What’s Covered in this Allianz 222 Annuity Review?In today’s review, we’ll be covering the Allianz 222 Fixed Index Annuity with Protected Income Value. The Allianz 222 is a fixed index annuity with available riders that provide lifetime income guarantees/death benefits and a few other bells and whistles. If you’ve been pitched this annuity and are looking for all the info – good, bad, ugly and even a 35-minute video that shows exactly how to determine the REAL returns you might earn with this annuity – you’re in the right place! (Note: Because this insurance company’s name sounds so much like the word “alliance,” it is sometimes referenced by those seeking more information as Alliance annuities – or in this particular case, Alliance 222 annuity). Why do we specify real returns? One of the most concerning things about annuity sales today is the way these financial products are sometimes presented by financial salespeople. Annuities provide benefits that a conservative retiree might find desirable, but they are sometimes sold with the promise of returns and potential fund performance that may not be entirely true. (But keep in mind that there are various charges on many annuity contracts that could lower the overall return, too. Some of these may require you to contribute an additional amount of premium). Also, because the market tends to move up and down regularly, an index-linked annuity such as the Allianz 222 may have a better return in some years over others. For instance, a 30% drop like the one incurred during the Coronavirus outbreak can literally happen overnight. In this case, the market was at an all-time high in mid-February 2020, only to incur daily 3- and 4-figure losses consistently throughout the following weeks. Ouch! And as always, it’s important to keep in mind that past performance is definitely no guarantee of the future results that you’ll receive in most any financial vehicle. This is especially the case when it comes to your life savings. Before you buy, it’s important you understand the savings and income components of the annuity, along with the difference between what financial salespeople say, and how the product actually works, so you can determine if the annuity is a good fit for you. Be especially careful if the financial salesperson tries to use this annuity as a replacement for an existing annuity you already own, but that still has surrender penalties and charges. As the long-time sweetheart of the annuity industry, the Allianz 222 offers buyers a rather large bonus which can sound attractive, but which you’ll learn shortly is far from a free lunch.
Annuity and Retirement Income Planning Education You Can Actually TrustA popular way people are getting introduced to this annuity is through free local dinner seminars where financial salespeople send out thousands of direct mail pieces to invite folks generally ages 50 to 75 to a local restaurant for financial education and a free dinner. Attendees are told about the how each of the annuity’s components – tax-deferred growth and income – could benefit them both before and after retirement. After the seminar presentation, the annuity sales agent encourages the seminar attendees to sign up for a free consultation where the Allianz 222 may be proposed as a possible option for their retirement financial needs. There are also a ton of annuity marketing websites advertising either education on annuities or making bold claims that are also responsible for introducing many people to the Allianz 222. For readers who have found this website for the first time and don’t know much about us, we are an independent annuity research firm comprised of licensed annuity agents, researchers and self-proclaimed math geeks that have joined forces to revolutionize the annuity industry. We started AnnuityGator.com to publish the most comprehensive, independent annuity reviews on the web; and have been doing so longer than any of the (now many) copycat sites out there. If you stumble upon other “independent” “unbiased” or “impartial” annuity review websites, you’ll know what we’re talking about. 😉 We firmly believe that the financial industry has gotten too expensive, too complicated, and too out of touch with actually helping people reach their goals. We want to change the status quo and start a high quality, low cost, results-driven retirement planning revolution. Now that we’re acquainted, let’s dig in!
Opening Thoughts On The Allianz 222 Annuity With Protected Income ValueFor nearly 125 years, Allianz Life Insurance Company of North America has been helping Americans prepare for their financial future. The company is a leading provider of retirement solutions – including annuities – which can provide an income stream for life. The company is a subsidiary of Allianz SE, a global financial services group that is based in Munich, Germany. The consistently high ratings earned by Allianz reflects the company’s financial stability and strong balance sheet. These include a(n):
- A+ (Superior) from A.M. Best
- A1 from Moody’s Investor Services
- AA (Very strong) from Standard & Poor’s
- Allianz 222 offers a 15% bonus (as of August 2020) on any premium you put into your annuity in the first 18 months.
- You also receive an interest bonus equal to 50% of any interest you earn from your allocations (more on this later).
- Once you start receiving income, your lifetime income withdrawals can increase based on any interest you’ve earned, in addition to the above-mentioned bonus
- And, you can double your annual maximum withdrawal under certain hospital / nursing care / assisted living situations.
- Your beneficiaries can receive your annuities full accumulation value (very different than the fancy income values from above).
- Or, they can get the full protected income value as annuity payments spread out over 5 years.
Before we get into the gritty details, here are some legal disclosures…This is an independent product review, not a recommendation to buy or sell an annuity. Allianz Life Insurance Company of North America has not endorsed this review in any way nor do we receive any compensation for this review. This review is meant to be an independent review at the request of readers so they could see our perspective when breaking down the positives and negatives of this particular model annuity. 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 the property of their respective owners.
