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Independent Review of the Allianz Index Advantage Annuity [May 2020 Update]

What We Will Cover in this Annuity Review

In this review, we will be discussing the following information regarding the Allianz Life Index Advantage Annuity:

  • Product TypeIndependent Review of the Allianz Life Index Advantage Annuity
  • Fees
  • Current Rates
  • Realistic long-term return expectations
  • How it is used
  • How it is most poorly used

Annuities can be complex. That’s where having an Annuity Investigator who loves math comes in.
We make the complex, simple.

If you’ve been considering the purchase of an annuity because you want your money to grow, while at the same time you want the assurance of having an ongoing lifetime income stream in retirement, then the Allianz Life Index Advantage variable annuity could be a good option for you.

However, prior to moving full steam ahead with the purchase of this, or any, annuity product, it is highly recommended that you first do a bit of research on how the product works, and on how it may or may not ultimately work out for you and your specific financial goals.

Throughout the past decade or so – and especially since the U.S. market downturn of 2008 and the 2020 Coronavirus pandemic – many investors have been pretty leery about diving into equity-related financial vehicles. (This is particularly the case if you still feel the sting of losing a significant chunk of your hard-earned retirement savings in the recession).

Yet, in order to keep your money, and your future purchasing power, up to speed with future inflation, most of the “safer” fixed financial options just simply won’t work either. So, what can you do? One option is to consider investing in what is oftentimes termed as a “buffer” annuity.

These products – which are essentially a type of “cross” between a variable and an indexed annuity, provide a measure of downside protection in return for a “cap” on the product’s upside performance. One of the key attributes that make these annuities different from an indexed annuity product is that buffer annuities attain some of their growth via exposure to structured financial entitles like options contracts.

In many cases, a buffer annuity will actually be structured very similarly to an indexed annuity in that it does not invest directly in a market index. Typically, a buffer annuity will place around 90 or 95% of its funds into fixed income securities, with the remainder going to derivatives like options and/or futures.

Being relatively new to the insurance marketplace, buffer annuities started entering the market after the economic crisis roughly ten years ago. These annuities have helped cater to those investors who wanted a higher cap than those available via indexed annuities while the U.S. continued to linger in its low interest rate environment.

Yet, even though this can sound like a great way to hedge inflation, and to accumulate funds on a tax-advantaged basis, annuities can be extremely confusing – especially “hybrid” products like buffer annuities. Given that, it is even more important that you know just exactly what it is that you’re getting into with this, or any other similar financial vehicle.

Annuity and Retirement Income Planning Advice that You Can Trust

If this is the first time you have been to our website, we would like to personally welcome you here to AnnuityGator.com. We are a team of experienced financial professionals who are dedicated to providing non-biased and in-depth reviews of annuity products. We’ve been at this for a number of years now – far longer than most of our “copycat” competitors – and because of this, we have come to be known as a highly trusted source of annuity information.

If you’ve been seeking information about annuities online, it is likely that you have come across many conflicting details about these financial vehicles. This isn’t really very surprising, though, because there are a lot of opinions (both positive and otherwise) about these products floating around the Internet.

You may also have recently attended a seminar about annuity products. During this workshop, the presenter may have touted information about the Allianz Life Index Advantage annuity (or some other similar annuity) and why the product may be right for you. This could have even been the catalyst that led you here to our website, in search of additional product details.

Although there are a number of very good websites on the Internet that are focused on offering their annuity products, there are some that will attempt to lure you in with some pretty bold claims like:

  •  Lowest fees
  •  Highest income payouts
  •  Guaranteed lifetime income
  •  Top-rated companies

Sound familiar at all?

Yet, while these claims may sound appealing, it is all the more important to know whether or not these claims are true. This is where our website can help. In fact, if you have come here in search of more in-depth details on the Index Advantage annuity, you are certainly in the right place. We dare say that the website you are on right now is the only place where you can find out all of the information – the good, the bad, and yes, even the ugly. Knowing the whole picture, though, can help you in determining whether this product will be right for you.

Just to be perfectly clear, here, this type of annuity can provide you with some nice benefits. This, however, is really only the case if the product fits in with your specific financial plans. With that in mind, you should also know why you’re going with this annuity – and why you are choosing it over a long list of other potential annuities that may be available to you.

So, if you’re ready to learn more, then let’s jump in!

