Our experts tested and researched 15 best annuities and narrowed the list to their top 10 recommendations.
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Top 10 Best Annuities For 2020
How We Chose Our Top List
Guaranteed income is what dreams are made of — especially for seniors. And it’s made possible with annuities. We researched the best annuities for seniors, considering factors like annual fees, withdrawal charges, customer service, overall ratings, and much more. So if you’re close to retirement and/or want to protect your assets with annuities, you’re in good hands with our top 10 list.
If you get the defined variable annuity, you must make a minimum initial purchase payment of $25,000. Additional payments may be allowed during the first year but not afterward. There is a 7% withdrawal/surrender fee if you’ve had the annuity for less than two years. It gradually decreases, and after you’ve had the annuity at least seven years, there is no fee. State tax could add up to 3.5% to these fees.
The annual maintenance fee is 2% of your account value or $50, whichever is lesser (only if your purchase payments were less than $100,000). Other charges are for mortality and expense (0.95%), administration (0.15%), total insurance (1.90%) and the defined income benefit (0.80%). Underlying portfolio expenses come to about 0.75%.
Researching Prudential annuities on your own can get complicated quickly since you must read prospectuses for information on fees and the like. Prudential may offer a product you like, but we recommend you start with the Jackson website (find information on it below), so you can become familiar with terms before diving into a prospectus.
The Athene Agility fixed indexed annuity is something the company is focusing on a lot right now, so we’ll cover that. It follows a 10-year surrender timetable with charges starting at 9%. For no extra charge, you get built-in income and death benefit riders. The minimum premium is either $5,000 or $10,000, depending on your state ($5,000 in Alaska, Hawaii, Minnesota, Missouri, New Jersey, Oregon, Pennsylvania, Texas, Utah and Washington). The maximum is $1 million. Only single premiums are allowed.
Athene Agility’s most similar competitor is the Allianz 222 annuity (covered later in this guide). Both products tout a number of features that sound flashy but in actuality can be hard to understand through all the jargon. That said, Athene Agility’s income benefit is superior, and it can mean more lifetime income. In addition, your 10% no-charge withdrawals can come from either the initial premium or the account value (it’s the premium only with Allianz 222). Athene Agility can be a great product if you plan for your lifetime income to start in at least 10 years.
Let’s look at Pacific Choice, a variable annuity. There are the usual fees such as those charged for mortality and expense risk, and administration. They vary depending on your time horizons. For example, mortality and expense risk is 1.25% with a three-year horizon. It’s 0.95% for a five-year horizon. The minimum purchase payment is $2,000 if qualified ($50 subsequent) and $10,000 if non-qualified ($250 subsequent). If you’re charged for a withdrawal, it’ll be 7%, sloping downward over three or five years. There is also an option for no withdrawal charges. Additional fees are assessed for benefits such as earnings enhancement death and stepped-up death. While it is nice in one way to have all these optional benefits, all the fees and charges can add up to more than 7% (this is generally true for variable annuity products with several optional riders).
The number of annuity choices from Pacific Life can seem overwhelming. Fortunately, the company puts fact sheets and product guides online to give a rundown of each annuity. The fact sheets include information such as fees, minimum purchase payments, maximum owner issue age, access to money, withdrawal charges and investment options. In other words, there’s no need to wade through a prospectus until an annuity has seriously piqued your interest.
There are no annual fees for Shield index-linked annuities. You must have prior approval to pay more than $5 million, and the minimum investment is $25,000. Withdrawal charges start at 9% and last for five years.
The variable annuities with FlexChoice Access have fees such as an annual contract fee, mortality, expense and administration. Withdrawal charges go up to 7%.
If you like to customize and still have protection, a Shield annuity may be for you. You choose among three indexes to track, three term lengths and three shield rates (asset protection rates). Your strongest chance for growth is probably with the S&P 500 index, but do check the rates page before deciding.
One great thing about Jackson is that the company makes it extremely easy to find information on fees, charges and the like. You won’t find it presented more clearly anywhere else.
Let’s look at three products, one from each category. First is the Elite Access variable annuity. Initial premiums must be $2,000 (qualified) or $5,000 (nonqualified). You’re able to make a minimum additional premium of $500. The administration charge is 0.15% but is waived for accounts of $1 million or more. Mortality and expense risk is 0.85%, and there’s an annual contract maintenance charge of $50. Withdrawal charges are for five years and start at 6.5%. Investment expenses vary depending on the options you choose, and they range from 0.53% to 2.26%.
The minimum premium for the MarketProtector fixed indexed annuity is $25,000, and a $500 additional minimum premium is allowed in the first contract year. Withdrawal charges start at 9% and last five, seven or 10 years, depending on the option chosen. Annual charges are 1.25% for the single life option and 1.40% for the joint life option.
The Max Family fixed annuity has minimum premiums of $2,000 (qualified) or $5,000 (nonqualified). Withdrawal charges start at 6% on a six-year timetable. As is typical with fixed annuities, there are not additional fees.