How Allianz Life Insurance Company of North America Describes the 222 AnnuityPer the 222 brochure, here are some key points as to how it’s marketed and sold:
- Principal protection / no loss of principal in any type of market environment
- Valuable guarantees and death benefit protection
- Income tax deferral / tax-deferred growth
- Several income options, including an option for guaranteed lifetime income / lifetime income withdrawals
- More than one option for market indexes to track
- Flexible interest crediting options and death benefit
How Financial Advisors Might “Pitch” This AnnuityThe Allianz 222 is a lot like other annuities that brokers/agents call a hybrid annuity. In the past few years, insurance agents have fallen in love with the term “hybrid annuity.” Even though the insurance companies don’t seem to like the term a whole lot, we guess the cool sounding name makes it easier to sell annuities, so it’s caught on nonetheless. When sales agents use the term “hybrid,” they are referring to an annuity that has multiple annuity features rolled into a single product. In the case of the 222 Annuity from Allianz Life Insurance Company of North America, it combines a lifetime income guarantee or other payout options with the possibility of higher returns based on market-linked credit methods; so whether Allianz likes it or not – some annuity sales agents may call it a hybrid annuity.
- The protection from market losses combined with higher return potential
- The guaranteed income for life via the Protected Income Value (PIV)
- The return potential via the Barclays US Dynamic Balance Index
It can also be really helpful if you know how – and how much – the advisor who is offering you this annuity is getting paid. Unfortunately, even though the majority of insurance and financial services representatives work hard to do what is best for their clients, money definitely still talks – and if a commissioned salesperson is weighing the odds between being able to eat steak or mac and cheese, they’re more than likely going to push hard to make a sale.
Some Important Info on the Barclays Dynamic Balance Index ReturnsA feature that has started to come up with many of the newest fixed index annuities are proprietary indexes for determining the returns (or index credits) of the annuity. In the case of the Allianz, many of their newest products (like the 222, 365, and 365i) include the Barclays Dynamic Balance Index. When we first wrote this review, we warned investors that the Dynamic Balance I Index was new. It shows a history going back to 1989, but that is almost all back-tested. Back-testing is done to show how the formula used to create the index WOULD HAVE measured up in past market conditions. We all need to be extremely careful when we look at back-tested data as it is done with the benefit of hindsight. In other words, pretty much anyone can create a special “formula” that would have picked all the best investments and times to be in the market. Just because something back-tests well does NOT mean it will perform the same in the future. Case in point: we now have a new development to report… Prior to 2015, the Alliance 222 used the Barclay US Dynamic Balance I Index in order to give investors a hypothetical illustration of returns. Now, they are using the Barclays US Dynamic Balance II Index, which has only been in existence since April 14, 2015. We actually spoke with an internal sales consultant and asked why they changed from the Barclays I to the Barclays II, and were told, “because this one back tested higher than the other.” Take a look for yourself at the difference. Here’s the disclosure directly from the Barclays website indicating the back-tested data and its limitations (red box and lines added by AnnuityGator.com): This is the OLD index used prior to 2015:
These rates are guaranteed for one year. They are declared at the time of issue and on each contract anniversary. To check out the most up-to-date Allianz 222 annuity rates and index crediting methods, go here.(Note here that the returns can differ, depending on your state of residence). You can also take a look at the chart below, which also shows the movement of this index through March 2021.
Accessed: August 11, 2020Accessed: March 31, 2021. Remember, some financial sales folks may depend on these hypothetical illustrations to make their pitch look impressive. Here again, there are actually two versions with different caps and spreads on the crediting methods used by the Allianz 222 depending on what state you live in. If you watch the video below, we break this down in detail using data directly from Barclays. If you didn’t watch the video, then just let this text be your caution. If the Barclays Dynamic Balance I Index was new, then the Barclays Dynamic Balance II is in its infant stage, not even crawling yet. We’d caution against putting any real weight on the validity of these hypothetical returns. Plus, there are other items, such as surrender charges, that could also have an impact on the overall return that you receive. There are other potential items that can reduce the amount of net spendable income that you receive. For instance, you will incur ordinary income tax on withdrawals. For instance, in a non-qualified account, taxes would be due on the gains, but not the amount that is considered a return of your premium. But if you’ve “rolled” money over from an account funded with pre-tax dollars – such as a traditional IRA or 401(k) – then you would owe ordinary income tax on the entire amount of your withdrawals. Plus, you could also have to pay a 10% early withdrawal charge to the IRS if you make withdrawals before you turn age 59 1/2 – even if you do so after the surrender period has elapsed).
