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Which Fixed Indexed Annuity is Best?

Updated on March 18, 2014
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North American Company For Life and Health Charter 14 Fixed Indexed Annuity

The North American Charter 14 is an Index Cap Rate only product that truly is in a class of it's own. Other contracts mock it but not many are better.

The Bonus

Depending on the state you live in, the Charter 14 fixed indexed annuity gives a 10% upfront bonus upon deposit of funds. This bonus is yours from day one and is not recaptured if you surrender your contract early. That's not the special part about this annuity, because there are other rival annuity contracts on the market that offer the same. What makes this contract special is that North American Company will also give you a 10% bonus on all new deposits for the first 7 years of the contract. It's like having an employer that matches your contributions by 10%. This contract would be great for anyone making Roth or any type of IRA contributions. Because of that single feature makes this contract better than most of it's competitors.

Indexing Strategies


The Charter 14 annuity allows the owner to choose from four different indexing strategies. These strategies are:

  1. Daily Average Index Cap Rate
  2. Annual Point-To-Point with Index Cap Rate
  3. Monthly Point-to-Point with Index Cap Rate

North American Charter Cap Rates Cap Rates as of January 9, 2014

14 Year Option
Daily Average
Annual Point to Point
Monthly Point to Point
S&P 500
3.60%
3.00%
1.55%
DJIA
3.75%
2.85%
N/A
S&P MIDCAP 400
2.85%
2.50%
N/A
RUSSELL 2000
2.80%
2.55%
N/A
NASDAQ-100
N/A
2.65%
1.35%
EURO STOXX 50
N/A
3.10%
N/A
HINDSIGHT INDEX STRATEGY
N/A
2.25%
N/A

The Caps

When you look at the chart above, you are probably thinking that the caps seem a little low. For instance, if you were to choose the Daily Averaging indexing option, the most you can earn in one year is 3.75% in the DJIA index. The most you can earn using the Annual Point to Point strategy is 3%. If you look at the Monthly Point to Point Strategy, you will see that it only offers a 1.55% cap. This cap is per month, so the potential growth cap for the year is 18.6%. Not many companies offer the monthly point to point option. Most companies offer a monthly average with a lower annual cap. This indexing feature makes this annuity better than most of it's competition. Each year your contract locks in the gains and ratchets up never experience a loss.


Charter 14 Surrender Penalty Chart

Contract Year
 
1
18%
2
18%
3
17%
4
15%
5
15%
6
15%
7
15%
8
14%
9
12%
10
10%
11
8%
12
6%
13
4%
14
2%
15+
0%

Surrender Penalty

The Charter Annuity does have a long set of penalties, but don't forget about the upfront bonus you received. This bonus is not recapture-able. It's not exactly like taking 10% off the surrender penalty but you get the point. Let me also say that I do not recommend the purchase of an annuity by anyone who needs liquid access to their money. The purchase of an annuity is for long term gains. It is important to note that surrender penalties are waived upon death of the annuitant.

Interest Adjustment

The Charter 14 also includes an Interest Adjustment,
that may decrease or increase your Surrender Value,
depending on the change in interest rates since your
annuity purchase. Lower interest rates at time of issue
may result in less opportunity for a positive Interest
Adjustment in future contract years. In certain rate
scenarios at the time of issue, it may not be possible to
experience a positive Interest Adjustment.
Due to the mechanics of an Interest Adjustment feature,
the Surrender Value generally decreases as interest
rates rise or remain constant. Likewise, when interest
rates have decreased enough over a period of time,
the Surrender Value generally increases. However, the
Interest Adjustment is limited to the interest credited to
the Accumulation Value.
This adjustment is applied only during the surrender
charge period to surrenders that exceed the applicable
penalty-free amount.

Free Withdraw Amount

The Charter 14 annuity offers annual free withdraws every year starting in the 13th month of up to 10% of the annuity contract's value.


Nursing Home Confinement Rider

After the first contract anniversary, should the annuitant become confined to a qualified nursing home facility for at least 90 consecutive days, we will increase the penalty-free withdrawal amount by 10% of the Accumulation Value each year while the annuitant is confined. This rider is only available for issue ages 75 and younger and is automatically included with your annuity at no additional charge.

Guaranteed Income Rider

Need a guaranteed income stream that you can't outlive? The Charter contract offers an optional income rider called the Guaranteed Benefit Income Rider. With this rider, you have three choices:

Option one: Bonus Credit: 5.50% for life Cost: 0.40%

Option two: Bonus Credit: 6.75% for the first 10 contract years with reset opportunity Cost: 0.95%

Option Three: Bonus Credit: 6.25% for the first 10 contract years; with option to extend for an additional 10 years Cost: 0.95%*

Recommendations

Where it Works the Best:

  • Individuals who are saving for retirement making annual deposits. All deposits made during the first 7 years are credited with a 10% bonus. (Small Business Owners)
  • Individuals who understand that it's what you keep that counts.


