While people are shopping for an annuity, they typically learn the financial ratings of the insurance company behind the products they are perusing but usually pay them little heed. This may seem like a mistake but typically is not. In reality, a respectable rating, which is extremely common, is good enough. And in some cases, insurance companies with top-flight ratings offer less generous terms than the competition.
In this case, you have absolutely nothing to fret about ever regarding your guaranteed payments. But you seldom have to worry about them anyway. So, in the end, buyers in this camp sometimes pocket less money for no good reason.
Here is some good news for those who nonetheless prefer buying an annuity from a top-rated firm. At least one annuity purveyor with a stellar A+ rating from A.M. Best – Pacific Life Insurance Company – offers more attractive features in some cases and sometimes more generous financial terms. So for those who think a top-flight rating is important, they can get icing along with the cake.
Specifically, Pacific Life offers a fixed indexed annuity (FIA) with an attractive and rare surrender period of only five years and another FIA that offers more generous terms in an otherwise standard product with a typical 10-year surrender period. Many FIAs are more compelling than a plain vanilla fixed annuity. This makes some Pacific Life FIAs even more so.
The first FIA is Pacific Life Index Edge 5. The five-year term is highly attractive in and of itself. “A lot of my clients say, ‘I’m already 70 years old. I will be 80 when a 10-year FIA matures,’ says one annuity broker. “That is just too long. What if interest rates, now 4%, rise to 6% along the way? That’s a whole new ballgame.”
This product is best for folks in their 50s who are primarily interested in a growth opportunity and low fees. Index Edge 5 offers no guaranteed income rider. The annuity offers a high 65% participation rate on the S&P 500 with a two percent spread. For this FIA to beat the performance of more typical FIAs, the S&P 500 has to increase at least 14% in a given year.
In addition to the standard death benefit, which pays beneficiaries the contract’s remaining principal, this annuity offers owners the option of signing up for a more generous death benefit that instead offers benefit-based payouts over five years. The minimum investment for the Pacific Life Index Edge 5 is $25,000.
Another Pacific Life FIA worth noting is the Index Dimensions 10. One version of the product offers a 60% participation rate on the S&P 500 with a two percent spread. This compares with a participation rate of 50% to 55% at most other FIAs with a two percent spread.
This product, unlike Index Edge 5, offers a guaranteed income rider that is a bit cheaper and could be better than the rider offered by competitors. It costs 75 basis points a year, versus a norm of 95 basis points. Owners receive 5% simple interest annually and can get up to 3% more when the market has a good year. In these cases, the payout is better than the typical 6.5% to 7% guaranteed annual payout offered by many competitors.
The minimum investment for Index Dimensions 10 is also $25,000.
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