The Annuity Gator’s End Take on the Allianz 222 Annuity with Protected Income Value (PIV):Where it works best:
- For producing a reliable, “pension-like” guaranteed income stream / lifetime withdrawals (although there are other annuities with higher guaranteed income at this time)
- For producing lifetime income payments / an income for life that cannot be outlived by a surviving spouse
- For investors who have a family history of longevity
- For investors that have no need for their money or generating large returns, but want it to grow safely until transferred to their beneficiaries
- For investors willing to defer income payments from the annuity for 10 years or longer in order to get maximum benefit from the PIV (protected income value)
- For those that do not plan on using the Protected Income Value (PIV) feature
- For those seeking maximum long-term growth
- For those looking for a good “worst case scenario” annuity
- For those who don’t want to incur surrender charges if they need to make withdrawals in the early years
In SummaryOne of the most important things for investors to understand is that the “Protected Income Value” is not the actual return, nor is the “income percentage” the actual return. We’re having a difficult time seeing it produce the 5% to 8% return numbers a lot of uneducated financial salespersons toss around when trying to get you to buy it. As noted in the video review below, a couple both age 60 with a 30-year life expectancy could realistically expect to earn somewhere between 2% and 6% over the next 30 years – depending on which options they select and how long they defer taking income. You should know that you can improve your income situation by as much as 10% annually if you work with a financial professional who knows how to employ a strategy with these income creation tools. These annuity optimization strategies may lock in a greater guaranteed income for life. Most financial salespeople who are only interested in selling products (and fee-based advisors who can’t sell annuities) typically don’t know how to employ these creative and mathematically optimized strategies, and so investors are left on their own to figure it out. For someone strictly looking for guaranteed income with no market risk, the Allianz 222 can do the job, there may be better options available. For someone looking for an investment that cannot go down, is content with low / mid-to-single digit returns, and wants the transfer of risk annuities are really good at – this might be a good fit, though we’ve reviewed other annuities we think do that better. Also, we’re still convinced some agents don’t realize what the real returns are, and may significantly over-promise what’s realistic – so be especially wary of anyone who suggests this annuity will work better than how we illustrated it here. If the agents are being upfront and honest, you’ll notice their explanations will match very closely (if not exactly) as described in this review. When that happens, you have an agent you can trust. Allianz has done a very good job of producing easy to understand literature that in no way misrepresents their product. They can’t, however, control every word that comes out of every insurance sales agent’s mouth – so just always be careful out there! As a recap to the video below (for those that don’t have 35+ minutes to watch it), the Allianz 222 Annuity may not actually give a 7% return. Nor will it likely return 6%, and it’s possible the real returns will be 5% or less (maybe even 2% or less). When financial advisors use the bigger numbers, they are referring to percentages used to calculate the income guarantee. In summary, the Allianz 222 has good attributes – it’s backed by a quality company, it has the potential for growth, and you do have some access to money. BUT it may fall short on guaranteed income. People often buy lifetime guaranteed income annuities for what they WILL provide, not for what they MIGHT provide. Allianz is big on the might, and it might not be as mighty as other annuities out there. If you want to see if there are other annuities that can go up against the mighty Allianz 222, you can reach us via the Free Annuity Help form below. We can show you what your other options are so that you can compare and point you in the right direction.
Have Questions on the Allianz 222 or any other Allianz Annuity? Did You See Any Mistakes in this Allianz 222 Annuity Review?Annuities can be complex. That’s where having an Annuity Investigator who loves math comes in. We make the complex, simple If you have questions please let us know. [You can reach me via the Free Annuity Help form here] We realize that annuities can be complex and confusing and a lot of financial salespeople are pushing investors hard to buy them. But you need to know the real facts to make sure if you go that route, you don’t end up regretting it later. After all, annuities are long-term investment vehicle with contracts, surrender penalties, etc. For some people, they won’t make sense at all, but for some, they might. That’s where having an Annuity Investigator who loves math comes in. We make the complex simple. If you know anyone who has an annuity or is thinking of buying one, please share this post with them. We know a lot of people are getting very conflicting information and our goal in writing this review and making the video was to educate in an objective way. If you have a Facebook account you can click on the little “Facebook” icon and share this article. That way more people will be able to find it and hopefully, more people will benefit. Thanks for bearing with us on this rather long post. We hope you found it beneficial in your research. Lastly, like all humans – we do make mistakes. If you see one on this review please reach out and let us know. We are always more than happy to make corrections and give credit where it is due. If you’re an investor and this review causes confusion and creates questions, feel free to reach out as well. We can’t always get back right away but usually, we can clear up those questions within a day or two. Best, The Annuity Gator P.S. We included a few more related links to the Allianz 222 below that you might find useful:
- Allianz 222 Annuity Complaints
- Allianz 222 Annuity Statement of Understanding
- Barclays U.S. Dynamic Balance Index ll
- Allianz MasterDex X with Simple Income Rider Annuity
- Allianz MasterDex X Index Annuity
- Allianz Retirement Pro Variable Annuity
- Allianz Vision Variable Annuity
- Allianz Life 360 Annuity
- Allianz Life Core Income 7 Annuity
- Allianz Life Allianz Endurance Plus Annuity
- Allianz Master Dex 10 Annuity