What’s Covered in this ReviewIn this review, we will be covering the following details on the AXA Investment Edge Annuity:
- Product Type
- Current rates
- Realistic long term investment 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.
Annuity And Retirement Income Planning Information That You Can TrustYou may notice that, like most other variable annuities, the AXA Investment Edge is going to perform very well in some areas, and not so well in others – depending on what your specific financial goals and risk tolerance are. If this is the first time that you have visited our website and you are not familiar with us, here is what we do. We are fee-only financial planners, so we don’t get paid for selling annuities to our clients. Nor do we sell these products. But, unlike other fee-only planners, we are of the opinion that annuities can offer some investors with a key element of their overall financial planning strategy, as long as they are used properly. Doing so starts with having a thorough understanding of how annuities work, and why they are being purchased in the first place. Because our pay is not tied to the sale of these products, we have no real incentive either for or against them. With that in mind, our views here are completely unbiased and impartial. So, let’s get started.
AXA Investment Edge at a Glance
|Investment Edge Variable Annuity
|Type of Product
|Standard & Poor's Rating
Opening Thoughts on the AXA Investment Edge Variable AnnuityIn a nutshell, a variable annuity is supposed to do two key things for investors. These are to grow account value, or principal, and to produce income. However, what many investors may not realize is that while a variable annuity may offer the opportunity for growth in the account, these financial vehicles are not very good at producing income. This is because of the risk that the annuity presents to both the investor, as well as the underlying insurer. In fact, the account value of a variable annuity can actually vary so much over time that these types of annuities will oftentimes end up guaranteeing less in income than fixed or fixed indexed annuity options that offer lower guaranteed rates of return. With that in mind, what can often end up happening is that for every dollar an investor places into a variable annuity, less income is promised on the back end than would be received from a fixed annuity that was purchased for the exact same amount of deposit. Therefore, if income is your primary objective with the AXA Investment Edge, this may not be your best alternative. From an investment perspective, variable annuities certainly can provide investors with the opportunity to earn unlimited returns. However, just as anyone who has knowledge of the stock market knows, along with this upside potential also comes downside risk. There are also a variety of fees that are typically involved when investing in variable annuities – and the AXA Investment Edge is no exception. One reason for this is because of the investments, such as mutual funds, that are held within the variable annuities. These will typically have their own management fees. Then, you will have the annuity fees to contend with on top of that. In this case, the Investment Edge has a front-end load, as well as a number of other annual administrative and operations fees. Annuities with a front-end load is a charge that is applied to the initial purchase of the annuity and typically deducted from the investment amount, as a result it lowers the size of the investment. The annuity will also charge a surrender fee if funds are withdrawn within the first six years of ownership. (Fees will be discussed in more detail later in the review). While contending with keeping your head above water due to the various fees, there is also the uncertainty of the market. Over the past several years, investors have had to deal with a particularly volatile stock market, which has resulted in lost principal for many. This can be detrimental to income for those who are approaching retirement. While the AXA Investment Edge offers over 100 different investment options – along with tax-deferred growth – it is still a variable annuity, and that means that investors will need to be mindful of market volatility because this can have an effect on the income you end up with overall.
Before we get into the gritty details, here are some legal disclosures…This review is an independent product analysis, and it does not constitute any type of recommendation to purchase or to sell any product. AXA has not endorsed this product review in any way, nor do we receive any compensation for providing this review. This data is meant to be an independent opinion so that readers can obtain our personal perspective when they are seeking the potential advantages and/or drawbacks regarding this financial vehicle, as well as how it could possibly fit in with their overall financial objectives.Before you purchase any financial product or service, it is essential to pursue your own due diligence and to consult with a licensed and competent financial professional prior to moving forward. In doing so, you will be able to more precisely ensure that the product and/or the service may (or may not) fit in with your specific goals, time frame, and risk tolerance. All of the names, materials, and trademarks that were used during this annuity review are the property of their respective owners.
How AXA Describes The Investment Edge Variable AnnuityBased on information from the AXA’s website, this annuity provides investors with access to more than 120 traditional and alternative investment options – including packaged portfolios. It also allows investors to build their own portfolio with access to the expertise of world-class investment managers. Because investment gains and losses may change an investor’s asset allocation over time, the Investment Edge annuity will allow regular cost and tax-free rebalancing of the portfolio in order to help an annuity holder with maintaining his or her intended diversification. As with other annuities, the Investment Edge offers tax-deferral of gains so that earnings can grow and compound, without having to pay tax on the growth until the time of withdrawal. The annuity also offers a death benefit option so that the annuitant can build a legacy for their loved ones. The Investment Edge offers a guaranteed lifetime income option. It also enables the annuitant to adjust their income flow via a customizable payment feature, referred to as Income Edge, that is available in non-qualified contracts. There is no additional fee for this option.
