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The Best No-Risk Annuities of 2017

Is there such a thing as a great no-risk annuity? Yes, there is – it’s a fixed indexed annuity (FIA) that provides a better return than most more often than not.
Is there such a thing as a great no-risk annuity? Yes, there is – it’s a fixed indexed annuity (FIA) that provides a better return than most more often than not.

There are good annuities, average annuities and at best mediocre annuities, measured, in large part, by the return they generate over time.

And while they are relatively rare, there are great annuities, too – annuities that often perform much better than most. Assuming they meet the needs of most investors – their risk, if any, is acceptable; they have little or no fees; and offer competitive features – these are the annuities you probably want to look at the hardest.

With this in mind, here are Annuity FYI’s top three risk-free annuities of 2017, based on the returns they generated last year (or in one case, over the last two years). All are fixed indexed annuities (FIAs) or similar to them – the only type of annuity that combines the potential for high returns with the elimination of the risk of loss of capital. If the bull market continues in 2018, as many investment pros expect, these annuities could be repeat performers in 2018:

  

  • North American Rapid Builder IUL (indexed universal life). This product generated a return last year of 10%, making it the top performer. It is an indexed universal life product, not a FIA, but very similar to one – owners participate in an index when the market rises, but do not lose money when the market declines.

    North American is pegged to the S&P 500. Last year, it offered a cap of 11.5%, minus fees. (The cap has since been cut to 10.5%.) This cap was roughly twice as high as most FIA caps and, unlike FIAs, North American charges no surrender charges. It also offers an unusually generous death benefit – twice as much as your investment.

    Unfortunately, this product is not for everyone. For starters, as consumers of a life insurance product, buyers must be healthy and cannot be smokers. In addition, the minimum investment is $100,000, and the product is for non-qualified accounts only. This means it offers fewer tax advantages than qualified accounts, such as IRAs. Applicants are examined by a paramedic. Fees are low – 1.5% less annually — but the lowest of all are offered to younger people in superior health.

    North American offers a guaranteed annual return of 2.5%, minus fees. The fact that it is non-qualified can be tempered by transferring the balance to an annuity at some point, continuing to defer taxes through what is known as a 1035 exchange. Again, there is no surrender charge.

If you want to know more about these products, call (866) 223-2121 or send us an email.

 

  • Delaware Life Retirement Stages 7. This no-fee FIA returned 8.73% in 2017. Pegged to the S&P 500, its participation rate last year was a then-generous 45%, and it increased to 50% in 2018.

    The minimum purchase price is $10,000. It offers no guaranteed return but has no riders and no fees. It has a surrender schedule of seven years, better than an average of 10 years among most FIAs.

    Other flavors of this annuity pay 100% of the S&P’s performance, but with a substantial catch – a cap of 5.6%.

    Owners can withdraw 10% annually penalty-free. They can also purchase a Return of Premium rider for 0.4% a year, erasing surrender charges.

 

  • Athene Ascent Accumulator 10. The index attached to this FIA, which uses a two-year crediting formula, returned an average annual rate of 8.69% for the two-year period ended in 2017, including a 30% premium on the performance of the index.

    The premium for 2018 has been increased to 40%.

    The minimum investment for this return is $100,000. Other smaller but still respectable returns would have required substantially less.

    Athene Ascent invests in the relatively exotic BNP Paribas MAD (Multi Asset Diversified) index. This is a rules-based index comprised of eight components – three equity futures indices, three bond futures indices and two commodity indices. This means it will not equal the performance of a stock-based index in a good year but may beat it in a bad or mediocre year.

    This annuity provides a guaranteed annual return of 1%, calculated as simple interest. It offers a surrender schedule of five, seven or 10 years. The longer the surrender period, the higher the return. The 8.69% return cited above is based on the 10-year surrender schedule.

If you want to know more about these products, call (866) 223-2121 or send us an email.

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