Where it Works the Worst:

  • Individuals who need access to more than 10% of their account value in any one year.
  • Individuals who seek MAXIMUM RETURNS.

Company Strength

A.M. Best
Standard & Poors
A+ Superior
A+ Strong
 
 

Allianz Life MasterDex X Fixed Indexed Annuity

The MasterDex X fixed indexed annuity is a popular annuity. Many agents like to sell Allianz Life because of this product.

Source

The Bonus

The MasterDex X fixed indexed annuity offers a 5% bonus on all deposits for the first 3 years of the contract. Not as good as North American's Charter annuity, but still a nice bonus. Unlike the Charter annuity, the MasterDex X annuity recaptures this bonus upon early surrender of the contract.

Bonus Vesting Schedule

Year
Percentage
1
10%
2
20%
3
30%
4
40%
5
50%
6
60%
7
70%
8
80%
9
90%
10
100%
Example: If the owner of an annuity contract wanted to surrender the MasterDex X contract in year 5, 50% of the initial bonus would be subtracted from the account value in addition to surrender charges.

Indexing Strategies

The main reason I included this product is because of it's indexing strategies. This annuity contract offers three indexing options:

1. Monthly Sum Crediting - This strategy is the same as the Charter annuity, This strategy is a monthly point to point with a cap.

2. Annual Point to Point - Once again, the same as the Charter contract. The contract measures the gain from the beginning of the contract until one year later with an annual cap.

3. Monthly Averaging: This is why I included this contract. This indexing strategy will give you 100% of the monthly gains minus a spread.

Just like the Charter 14 all gains are locked in and can never be lost. Each year your contract will either have a positive gain or no gain, never a loss.

The Caps

MasterDex X
Annual Point to Point
Monthly Sum
Monthly Average with Spread
Nasdaq 100
3%
1.7%
 
S & P 500
5%
1.7%
 
Blended Monthly Average
3.00%
 
3.25% Spread
Euro STOXX 50
3.25%
1.8%
 
 
 
 
 
 
 
 
 
Rates and caps are as of March 17, 2014

MasterDex X Surrender Penalty Chart

Year
 
1
10%
2
10%
3
10%
4
8.75%
5
7.50%
6
6.25%
7
5.00%
8
3.75%
9
2.50%
10
1.25%
11+
0%
 
 

Surrender Penalties

The surrender penalties for this annuity start off at 10% for first three years and then decreases by 1.25% every year. Surrender Penalties are waived upon death of the annuitant.

Interest Adjustment

This annuity does not have this feature.

Free Withdraw Amount

MasterDex X offers annual free withdraws every year starting in the 13th month of up to 10% of the annuity contract's value.

Nursing Home Confinement Rider

After the first contract anniversary, should the annuitant become confined to a qualified nursing home facility for at least 90 consecutive days, we will increase the penalty-free withdrawal amount by 10% of the Accumulation Value each year while the annuitant is confined. This rider is only available for issue ages 75 and younger and is automatically included with your annuity at no additional charge.

Simple Income III Rider

Source

Guaranteed Income Rider

Allianz's Income rider is called Simple Income III. The annuity will increase in value every year by a "simple" bonus of 8% until the annuitant either turns 90 years old or starts taking the income. Don't get too excited about the 8%, please google the difference between compound interest and simple. When the annuitant decides to start taking an income, they have 3 options.

Option #1: Guaranteed Level payment for the rest of the annuitant's life.

Option #2: Guaranteed level payment that has the opportunity to increase with interest credits to your annuity.

Option #3: Guaranteed level payments that increase with inflation. The income starts off lower but this option is tied to the Consumer Price Index (CPI-U), the payments can increase with the cost of living goes up. Gains are capped at 10% per year and are limited to the first 20 years of income.

Cost for the rider 0.95

Company Strength

A.M. Best
Standard & Poor's
Moody's
A Excellent
AA Very Strong
A2 Good
 
 
 
2013 Ratings
Source

Total Value Annuity

Source

Security Benefit Total Value Annuity

This fixed indexed annuity is different from any other annuity on the market. Security Benefit's Total Value Annuity is linked to the S & P 500, TVI (Trader Vic Index) and the TVBI (Transparent Value Blended Index). No other annuities have this combination.

