Best Paying Annuities Today – Part 2

This month we continue our survey of the best-paying annuities available today, which we began last month.

Let’s start with Table 1 on the next page. This is a collection of the best annuities for certain situations or goals.

If you’re looking at indexed annuities and want to maximize growth, consider Fidelity & Guaranteed’s LegendMark. It has generous monthly and annual caps that compare favorably with the long-term returns of the category. These are caps or limits, not guarantees. If your investments in the annuity do poorly, you won’t be credited with the limits. The worst case is a 0% bear market return.

Next is the variable annuity with the best survivor benefit. This can be an alternative to life insurance for someone who isn’t insurable. The Nationwide Variable Annuity Destinations B has a rider that guarantees your survivor a minimum 5% annual growth on your deposit. The rider can be added for an additional 0.65% annual fee.  If your investments do better than 5%, your survivor receives the higher amount. You can select the most aggressive investments, and your beneficiary will receive at least 5% annually on your deposit. Another unique feature is that a couple can buy the annuity jointly and the death benefit will be triggered on the death of either spouse.

Plus, you can pick how your account is invested from over 80 different funds.

Keep in mind that the 5% minimum annual increase is only on the death benefit. It doesn’t apply to what’s available during your lifetime. Also, this isn’t the same as a life insurance benefit. Your beneficiary will have to pay ordinary income taxes on the gains just as you would. A life insurance benefit would be tax free. The exact amount your beneficiary receives will depend on how long you hold the annuity before passing.

For those who want to cover long-term care expenses, the ForeThought ForeCare annuity combo remains the best. Full details are in our July 2013 visit.

For a low-cost variable annuity, consider the Jefferson National Monument Advisor. It has a $20 per month flat fee and lets you choose from over 350 investment accounts. But it’s designed to be implemented with an outside investment advisor who receives an additional fee.

Let’s turn to Table 2. The Indexed Annuity with Lifetime Income Payout Rider is very popular these days. Indexed annuities provide a guaranteed minimum return but also give you the opportunity to earn a higher return based on the returns of one or more stock indices. You won’t earn the full return of the index most of the time, but if stocks do well you’ll earn more than is available from ordinary traditional annuities, bonds, and CDs. Full details about indexed annuities are in our April 2014 and November 2013 visits.

The Lifetime Income Payout Rider on an indexed annuity is popular because it guarantees a minimum lifetime income once you begin distributions. Also, many of the riders will have the income increase by a guaranteed amount annually. A standard rider will guarantee annual income equal to at least 5% of your initial deposit for life, no matter how long you and your spouse life.

My annuity expert, Todd Phillips, points us toward the American General Power Select Plus Income Indexed Annuity, a new annuity and not widely-distributed annuity. It gives you a higher payout than other annuities from insurers with good financial safety ratings. What’s more interesting is to compare the payouts with those of the delayed income annuities (also known as longevity annuities) in Table 3. You can see that when a 65-year-old couple buys today and defers the distributions until age 70, the indexed annuity in Table 2 has higher initial and lifetime payouts than the delayed income annuity.

This shows the importance of shopping around and working with insurance brokers and agents who have access to a wide range of annuities instead of those from only one or two companies. If you have questions about these or other annuities, I recommend calling Todd Phillips of Phillips Financial Services at 888-892-1102. He put these tables together for me and can answer your questions about almost any annuity.