How Financial Advisors Might “Pitch” This AnnuityVariable annuities are not as widely popular today as they were several years ago. One reason for this is that, because of the volatility in the market, many investors are now turning to options that will provide them with more safety of principal. With that in mind, advisors may pitch this product by highlighting the expansive investment options. This product offers over 100 traditional investment strategies – which include sector and specialty investments. It also offers a wide range of low-correlated assets that can provide even more diversification – as well as the opportunity for enhanced risk-adjusted returns. The AXA Investment Edge also offers packaged portfolios. Here, investors can combine core and alternative asset classes that are professionally allocated in an array of diversified portfolios that are tailored to specific investment goals and risk tolerances. The lifetime income feature is also always a key discussion point when most advisors pitch annuities with their clients. One reason for this is because people are living so much longer today – and a big concern for many is running out of income before running out of time. But using guaranteed income as a selling feature with variable annuities is something that must be carefully considered. This because variable annuities are not necessarily always the best products to produce guaranteed lifetime income – due in large part to the risk that they are up against from the market. With that in mind, there are other products out there that can oftentimes offer higher levels of guaranteed income – along with better protection from market downturns. And, although there is no perfect product or investment, it is important that your priorities be clear at the beginning as to what you want your annuity to do. For example, are you purchasing the vehicle with the intention of market returns, or with the intention of guaranteed lifetime income in the future. Even with the vast amount of diversification and variety of investment options, the truth is that the AXA Investment Edge can still be exposed to downside market risk – and because of this, investors can be exposed to loss of principal. Given that, you will need to take stock of your true risk tolerance before moving forward with this particular annuity contract. If you’re wondering if this annuity is right for you, or if you have questions and need a little help getting pointed in the right direction; just reach out via our secure contact form here.
What About the AXA Investment Edge Annuity’s Fees?Of all the annuity types out there, variable annuities tend to be on the more expensive side. The AXA Investment Edge is no exception. You should know that if you own this particular annuity, you will be hit will numerous fees – including an annual account maintenance fee of $50 each year if your account value is less than $50,000. Depending on which version of the Investment Edge annuity you own, you will also be hit with an annual operations fee of between 0.20% and 0.75%, and an annual administrative fee of between 0.10% and 0.30%. This annuity also has a surrender charge that starts out at 6.00% and gradually grades down to 3.00% in year 5. It goes to 0% in year 6 and beyond. Be prepared for other charges, too, depending on the circumstance. For example, there are a plethora of “special service charges,” such as:
- Express mail charge – $35
- Wire transfer charge – $90
- Check preparation charge – $85
- Charge for third party transfer or exchange – $125
- Duplicate contract charge – $35
- Duplicate Annual and/or Quarterly Statement of Account or Annual Payout Statement charge – $35
The Annuity Gator’s End Take on the AXA Investment Edge Variable AnnuityWhere it works best:
- When considering the AXA Investment Edge annuity, it can oftentimes work the best in situations where an investor has already “maxed out” his or her employer-sponsored retirement plan and/or IRA accounts and still wants the ability to invest in tax-deferred financial vehicles.
- The Investment Edge may also provide a good option for investors who are concerned about outliving their savings/income in retirement. This is because it offers a guaranteed lifetime income feature. This, however, will be largely dependent upon how the accumulation account performs.
- Due to the fact that the Investment Edge has surrender charges for several years, this annuity should be considered a long-term financial endeavor.
- This annuity also offers the opportunity of a death benefit for a named beneficiary – less any fees and/or withdrawals. Therefore, it could provide a way for an investor to leave a legacy for his or her heirs.
- If not planning on using the income benefit, then the AXA Investment Edge may not be the best product choice, and in turn, another more suitable alternative should likely be considered. In addition, due to the potential for market volatility, variable annuities are not typically considered to be the best products for long-term, guaranteed lifetime income.
- With that in mind, if income is your primary goal, then either a fixed or a fixed indexed annuity product may be a better option for your needs.