Unlike other index annuities that mainly use the equity indexes, the TVA annuity uses mostly commodities with their TVI Index strategy.

The Bonus

States
All States except those listed to the right
AK, IN, ME, MN, MO, NH, NJ, NV, OH, OR, PA, SC TX, UT, WA
CA, FL,
CT, DE
Bonus
8%
5%
7%
2%
Bonus with either Rider Purchased
10%
7%
9%
2%
 
 
 
 
 
If a Death Benefit Rider is purchased and you are 76 or older, the Bonus rate does not increase.

Bonus Recapture Schedule

Year
Recapture Percentage (Most States)
AK, IN, MN, MO, NH, NJ, NV, OH, OR, PA, SC, TX, UT, WA
1
100%
100%
2
100%
90%
3
100%
80%
4
100%
70%
5
100%
60%
6
100%
50%
7
80%
40%
8
60%
30%
9
40%
20%
10
20%
10%
11+
0%
0%

Indexing Strategies

As I said earlier is that this annuity uses three indexes.

  1. S & P 500 Annual Point to Point strategy
  2. TVI (Trader Vic Index) 5 Year Point to Point strategy
  3. TVBI (Transparent Value Blended Index). 5 Year Point to Point strategy

The Caps

S & P 500 Annual Point to Point
TVI 5 Year Point to Point
TVBI
3%
No Cap Annuity Owner keeps 100% of gains
No Cap Annuity Owner keeps 100% of gains
 
 
 
 
 
 

Surrender Penalty Chart

Year
Most States
AK, IN, MN, MO, NH, NJ, NV, OH, OR, PA, SC, TX, UT, WA
Florida
1
12%
9%
10%
2
12%
8.1%
10%
3
11%
7.2%
10%
4
11%
6.3%
10%
5
10%
5.4%
10%
6
9%
4.5%
9%
7
8%
3.6%
8%
8
7%
2.7%
7%
9
6%
1.8%
6%
10
4%
0.9%
4%
11+
0%
0%
0%

Surrender Penalties

The surrender period is 10 Years (9 years for contracts issued in CT and DE)

Interest Adjustment MVA

The Interest Adjustment aka as MVA applies during the Surrender Charge Period. The MVA is based on the interest rate market at the time you purchase your contract and when the MVA applies, measured by the 10 year Constant Maturity Treasury interest rate. If interest rates in the market are lower by 0.25% or less, or if the market interest rates are lower by more than 0.25% than when you purchased your contract, an additional amount is added. The 0.25% threshold does not apply to contracts issued in Connecticut.

The MVA does not apply in Alaska, California, Indiana, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Pennsylvannia, South Carolina, Texas, Utah, and Washington.

Free Withdraw Amount

The TVA Annuity offers annual free withdraws every year starting in the 13th month of up to 10% of the annuity contract's value.

Nursing Home Confinement Rider

The TVA Annuity is much more flexible when it comes to Nursing home confinement. After a 90 day stay in either a nursing home or hospital, Security Benefit Life will waive all surrender penalties and bonus recapture fees.

If you are diagnosed with a terminal illness after the contract date, they will waive all surrender penalties and bonus recapture fees.

Guaranteed Income Rider

The guaranteed income rider offered with this annuity is definitely one of the best in the industry. The roll up interest rate is 4% and then at the end of each 5 year period, they credit 100% of the actual gains on top of the 4% annual gain. The income rider is for 10 years and can be renewed for 10 more years.

Income Doubler: One other great feature about this income rider is that if you become unable to perform 2 of 6 ADL's (Activities of Daily Living) Security Benefit will double your income.

Death Benefit Rider

This is a rider that neither North American or Allianz offer. The Death Benefit Rider is unique and is geared towards individuals who have no interest in touching this money and want to leave it to their heirs. This rider works the same as the income rider, it guarantees a 4% gain every year and then at the end of every 5 year period, they credit all gains to this account.

Your Opinion Counts

Which Annuity Do You Like Best?

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Which Fixed Indexed Annuity is Best?

So which fixed indexed annuity is best? Each annuity has features that are attractive to different people with different needs. Which annuity do you think fits your needs best? You decide! Please participate in our poll and help us decide, which fixed indexed annuity is best.

Disclaimer

This is an independent product review, not a recommendation to buy or sell an annuity. North America Company for Life & Health, Allianz, and Security Benefit have not endorsed this review in any way nor do I receive any compensation for this review. This review is intended to be an independent review. Before purchasing any investment product be sure to do your own due diligence and consult a properly licensed professional should you have specific questions as they relate to your individual circumstances. All names, marks, and materials used for this review are property of their respective owners.

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