What Will We Be Covering in this Annuity Review?In this review, we will be covering the following details on the NAC North American Guarantee Choice 5 Year annuity:
- Product type
- Current rates
- Realistic long-term return expectations
- How it is used
- How it is most poorly used
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If you have been looking for ways to grow money in a tax-deferred manner, while at the same time keeping your principal safe, and ensuring that you have a secure income stream in the future, then the North American Guarantee Choice 5 Year annuity could be a viable option for you. That’s because this MYGA (Multi-Year Guarantee) annuity provides an interest rate that is locked in for five full years, regardless of what occurs in the market. And, if you go with the lifetime income payout option, you’ll know that you can count on a stream of income for the remainder of your (and possibly also your spouse’s) lifetime, no matter how long that may be. But before you go out and purchase this seemingly “best of all worlds” financial product, there are some other things that you need to know, particularly because this is a long-term financial endeavor that could end up costing you money if you decide once you purchase it that it really isn’t the right vehicle for you. Given the increased popularity of annuities over the past several years, these products are being offered by a growing number of insurance and financial advisors. This, however, may not necessarily be a good thing. One reason for this is because annuities can have a lot of “moving parts” – which can make them highly confusing, even for well-educated consumers and some financial professionals. With that in mind, it is essential that you not only take at face value what your current advisor is telling you but that you also read very carefully all of the in-depth “fine print” before you plunk down what could be a large amount of your hard-earned retirement savings. This is where the Annuity Gator comes in!
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The North American Guarantee Choice 5 Year Annuity at a Glance
|Guarantee Choice 5 Year Annuity
|North American Company for Life and Health Insurance
|Type of Product
|MYGA (Multi-Year Guarantee) / Fixed Annuity
Opening Thoughts on the North American Guarantee Choice 5 Year AnnuityAs one of the leading providers of annuities and life insurance in the U.S., North American has fulfilled its commitments to its customers ever since 1886. Unlike many of the other insurance carriers in the marketplace, North American is a privately owned company. Therefore, the company is not subject to the short-term earnings pressures that are often faced by publicly traded entities. North American is a part of the Sammons Financial Group, Inc., whose member companies offer a wide range of products, including annuities, life insurance, and retirement solutions. The parent company of Sammons Financial Group is Sammons Enterprises, Inc., a diversified holding company that owns and operates businesses across a diverse range of industries. An MYGA annuity – known as a Multi-Year Guarantee Annuity – is an annuity that is issued with a guaranteed interest rate period. Due to the constant ups and downs of the stock market – particularly over the past ten years or so – the demand for fixed annuities that offer guarantees has grown substantially, particularly as retirees and those who are saving for retirement vie to keep their money safe. But on the other side of the coin, due to the extremely low-interest-rate environment that we have been stuck in during this same time period, the “price” of keeping your money safe has come in the form of extremely low return. And these returns are hard pressed to meet, much less beat, the rate of inflation. This could then have a negative impact on your ability to continue buying the items and the services that you need in retirement.
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. North American Company for Life and Health Insurance has 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 North American Describes the Guarantee Choice AnnuityNorth American Company for Life and Health Insurance describes the Guarantee Choice 5 Year annuity as a single premium, multi-year guarantee (MYGA) annuity product that offers the following benefits:
- Competitive guaranteed interest rates for the entire term (in this case, five full years)
- Multiple guaranteed interest rate periods/surrender charge periods (with MYGAs, the surrender period will typically last for the same duration as the interest rate guarantee period)
- Tax-deferred growth
- Banded interest rates (with a low band being $199,999 or less in premium, and a high bank considered to be $200,000 in premium or more)
- Suitable for either qualified or non-qualified market
- Death Benefit – North American Company will pay out, as a death benefit, the accumulation value to the named beneficiary upon the death of the owner or the annuitant. The beneficiary will be able to receive this payout in either one, single lump sum, or as a series of income payments. (If there are joint annuitants on this contract, the death benefit would only be paid to a beneficiary in the event of the death of the second annuitant).
- Nursing Home Confinement Waiver – As an added benefit, North American will increase the penalty-free partial surrender amount by 10% of the contract’s accumulation value each year while the annuitant is confined to a qualified nursing home facility. This benefit will begin after the first contract anniversary, and the annuitant would need to be confined for a period of at least 90 consecutive days. There is no added charge for this benefit, although the issue age must be 75 or younger.
How an Insurance Agent Might “Pitch” the Guarantee Choice 5 from North AmericanIf you are like most people – especially those who are preparing for retirement – you probably like to know that you have certain guarantees when it comes to your money. You can get this with the North American Guarantee Choice 5 Year annuity (in fact, the word guarantee is right there in its name!) It is also beneficial that, regardless of what happens in the stock market during that time – as well as throughout the remainder of the annuity’s life – your principal will be safe. So, you don’t have to endure sleepless nights worrying about the loss of your hard-earned savings. Plus, because you also can choose an income stream that will last for the remainder of your lifetime (as well as someone else’s), you won’t need to worry about running out of retirement income down the road. However, just as with most anything else in life, there are always tradeoffs to be considered – especially in the case of guarantees. Therefore, you need to also be mindful of what you may be giving up in order to get these benefits. In the case of this particular annuity, it could be challenging for you to meet or beat the rate of inflation in the future – in turn, resulting in a lower amount of purchasing power each and every year. Do you really want to deal with that during your retirement years?
What About Fees on the Guarantee Choice 5 Year Annuity Product?In addition to a low rate of return, there are also fees that you may need to contend with on this annuity – which can make your small return even smaller. One of these is the many years of surrender charges, meaning that if you are still within the surrender period, and you want to take out more than 10% of your annuity’s contract value, you’ll be penalized. In the case of the North American Guarantee Choice 5-Year Annuity, these charges are a pretty steep 10% across the board, each year for the first five years of the contract – and, if you start another interest rate guarantee period after the first five years have elapsed, then the surrender period begins all over again.
|Surrender Charge %
The Annuity Gator’s End Take on the NAC North American Guarantee Choice 5 AnnuityWhere this annuity works best:
- If you are seeking protection of principal in any market condition
- If you want a set rate of growth for a certain period of time, without the worry of losses in a volatile market
- If you want the security of knowing you’ll have a guaranteed income in retirement
- If you want the opportunity for a higher return
- If you do not plan to use the lifetime income feature