Taking Down the Allianz Benefit Control

Main key points:

  1. The Allianz Benefit Control (ABC) annuity lures in potential buyers with a bonus, but it’s crucial to see past this and focus on the actual bottom line, as there’s no such thing as free money.
  2. The contract’s flexibility makes it complicated, for example, the contract’s cash value can deplete after the 18th year, even though it suggests substantial annual income increases, raising questions about sustainability.
  3. I’d suggest considering alternative options and approaching insurance companies and annuity illustrations with caution, especially when they seem too good to be true. In conclusion, I’d recommend seeking a second opinion and staying vigilant when evaluating annuity choices.

Let’s get into it

The bonus is what gets a lot of people and makes for an easy sales pitch. Underneath that is just another annuity that may or may not work for you. There is no such thing as free money so you have to forget about that part of the contract and focus only on the bottom line. If more people would have done that then this contract would not sell nearly as well as it has. The Allianz Benefit Control (ABC) was released as the near-term income answer to the 222 that required a ten year deferral. With the new product, you get a bonus that factors into the income payments right away so you can take guaranteed lifetime income at any time.

A Closer Look at The Allianz Benefit Control Numbers

Big numbers are nothing new to Allianz and the illustrations look out of this world. But the guarantee is what’s important and too many variables in the contract are adjustable. I had the chance to look at an ABC proposal recently so I’m going to go through it and tell you what I think. One major benefit of the contract is that there is no fee for the income rider. I wrote about and recorded a podcast recently that covered this class of product. You can read the newsletter or listen to the podcast.

Guaranteed Income:  With or Without Fees? Newsletter Podcast (March 3, 2023)

The way I start with any second opinion is to make sure the person I’m helping understands the contract. In this case there was a little confusion so we had to straighten that out at the beginning. The man I was helping is single and 65 years old. He needs $20K annually to supplement retirement income and the first advisor he talked to recommended he put $400,000 into the ABC. It would produce about $21K per year and performance would offer inflation adjustment over time. The hardest part for him was to first understand that the bonus and additional interest credits only affected the income payments and not his account value.

The Promise vs. Reality

It’s a product with an implied promise that it can do anything you want in retirement. Market participation, guaranteed income, inflation adjustments and a remainder for heirs. What’s interesting is that in even the best case scenario, the cash value of the contract disappears after the 18th year, meaning nothing is left for the heirs. My biggest issue with the illustration is that even after the cash value goes to zero, the table illustrates substantial annual income increases. This would not be possible when the insurance company has no money left to work with.  If it were to happen that way then Allianz would go broke. I covered this topic as well in a recent podcast and you can click below to check it out.

BS Annuity Illustrations,  Newsletter or Podcast

Exploring Alternatives

At the very least you should see some alternatives when you are looking for a good financial product. All I could do in this case was straighten out some confusion for this guy and show him what an alternative might look like. I ran the numbers and found that he could get the same amount of guaranteed income for only $270K. That saves him more than 30%. The problem is that he pays a fee and doesn’t have the potential for inflation adjustments.  But he has $130,000 to invest elsewhere and can still make that happen on his own. Allianz has the ability to reduce growth rates or even add fees that will dramatically affect the outcome. Expect it.

Which Should You Trust?

This is my question to him and any of you:  How much do you trust the insurance company? 

So many people comment to me that they don’t believe an insurance company will keep rates steady.  At the same time, so many people buy these annuities based on an illustration that goes way over the line. 

In my book, annuities have tremendous value for retirees but there’s a fine line to cross when you see things that are too good to be true. My advice is to be as efficient with your money as you can and keep control of as many variables as possible. 

Seek a second opinion when something doesn’t seem right.

Let me know which option seems the best to you…

Podcast about Taking Down The Allianz Benefit Control

What You’ll Learn From This Episode:

[2:32] Comprehensive review for safety, growth, and income.
[2:40] The Allianz Benefit Control is a fee-free product that enables you to generate income.
[3:03] Presenting a detailed case study.
[5:15] You can obtain guaranteed income without incurring any fees; however, to mitigate risk, the company includes a fee to ensure they are prepared for longer life expectancy.
[7:35] It is advisable to select a contract that offers flexibility in choosing allocation fees.
[9:26] Index annuities leverage their bond portfolio earnings to purchase options on the index.
[14:38] Take charge of your finances. Both the stock market and annuities offer potential yields. Relying solely on insurance companies is not a comprehensive solution to all your problems.

Key Quotes:

“You want to cover your basic income needs and plan for inflation. It’s pretty simple!”

Last Updated on February 5, 2024 by Bryan Anderson