Allianz Life Index Advantage Annuity

Product NameIndex Advantage Annuity
IssuerAllianz Life
Type of ProductVariable “Buffer” Annuity (Index Variable Annuity)
Standard & Poor's RatingAA
Phone Number(800) 950-5872
Websitewww.allianzlife.com

Opening Thoughts on the Allianz Life Index Advantage Annuity

Allianz has long been considered a strong and stable financial and insurance industry leader. Originally founded in 1896, Allianz has established a long track record of keeping its promises – which is why the company has amassed more than 12 million customers.

Being a provider of both annuities and life insurance, the company has the experience and the ability to help its clients prepare for retirement, as well as for many of life’s financial uncertainties.

As of early 2020, Allianz boasts a $119 billion portfolio – most of which consists of investment-grade securities. The company’s extensive, in-house capabilities allow it to monitor and control risk in real time.

Allianz has earned very respectable ratings from the insurer rating agencies, including a(n):

  •  AA (Very Strong) from Standard & Poor’s
  •  A1 from Moody’s Investors Service, and
  •  A+ (Superior) from A.M. Best

Over the past couple of decades, with so many employers eliminating their defined benefit pension plans, it has become the responsibility of individuals to make sure that they convert their savings over into an income stream – and that the income continues to last throughout the remainder of their lifetime. This can be a difficult task – especially in light of stock market volatility and a historically low interest rate environment (which doesn’t look like it will end any time soon).

But there is a potential solution.

An index variable annuity like the Index Advantage from Allianz Life is designed for helping you to accumulate money for retirement and to also provide you with income after you have retired.

So, it can essentially give you long-term growth potential through market protection, along with a level of principal protection, through a combination of traditional variable options and multiple index strategies.

Before we get into the in-depth details, we have some legal disclosures to present…

This is an independent annuity product review. It is not a recommendation to purchase or to sell an annuity. Allianz 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.

Want to more about how annuities really work? click here to receive our updated annuity report.

How Allianz Describes the Index Advantage Annuity

On the Allianz Life website, the Index Advantage annuity is described as a type of variable annuity that offers a different risk/return consideration from traditional accumulation products.

There are three variable options, and multiple innovative index strategies. Each of the index options is the combination of a crediting method – which is also referred to as an index strategy, the index, and the time period for measuring index performance.

So, you can choose a strategy that most closely fits your specific needs and goals. These can include:

3-Year Term Strategy

With the 3-year index performance strategy:

  •  A longer term can provide the greatest performance potential
  •  Provides a level of protection with a “buffer” that absorbs the first 20% of negative index performance
  •  May perform best in a longer period of market growth and protection from index losses

1-Year Term Strategy

The 1-year performance strategy:

  •  Provides greater performance potential, based on a cap, among 1-year term strategies
  •  Provides a level of protection with a “buffer” that absorbs the first 10% of negative index performance
  •  This strategy may perform best in a strong market with protection from smaller index losses

Index Precision Strategy

The index precision strategy:

  •  Offers the same level of protection and 10% “buffer” as the index performance strategy
  •  Credits an annual pre-determined precision rate if the change in the annual index value is zero or positive
  •  This strategy may perform best in a low growth environment with protection from smaller index losses

Index Guard Strategy

The index guard strategy:

  •  Offers upside potential that may be matched or exceeded only by the index performance strategy
  •  Provides protection with a 10% floor, which means that you assume the first 10% negative index loss, but no more
  •  This strategy may perform best in a strong market with protection from large index losses

Index Protection Strategy

The Index Protection Strategy is an alternate crediting method. Here, you’ll have protection of principal, along with the potential for some growth. If, for instance, the return on the index is positive or flat, then you will receive what is referred to as the DPSC, or Declared Protection Strategy Credit. This is the amount of potential return that may be credited in any given year. However, if the annual return is negative, nothing will be credited to the account. The Index Protection Strategy:

  •  Can provide you with the most amount of protection with no losses due to market index returns
  •  Offers modest growth potential with a cap or Declared Protection Strategy Credit (DPSC) to the other strategies

This annuity is designed to compliment your portfolio. In addition to growth and protection during the “accumulation” period, and an income stream in the future, this annuity also offers some added features, such as two death benefits (one that offers the potential for a higher payout, but also requires an added premium charge).

To check out which indexes and variable options are currently available on this annuity, you can go here.

How a Financial Advisor Might “Pitch” this Annuity

Just like when buying a brand new car that offers a plethora of different amenities, the Allianz Life Index Advantage annuity may be appealing to a broad spectrum of investors, as it provides the opportunity for growth, along with a floor, or maximum amount of annual losses.

Because of that, it is likely that a financial advisor will key in on this vast appeal when pitching this product. Also, because this type of annuity is purchased primarily for accumulation (as versus predominantly for income), it can also be appealing to those who may have already “maxed out” other tax-advantaged retirement savings options like IRAs and/or employer-sponsored retirement plans, but who still want to add to that type of saving.

