What will we be covering in this review of the American Life Classic 5 Fixed Deferred Annuity?In this annuity review, we will be going over the following details regarding the Classic 5 Annuity from American Life:
- Type of annuity
- Charges and fees
- Current rates
- Realistic short and long-term expectations of performance
- How this annuity may best be used
- Why this annuity may not fit in a portfolio
Annuities can be complex. That’s where having an Annuity Investigator who loves math comes in. We make the complex, simple.
Over the past several years, annuities have become a much more popular component of retirement planning. One reason for this is because, as people are living longer, having a retirement income that lasts much longer is necessary – and unlike any other insurance or financial product in the market place, an annuity is the only vehicle that can guarantee you an income for the remainder of your lifetime, regardless of how long that is. Annuities aren’t just some new-fangled financial vehicle, either. In fact, annuities have actually been in existence ever since the Roman empire, although some believe that they were initially created in Egypt, somewhere between the year 1100 BC and 1700 BC. When the Great Depression hit the U.S. in the 1930s, annuities gained popularity as a safe place from volatile markets. They again became a go-to product during the Great Recession in 2008 and 2009 – primarily fixed and fixed indexed annuities – because they don’t lose value, even in a downward spiraling market. Fixed annuities have become particularly favored by those who are at or approaching retirement time, as people are getting much more leery about entrusting their savings to an extremely volatile stock market. So, if you’ve been considering a fixed annuity like the American Classic 5 from American Life because you want to ensure that your money is safe and that you’ll have a lifetime income that you can count on, this product could be a viable option for you. But, before you go and plunk down a large chunk of your savings into this (or any) annuity, it is highly recommended that you first obtain an understanding of what a fixed annuity will and won’t do for you. That’s where the Annuity Gator comes in!
Annuity and Retirement Income Planning Information That You Can TrustIf this is the first time you have visited our website, we’d personally like to welcome you to AnnuityGator.com. We are a team of experienced financial pros and retirement income experts who are dedicated to providing you with comprehensive and non-biased annuity reviews. We have been offering these reviews for quite a few years now – much longer than our competitors have been and because of this, we have come to be a highly trusted source of annuity information. We have hundreds of reviews in our annuity review database on our website. So, please feel free to spend as much time as you’d like looking over them. If your search for annuities has been conducted via the Internet, it is likely that you have come across a lot of conflicting details about these products. This isn’t really all that surprising though, as there are a multitude of different annuities in the market today, and there are numerous opinions about them. Even though there are a number of very good websites that are focused on marketing their annuities online, the reality is that some of these sites will work hard at luring you in by touting some pretty impressive claims, such as:
- Highest income payouts
- Top-rated annuity companies
- Guaranteed income for life
- Lowest annuity fees
The American Life Classic 5 Fixed Annuity at a Glance
|Product Name||American Classic 5|
|Type of Product||Fixed Deferred Annuity/Multi-Year Guarantee Annuity (MYGA)|
|A.M. Best Rating||B++ (Good)|
|Phone Number||(402) 489-8266|
Opening Thoughts on the American Classic 5 MYGA Annuity from American LifeOriginally founded in 1960, American Life was restructured in 2018. Today, this company offers financially stable insurance products to customers so that they can ensure ongoing income in retirement and protect loved ones in case of the unexpected. American Life is in a partnership with FAST, a leading digital platform, which allows customers to plan financially without ever having to leave the comfort of their home – a concept that has become so much more important since the COVID-19 pandemic. This platform also makes purchasing insurance and annuities fast and easy. Without a significant amount of overhead expense, American Life possesses a flexible capital model that allows the insurer to quickly meet the changing demands of both its customers and the overall marketplace. With so much volatility and unpredictability in the stock market over the past several years, the demand for fixed annuities has grown quite a bit, particularly as a way for retirees (and those who are preparing for retirement in the near future) to keep assets safe, and to ensure that they have a stable and reliable income going forward. Unfortunately, though, due to the historically low interest rate environment that we’ve been stuck in for nearly a decade now, the return that has been offered by fixed annuities has been very low. In fact, in many instances, the returns that are obtained on fixed annuities have not even been enough to outpace the inflation rate over time. Because of these low rates, your future purchasing power could be affected – especially if you plan to use the income from a fixed annuity as a primary source of your retirement income down the road.
