up to a few more states so it’s going to hit home for more people. I can sell it now but this is by no means a solicitation. It’s nothing more than a basis for comparison and it’s pretty competitive so it offers a good test for my strategy. We’ll start with that next week but for now let’s look at the details of this.
10% bonus to the income value
7% simple interest annual income increase for each year of deferral
Extremely generous payout rates for all ages (the grid is too detailed to mention because it’s different for everyone)
Immediate income option means this will offer higher income and more liquidity than a single premium immediate annuity
Yes there is a fee for the income rider but who cares if your goal is maximum income – this will likely deliver it
Ashok Ramji and I just recorded a podcast about this contract that will be edited and released next Thursday, July 29th, 2021. Subscribe to the podcast here at Castos or here on my YouTube channel if you want to see the video with illustrations. If you do either, you will be notified when it’s published.
What we talked about during the recording is that the 10% percent bonus increases the immediate income to the point where it clearly beats any other contract for immediate income. This is not free money in your pocket, rather an enhancement to the guaranteed income payment. What makes it more compelling is that the payout is only reduced by about a quarter percent for a joint life payment. What does this mean? Insurance companies pay more income for one person than two. One of two people will always live longer than a single person so the company has to lower the payout to make sure it works. Actuaries are never wrong.
In the example we ran during the podcast we showed a basic example of a 65 year old paying $100K for the contract. Including bonus, a single 65 year old could receive more than $5600 per year for the rest of his or her life. But a 65 year old couple would get just over $5400 as long as either person is alive.
This is incredible because most of the time you would see a substantial reduction for a joint life payment. From what I understand the typical change in payout would take the joint life payment to around $4500 or so. That’s an amount that would add up over time.
Again, I’m not saying that everyone should bombard my phone on Monday with purchase orders. It’s more about this being a viable option for certain people who want a simple solution. My instincts tell me it will be better for near-term income in the range of 1-5 years but longer term deferrals may show another product to offer more. I can still beat it with another strategy but that can only be determined on a case-by-case basis.
The summer is hot and dry just about everywhere, including Montana. But summer is fleeting so we all have to take advantage of the sunshine when we can. I’ll probably hit the trails with the horse and mules at some point this weekend. By Monday morning I will have coughed up all the trail dust and be ready for anyone who wants to chat.
Enjoy your weekend!