What Will Be Covered in this Review?In this annuity review of the Principal Single Premium Deferred Annuity, we will discuss the following information:
- Product type
- Current rates
- Realistic long-term return expectations
- How it is 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’ve been considering the purchase of an annuity because you want to ensure that you won’t run out of income in the future – especially if you live a nice, long life – then purchasing the Principal Single Premium Deferred Annuity could be a way for you to achieve that goal. One reason for this is because this annuity allows you to avoid the ups and downs of the market, while at the same time providing you with a guaranteed, fixed interest rate for a set period of time. Also, when the time comes to convert the annuity over into an income stream, that income can last throughout the remainder of your lifetime, regardless of how long that may be. But, prior to heading out and purchasing this – or any – annuity, it is really important for you to first have an in-depth understanding of the benefits it can provide, as well as any of the possible drawbacks. This is because even a fixed annuity can be quite difficult, and costly (due to surrender charges) to get out of once you are in. Over the past ten or so years, annuities have become much more popular with people who are retired, as well as those who are approaching that time in their lives, as they can help to alleviate the concern about running out of money in retirement. Because of this demand, many insurance carriers are introducing new products into the marketplace. However, while it’s nice to have more available options, unfortunately, this can make a product that is already somewhat confusing even more so. This can be the case for well-informed consumers, as well as many insurance and financial advisors! With that in mind, unless the advisor that you work with has a primary focus on selling annuity products, you really should do some additional research on these products, as they will oftentimes require that you deposit a large chunk of your savings into them. That’s where the Annuity Gator can come in!
Annuity and Retirement Income Planning Information You Can TrustIf you have not been to our website before, then please allow us to personally welcome you here to Annuity Gator. We are a team of annuity professionals who focus on providing unbiased and in-depth annuity reviews online. We’ve been at this for quite some time – far longer than our competitors have. And because of this, we’ve become known as a highly trusted source of annuity information. While 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
Principal Single Premium Deferred Annuity at a Glance
|Product Name||Single Premium Deferred Annuity|
|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 Financial Single Premium Deferred 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 fact, in many instances, the returns that are obtained on fixed annuities have not even been enough to outpace the inflation rate over time. Because of these low rates, your future purchasing power could be affected – especially if you plan to use the income from a fixed annuity as a primary source of your retirement income down the road.
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. The Principal 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. For more details 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 The Principal Describes the Single Premium Deferred AnnuityThe single premium deferred annuity from The Principal is actually part of the company’s Principal Select Series of annuity products. These annuities can help you to save for retirement, as well as to balance out your portfolio and/or generate a future stream of income without worry of market volatility. This particular annuity product is a single premium deferred annuity – which means that you deposit just one single lump sum, which could be from your savings in an employer-sponsored retirement plan (like a 401k or 403b plan) and/or the money that you’ve been saving in an IRA (Individual Retirement Account). An additional premium credit may be made, based on the amount of money that you deposit into the annuity during the first year. The annuity offers an interest rate guarantee period that you choose from durations of three years, four years, six years, or nine years. At the end of this guarantee period, the interest rate will then be determined on an annual basis – and your surrender charge period will also end at that time. You can opt to keep your money in the annuity, or alternatively, you may opt to take the value of the annuity account and withdraw it, without incurring any surrender or market value adjustment (MVA) charges. The Single Premium Deferred Annuity from the Principal also has some additional features, such as the waiver of surrender charges due to a terminal illness or disability, or due to being admitted into a nursing home facility. For more information on the Principal Select Series annuities, you can visit the company’s website HERE.
How an Insurance or Financial Advisor Might “Pitch” this Annuity ProductAs you approach retirement, protection of your hard-earned principal will typically become more and more important – as well the assurance that you will have enough income in the future, regardless of how long you may need it. Given that, it is likely that if you are being presented the Single Premium Deferred Annuity from the Principal Financial Group by an insurance or financial advisor, he or she will key in on these guarantees. However, while having these assurances can help you to sleep a bit better at night, the reality is that the interest rates today (and for the past decade or so) that are offered on fixed annuity products would have you hard pressed to meet, much less beat, inflation. This, in turn, could put you in a bind in the future when it comes to ensuring that your income is keeping up with the rising cost of goods and services that you need to purchase. Also, should you need to withdraw more than 10% of the annuity’s account value within the first several years (actually, within your interest rate guarantee period), you could also incur a substantial withdrawal charge for doing so.
What About the Fees on the Principal Single Premium Deferred Annuity?When it comes to any insurance or financial product, chances are that you will run across at least some amount of charges or fees. The Principal Single Premium Deferred Annuity is no exception. In this case, if you withdraw some (more than 10%) or all of your contract’s value during the first few years, you will be penalized with a surrender fee. Here, how long you will endure these looming charges matches up to the interest rate guarantee period that you select. For instance, if you go with a three-year interest rate guarantee, then you could be hit with a withdrawal charge if you make such a withdrawal within the first three years. Likewise, if you choose a nine-year interest rate guarantee, then guess what – the surrender charge period will go on for nine years.
Surrender Charge Schedule
The Annuity Gator’s End Take on the Principal Financial Single Premium Deferred AnnuityWhere it works best: This particular annuity will usually work the best for those who are looking for:
- Guaranteed lifetime income
- Safety of principal
- Interest rate guarantee – at least for a certain period of time
- Want access to most or all of your funds within the first several years (during the surrender charge period)
- Are seeking a high rate of return on your money
- Do not anticipate using the annuity for lifetime income