Before we get into the gritty details, here are some necessary legal disclosures…This is an independent annuity product review. It is not a recommendation to purchase or to sell an annuity. American Life has not endorsed this review in any way, nor do we receive any type of compensation for providing this review. This annuity review is meant solely to be an independent review at the request of our readers so that they may see our perspective when breaking down the positives and the negatives of this particular annuity. Prior to committing to the purchase of any type of insurance and/or investment vehicle, it is critical that you do your own due diligence, and that you also talk with a properly licensed professional if you have any questions that relate to your specific situation. All of the names, materials, and marks that have been used in compiling this annuity review are the property of their respective owners. For additional information on how to compare fixed annuities so that you can decide which may be the best one for you, click here in order to obtain our free annuity report.
How American Life Describes the American Classic 5 MYGA AnnuityOn its website, American Life describes the American Classic 5 annuity as a financial vehicle that allows for a simple and secure way to manage money into retirement. The American Classic 5 is a fixed deferred multi-year guarantee (MYGA) annuity, meaning that multiple contributions may be made to the product over time. These funds are allowed to grow tax-deferred, which means that there is no tax due on the gain until the time of withdrawal. Being a multi-year guarantee, or MYGA, annuity, the American Classic 5 provides a rate lock for five full years, no matter what occurs in the economy, the stock market, or interest rates. This, in turn, provides a low-risk and predictable return that is insulated from economic volatility. At the end of the five-year rate guarantee period, you can choose to either withdraw your initial premium – along with your guaranteed return – without paying a penalty. Alternatively, you could roll the account value into a new American Life annuity product. There are some other enticing features found on the American Classic 5 MYGA annuity, too, such as a death benefit that will pay out if the income recipient (the annuitant) dies during the term of the annuity. In addition, there is a “loyalty bonus” that rewards annuity holders for not making any withdrawals during the interest rate guarantee period. This can provide you with even more money in the account. As with other annuities, the American Classic 5 annuity can be converted into an income stream. These payments can last for a set period of time, such as 10 or 20 years, or for the remainder of your lifetime, regardless of how long they are needed. To visit the American Classic 5 Annuity information on the American Life website, go here. You can also take a look at the American Classic 5 annuity brochure by going here.
How an Insurance or Financial Advisor Might “Pitch” the Classic 5 AnnuityGiven all of the guarantees that a fixed, multi-year guarantee annuity can provide, it is likely that if you have been presented with the American Classic 5 Annuity by an insurance or financial advisory, they touched on the safety of principal, set amount of growth (that is locked in for five full years,) and the reliability of the income you can receive. What the advisor might not focus on, though, is the fact that most fixed annuities offer a painfully low rate of return – in some cases in the same neighborhood as CDs and government bonds. So, unfortunately, even though your principal is safe, you would be hard-pressed to meet, much less beat inflation.
What About Fees on the American Classic 5 Annuity?Even though there is no up-front commission deducted from your contributions to the American Classic 5 annuity, it doesn’t mean that you won’t incur any type of charges or fees with this financial vehicle. In this case, for example, if you withdraw more than a certain amount from your account (in this case, more than 10% of the contract’s value,) you will usually be hit with a surrender penalty. The length of the surrender charge period corresponds with the length of the interest rate guarantee period. There could also be taxes due on any of the gains that are accessed. Plus, if you take such withdrawals before you have turned age 59 ½, you may also incur an additional 10% IRS early withdrawal penalty. So, taking money out of the annuity can definitely cost you. With that in mind, it is important to make sure that you don’t contribute funds that may need to be used for emergencies and/or other obligations in the future.
The Annuity Gator’s End Take on the American Classic 5 Annuity from American LifeWhere it works best: This particular annuity will usually work the best for those who are looking for:
- Guaranteed lifetime income
- Safety of principal
- Slow and steady tax-deferred growth
- An interest rate guarantee of five full years
- Want access to most or all of your funds within the first five years (during the surrender period) of purchasing the annuity
- Are seeking a high rate of return on your money
- Do not intend to use the lifetime income feature