Jackson’s website is quite user-friendly. The company presents the information on each annuity product in a concise, clear way. If you’re new to annuities, we recommend you begin your data-gathering on Jackson’s site. It’ll help you get the hang of terminology, rates and fees so you can research more efficiently elsewhere.
As for the annuities themselves, they can be competitive with annuities from other companies. Give them a serious look.
The Venture variable annuity comes with a host of fees and charges, as is standard. Withdrawal charges start at 6% (8% for John Hancock New York). The administration fee is 0.15%, and the mortality and risk fee is 1%. There’s a 0.20% fee for the optional stepped-up death benefit, and account expenses come out to 1.35%. Operating expenses range from 0.50% to 1.725%. The initial purchase payment can be up to $5 million.
John Hancock and its subsidiaries manage more than $1 trillion in assets. There’s little cause to worry about whether the company will be able to make annuity payments down the road, but that’s true of all the companies on this list. The lack of information on John Hancock’s website is frustrating, but if you already have a good relationship with a financial professional, that may streamline the process of researching the company’s annuities. You can also contact the company to get prospectuses.
We’ll look at three products. First, the New York Life Guaranteed Future Income Annuity II requires a minimum premium payment of $5,000 with subsequent premium minimums of $100. Meanwhile, the Premier variable annuity has a $5,000 minimum payment (nonqualified) and $2,000 (qualified). The mortality fee ranges from 1% to 1.3%, and withdrawal charges start at 8% over a seven-year period. Fees for various optional riders go up to about 1.20% each.
The New York Life Secure Term Fixed Annuity has a minimum initial premium of $5,000. You must get prior approval for amounts of $3 million or more. As is typical, there are no fees for policy administration or policy maintenance. Withdrawal charges start at 7% over a seven-year period.
New York Life has tremendous financial strength. It’s a great company, perhaps the best, to get an annuity from as far as projected ability to pay claims. It offers a good mix of annuity products. Fact sheets and brochures for most products help you better understand these offerings.
The Polaris Preferred Solution variable annuity charges an 8% maximum withdrawal charge with the percentages going down over seven years, and a premium tax of 3.5%. Fees are also imposed for contract maintenance ($50 unless the contract value is at least $75,000) and separate account charges (1%). Portfolio operating expenses range from 0.47% to 1.98%. The fees for optional benefits include 0.40% for early access and a total of 0.55% for death benefits.
The minimum purchase payment for qualified accounts is $4,000, with a $500 minimum subsequent payment ($100 if done through automated withdrawals). For non-qualified accounts, the minimum purchase payment is $10,000, with a $500 minimum subsequent payment ($100 if done through automated withdrawals).
Meanwhile, the Assured Edge Income Builder fixed annuity has a minimum premium of $25,000, and you can add to that amount in the next 60 days. The maximum total premium without prior company approval is $1 million. Withdrawal charges start at 7% and last for seven years.
You can find much, if not all, of the information on AIG’s annuities via its website. While the data isn’t presented as cleanly as some other insurers present theirs, it’s fairly accessible. The range of annuities means that there could be a product to meet your needs if you’re serious about getting an annuity.
The minimum purchase price for an Allianz 222 Annuity, a fixed index annuity, is $20,000, and you can add to that over the next three contract years. Surrender fees last for 10 years and are 10% for the first three years.
Meanwhile, the Allianz Vision Variable Annuity has a minimum purchase price of $10,000. It has a seven-year withdrawal period with charges starting at 8.5%. Withdrawals are fee-free up to 12%. Fees are charged for expenses such as mortality and risk.
An annuity such as the Allianz 222 offers bonuses such as a 22% premium bonus in the first 18 months of your contract (and you must hold the contract at least 10 years). These bonuses can be nice in the long run, but make extra sure you have enough liquid assets to last 10 years. Otherwise, the withdrawal charges are steeper than usual, as is the 10-year timetable. However, if paying for possible long-term care costs is a concern, consider this annuity.
The Nationwide Destination Architect 2.0 Annuity, a deferred variable product, promises to be helpful for fee-conscious investors. It has a $25,000 minimum initial payment with $1,000 minimums for subsequent payments. The mortality and expense charge is 0.20%, and so is the administrative charge. Various riders such as the living benefit rider go as high as 1.50%. There are no other charges, apparently.
Now take the Income Promise Select immediate annuity. The minimum and maximum purchase amounts are $10,000 and $3 million. Income payments are based on your age, sex, premium, income start date, payment option and payment frequency.
The Nationwide New Heights fixed indexed annuity has a $10,000 minimum purchase. Withdrawal charges start at 8% over seven years. Many optional riders are available for varying fee amounts. Ask your financial professional about any fees for mortality and expense, administration and the like.
Nationwide offers an intriguing mix of annuity products. The online brochures make it easy to learn some basics (or most/all basics) about each annuity.
An annuity is a contract you sign with an insurance company for a goal such as lifetime income or protection of cash assets (the principal you put in). Some seniors also use annuities for help with anticipated long-term care costs. Also, some people who don’t qualify for reasonably priced life insurance turn to annuities.
Experts generally recommend that you get an annuity only after you’ve maxed out on your tax-advantaged IRA and 401(k) contributions. Most people purchasing annuities are close to retirement or are mid-career and want to protect their assets.