But there are a few things that you’ll need to be mindful of before moving forward with the Index Advantage – starting with the fact that there can still be risk of loss to your money here. And, while there is a floor that can help to prevent catastrophic losses, this type of annuity will also “cap” your gains – so you may or may not truly benefit, especially if the underlying investments in the contract have a stellar performance in any given year.

In addition, if you take a partial withdrawal during an index year, you will not be able to receive a credit on the following index anniversary. And then, don’t forget about the fees…

What About Fees on the Allianz Index Advantage Annuity?

Annuities have long been criticized for the fees that they charge – and variable annuities have typically been the worst offenders in this area. The Allianz Index Advantage annuity is not different.

First, this contract has a 1.25% annual product fee. (This is calculated as a percentage of the charge base, which is the contract value on the preceding quarterly contract anniversary, adjusted for subsequent purchase payment and withdrawals).

In addition to that, there are also some annual expenses for the variable options offered on this annuity. These yearly charges can range between a minimum of 0.64% and 0.72% per year.

If you decide to move your funds among the different variable options that are offered on this annuity, you are allowed to do so penalty-free twelve times per year. If you do more transfers, though, you will be charged a $25 transfer fee thereafter.

Further, the contract includes a six-year withdrawal charge schedule – and this is applied to each of your purchase payments. So, if you add money in the months and/or years following your initial purchase, you need to know that those dollars will all start at square one with regard to the surrender charge.

Need more info on the Allianz Index Advantage annuity? You can view the company’s website here.

The Annuity Gator’s End Take on the Index Advantage Annuity from Allianz Life

Where it works the best:

  •  For accumulating funds, without the risk of a catastrophic loss to the contract value
  •  For adding money to a tax-advantaged account – especially if other options such as an IRA and/or employer-sponsored retirement plan has been maxed out
  •  For attaining a higher cap than a fixed indexed annuity, along with the potential for some protection of principal

Where it works the worst:

  •  For those who have a low tolerance for risk (i.e. those who want no loss of principal at all)
  •  For those who want an annuity for the primary purpose of generating a lifetime income in retirement

In Summary

There are many factors that should ideally be considered when you are thinking about purchasing an annuity. In any case, an annuity should always be considered as a long-term financial decision – and because of that, it is truly important that you are confident about how the product may or may not fit in with your specific financial goals.

As time goes on, the need for the financial services industry to add new products is evident – and in the case of the buffer annuity, a “gap” was filled that the caps on fixed indexed annuities just simply were not filling.

The Allianz Life Index Advantage Annuity can provide the ability to attain a nice amount of growth, while also limiting the amount of loss that can be incurred in a given time period. But, even with the unique benefits that this product offers for investors, it may still fall somewhat short – and quite frankly, there may be some better alternatives out there for you.

The only way to really know if this annuity will work well for you is to have it tested. We can offer you that, based on figures that pertain to your specific financial situation. Just simply contact us if you would like to proceed with this information.

Any Additional Questions on the Allianz Life Index Advantage Annuity?

We realize that this annuity review went a bit long, so we appreciate you sticking with us. However, in this regard, we would much rather that you have too much information on this product than to not have enough. So, if you found this annuity review to be beneficial, please feel free to pass it on and to share it with other people who could also find value in it.

We also understand that, just like with most other financial vehicles, the information on annuities can change frequently. Therefore, if you did happen to notice information in this annuity review that may need to be updated or revised, then please let us know and we will happily make the necessary updates.

And, if this annuity review had caused you to be more confused about how “hybrid” annuities work – or, if by reading this review, you were prompted with any additional questions – then please click here and let us know that, too.

Is there any other annuity that you would like to see reviewed?

If so, great! Just provide us with the name of the annuity (or annuities), and our team of highly trained annuity experts will get to it as quickly as we possibly can.

Best,

The Annuity Gator.

 

Independent Review of the Allianz Life Index Advantage Annuity

 

2 Comments
  • Jneuy
    9:56 PM, 6 February 2019

    How about its unique performance lock feature? Don’t have to wait until the contract year ends like other buffer annuities?

    • Annuity Gator
      5:33 PM, 8 February 2019

      Hi Jneuy – Thank you for your comment. We are actually in the process of updating our annuity review database, so will add this to our list of updates / revisions. Please let us know if we can help or answer any additional annuity questions or concerns. We can be reached at (888) 440-2468 and online at http://annuitygator.com/contact/. Best! Annuity Gator

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