What Will Be Covered in this Review?In this annuity review, we will be going over the following details regarding the Principal Preferred Series Annuity:
- Product type
- Current rates
- Realistic long-term return expectations
- How the annuity is best used
- How the annuity 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 have been seriously considering the purchase of an annuity because you want to ensure that income will continue to come in during retirement – regardless of how long you may need it – then moving forward with a Principal Preferred Series annuity could be a good option for you. One reason for this is because, regardless of what happens in the stock market – or even in the overall economy – your money will be safe inside of a fixed rate annuity. Also, when it comes time to convert the annuity over into an income stream, those payments will continue to come in, and can basically alleviate the worry of running out of money down the road. However, prior to running out and making a commitment to purchase this, or any, annuity, it is important for you to know the benefits that it can offer, as well as any possible drawbacks that it can present to your current and/or future financial situation. This is where the Annuity Gator comes in!
Annuity and Retirement Income Planning Information that You Can TrustIf this is your first visit to AnnuityGator.com, we would like to officially welcome you here to our website. Here, we comprise a team of experienced financial pros who have a key focus on providing very in-depth annuity reviews. Because we’ve been offering these for a number of years now, we have come to be considered a highly trusted source of annuity information. If you’ve been in the process of seeking additional details about annuities via the Internet, it is likely that you’ve come across some highly conflicting information with regard to these financial vehicles. This, however, is not really surprising. There are a plethora of different annuities out there in the marketplace, and there are many people who like to tout their features and benefits, as well as those who feel that annuities aren’t very good at all. However, whether or not an annuity is actually right for you can depend on a number of different criteria. Therefore, there is no one-size-fits-all annuity. While there are many very good websites online that focus on marketing annuities, some of these websites may try to lure in visitors so that they will part with their contact information. One way that they try to entice you is through the offering of some pretty bold claims about annuities, like:
- Lowest Fees
- Highest income payouts
- Top-rated companies
- Quick quotes
- Guaranteed lifetime income
The Principal Preferred Series Annuity at a Glance
|Product Name||Preferred Series|
|Issuer||Principal Financial Group|
|Type of Product||Single Premium Deferred Annuity|
|S&P Rating||A+ (Strong)|
|Phone Number||(800) 986-3343|
Opening Thoughts on the Principal Preferred Series AnnuityThe Principal Financial Group (often simply referred to as The Principal) is a global financial investment management leader that is headquartered in Des Moines, Iowa. Founded in the late 1800s as an insurance company, The Principal has grown and expanded exponentially over the years. As a member of the Fortune 500, Principal (as of the third quarter of 2017) holds approximately $655 billion in total assets under management and has brought in roughly $1.8 billion in net income as of September 30, 2017. Because so many people are living longer these days, it is essential to ensure that you have income during your early stages of retirement, as well as many years down the road. In fact, it’s not uncommon for people to live for 20, 30 or more years past their retirement date. With so much volatility and unpredictability in the stock market over the past several years, the demand for annuities has grown quite a bit, particularly as a way for retirees to ensure that they will have the income to last throughout the remainder of their lifetime. 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 many cases, the return that is obtained through a fixed annuity is not really even enough to outpace the average rate of inflation – and because of that, your purchasing power in the future could suffer.
How The Principal Describes the Preferred Series AnnuityAccording to the Principal’s website, the Preferred Series Annuity can provide you with the flexibility to choose between either a higher interest rate or a guaranteed return of premium. So, the annuity can essentially be “customized” for best fitting your specific needs. This financial vehicle also allows you to make optional additional premium payments during the first year. With this product, you’ll have a guaranteed interest rate for three, four, five, six, or seven years. Then, once this initial rate guarantee period has ended, you have the choice of whether you want to withdraw the money from the annuity (without being subject to surrender charges), or alternatively, you could automatically renew again into the same or a different rate guarantee period. Depending on how much you contribute to the annuity, you could also receive a premium credit – which in turn, can help you to reach your retirement savings goals faster, based on the larger amount of principal to build upon. This annuity offers some other “bells and whistles,” like the option of choosing between the return of premium or a higher rate of interest. So, if you know that you (or your heirs) won’t need to access this money for a while, then you could earn at a higher rate. For more in-depth details about the Principal Preferred Series Annuity, you can check out the company’s product brochure HERE.
How an Insurance or Financial Advisor Might “Pitch” this AnnuityGiven our longer lifespans these days, the worry about running out of retirement income in the future is a very real fear for many retirees. Therefore, the ability of annuities to provide a guaranteed lifetime income is one of the key reasons that these products have grown in popularity – particularly over the past several years. Because of that, if you have been presented the Principal Preferred Series annuity by an insurance or financial advisor, it is likely that they have keyed in heavily on the income guarantee, as well as the fact that your principal will be safe, and that you can be guaranteed a set interest rate for a certain number of year. But, while having such assurances can definitely help you with sleeping better at night, the truth is that the interest rates today – as well as for the past decade or so – that are being offered on fixed annuity products are painfully low. And because of that, you could really run the risk of not being able to beat – or even to meet – future inflation. Why does that matter so much? Well, even though you won’t “technically” be losing money per se, the loss to your future purchasing power could mean that you’ll need to cut back on buying some of the items and services you’ll need in the future.
What Fees are There for this Annuity?While you can purchase the Principal Preferred Series annuity with no up-front or annual sales charges, don’t let that lull you into believing that there are no costs at all associated with this product. This is particularly the case if you decide to withdraw 15% or more of the annuity’s initial contract value for that year during its surrender charge period. In the case of this particular annuity, the time frame that you’ll be subject to surrender charges corresponds with the length of the interest rate guarantee period that you have chosen. So, this is a tradeoff of sorts in that, while you can count on a set rate of interest for a period of time – regardless of what is occurring in the market – your money will also essentially be “locked in.”
Principal Preferred Series Annuity Surrender Charge Schedule
Contract Year 1 2 3 4 5 6 7
3-Year Guarantee 8% 7% 6% 4-Year Guarantee 8% 7% 6% 6% 5-Year Guarantee 8% 7% 6% 6% 5% 6-Year Guarantee 8% 7% 6% 6% 5% 4% 7-Year Guarantee 8% 7% 6% 6% 5% 4% 3%
The Annuity Gator’s End take on the Principal Preferred Series AnnuityWhere it works the best: Although the Principal Preferred Series annuity may not be the right solution for everyone, it could be a viable option for those who are seeking the following benefits:
- An interest rate guarantee – at least for a certain period of time
- Safety of principal
- Guaranteed income for life
- Need or want to access their principal within the surrender period
- Want the opportunity to earn a higher rate of return
- Do not plan to use the lifetime income feature