Annuities may seem like investments, but they’re not. They are not FDIC-insured, either. You pay an insurance company a large lump sum or a series of payments. In theory, you’ll live long enough to get all of that money back plus more.
The payouts you receive from the insurer can begin almost immediately, wait to kick in for a few decades or something in between—your choice. The amount you get paid is based on your gender and life expectancy. Payments can be a lump sum, monthly, quarterly or yearly. It’s also possible to structure your annuity so that your beneficiary receives payments when you die.
Annuities are customizable, and there are several types. One is an immediate annuity in which you begin getting paid almost instantly after giving the insurance company a lump sum. Another type is a fixed annuity, which functions in some ways like a CD. A fixed annuity offers principal protection, and investments are made in safe places such as bonds. You get a guaranteed interest rate over a fixed period, and there usually aren’t fees/charges other than withdrawal/surrender charges. Another kind of annuity is called a deferred annuity in which you wait years, even decades, to receive payments.
Then there are variable annuities, which can be immediate or deferred. They track the stock market, and you get to choose which index, for example, the S&P 500. Some insurers offer more indexes than others. Variable annuities don’t have a promised rate of return, and it’s possible to lose money. Think of them as similar to 401(k) plans in terms of the risk involved. Variable annuities tend to come with a number of fees and charges as well. While you can end up with more money overall via a variable annuity than a fixed annuity, there’s an obvious risk of bad market conditions.
A fixed indexed annuity also tracks the stock market. It has a minimum guaranteed rate of return on most of your principal, generally 87.5%. You’re able to benefit to an extent from stock market growth. However, your gains are capped. Say your index gains 15%. If your cap is 6%, you get 6%. Because most, but not all, of your principal is protected, fixed indexed annuities carry risk, and you can lose money on them.
You can opt to add riders to your annuity. They provide benefits to you or to your beneficiary after you die. You get charged a percentage fee for each rider, which reduces the income coming in from the annuity. If your main goal is to maximize the income you get from an annuity, choose any riders carefully.
Annuities have something called a withdrawal/surrender period. It can be as short as two years and as long as 10 years, depending on the insurer and product. If you want all of your money back early (or a large sum of your money), expect a hefty fee, sometimes as high as 10% of what you paid in the first place. However, you can generally make withdrawals once a year, often up to 10% of the annuity amount, for no charge. In addition, surrender charges usually don’t apply in cases where you get diagnosed with a terminal illness or enter a nursing home and need your money back. In that way, a fixed annuity has a huge advantage over a CD. A CD will impose its penalty regardless of the reason you need your money back early. The rates for fixed annuities also tend to be better than CD rates.
Annuities are qualified or non-qualified. Qualified annuities are purchased with pretax money such as IRA contributions. Non-qualified annuities are bought with after-tax funds.
If you withdraw money from an annuity before you’re 59 ½, the IRS could hit you with a 10% tax penalty. If your product is qualified, treat your income as normal income for tax purposes when you begin receiving it. Always consult a tax professional for more information and for clarifications.
One more thing: The people selling your annuity get commissions, generally from 1% to 10% of the value of your annuity. Commissions are much lower for simple vehicles such as fixed annuities. Throw in a higher-risk annuity with a number of fees, extended surrender periods and more complex fine print, and the commission is higher.
The commission money should not come directly from your annuity. For example, if you put in $200,000, then your annuity value is $200,000 (that is, before fees and charges kick in, indirectly paying for some of that commission).
That said, the commission matters for one simple reason: Financial professionals have an incentive to sell you an annuity that may not be right for your situation because of the higher commission they receive. They may claim that they don’t charge a fee, which is technically true but misleading. They absolutely have an interest in trying to sell you certain annuity products, so take the time to understand your needs and educate yourself about what’s available.
So, if you put in a certain amount of money and receive more than what you put in over the years, how do the insurers make money? They do it with surrender charges, fees, charges such as mortality and expense, riders, investment management fees and investment gains. To explain the latter point, take a fixed annuity. The insurer knows that a certain rate of return is guaranteed and takes a bit of that gain for itself. You still get paid what you have been promised in the contract.
You can certainly benefit from an annuity—but only if you never need to surrender it. Be sure you have enough liquid assets to get you through the surrender period, however many years it lasts.
Fixed annuities are good for people who prioritize guaranteed rates of return. The other annuity types carry too much risk otherwise. Due to all of the fees associated with these other annuity types, they may not be the best option for people who are comfortable investing their own money.
It’s usually not possible to buy an annuity directly from an insurance company. Rather, they’re sold by brokerage firms, mutual fund companies, banks, independent agents and others. When you research an annuity on an insurance company’s website, the insurer normally tells you to contact your financial professional to purchase the annuity. If you don’t have one, many insurers provide search tools to help you find one.
One common annuity-purchasing scenario is when you try to buy life insurance. The agent may try to direct you toward an annuity instead. However, if you qualify for affordably priced life insurance and it’s what you want, an annuity may not meet your needs as much. Agents make more money by selling annuities than life insurance.