What’s Covered in this ReviewIn this review, I will be going over the following details on the Transamerica Axiom II annuity:
- Product Type
- Current rates
- Realistic long term investment expectations
- How it is used
- How it is most poorly used
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Annuity And Retirement Income Planning Information That You Can TrustWhat you might notice regarding the Transamerica Axiom II annuity, is that – similar to most other annuity products in the marketplace – it will perform very well in some areas, and then there are other aspects of it that may not perform up to your expectations. This, of course, will be dependent upon your specific financial goals, risk tolerance, and time horizon. If you are visiting our website for the very first time and you are not yet familiar with us, we are fee-only financial planners. Therefore, we don’t get paid to sell our clients annuities. Nor do we sell these products outright. Unlike other fee-only financial advisors, however, we do feel that annuities can offer certain investors with an important piece of their overall financial planning strategy – provided that they are used properly. As our compensation is not tied to the sale of annuities, we have no incentive either for or against them. With that in mind, our view is entirely impartial and unbiased. So, let’s proceed!
Transamerica Axiom II at a Glance
|Axiom II Variable Annuity
|Type of Product
|Standard & Poor's Rating
Opening Thoughts on the Transamerica Axiom II Variable AnnuityOverall, a variable annuity should ideally perform two key tasks. These include growing principal and producing income. However, the truth be told, variable annuities are not all that good at producing income. This is due primarily to the risk that these financial vehicles present to the investor, as well as to the insurance carrier that offers the annuity. Because the value of a variable annuity can – and often does – fluctuate so much – an insurance carrier can actually guarantee less in terms of income than it will for the “safer” options such as fixed or fixed indexed annuities. With that in mind, for each and every dollar that is invested into a variable annuity, it can essentially promise you less in terms of income than a fixed annuity would do for the exact same amount of premium deposit. So, it is important that you determine prior to entering into an annuity contract what your true goal is – and, if your goal is to produce guaranteed lifetime income, then a variable annuity may not be your best option. From an investment perspective, variable annuities can provide investors with the opportunity for unlimited return. However, as anyone who has ever invested in the stock market knows, this “opportunity” also comes with downside risk. Along with that, variable annuities also come with an ample amount of fees. One reason for this is because of the mutual funds that are found inside of variable annuities. These funds will typically come with their own management fees. Then, the annuities themselves will also have fees of their own – starting with a front-end sales load. Because of this, the investor will start out with an immediate loss on Day 1. That, coupled with the uncertainty of the underlying market, can make it difficult to get ahead. The Axiom ll annuity provides a comprehensive lineup of investment options from some of the most recognized money managers in the financial industry. It also maintains the asset allocation balance selected by automatically transferring money between investment options on a regular basis, without generating a taxable event. This helps to keep the original allocation objectives maintained.
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. TransAmerica 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 TransAmerica Describes The Axiom II Variable AnnuityBased on Transamerica’s website and literature, the Axiom II annuity is described as offering an array of different investment options and automatically rebalancing the portfolio, based on the initial allocation objectives that were set forth by the investor. In addition, this annuity also offers the opportunity to receive guaranteed lifetime income payments via a variety of payment schedules and options when the contract is annuitized. Annuitization is permitted after the third policy anniversary. The Axiom II annuity allows a low initial premium – especially on qualified accounts – of $1,000, as well as low minimum subsequent premiums of $50. The contract offers a death benefit option so that the annuitant can leave a legacy to heirs. It also provides a number of living benefit options, including allowable withdrawals for nursing care and terminal illness, as well as an unemployment waiver.
How Financial Advisors Might “Pitch” This AnnuityAlthough variable annuities are not quite the popular product today that they were in the early 2000s, they can still fit in certain scenarios. One way that advisors tend to niche these particular products is in the area of providing investment growth. The Transamerica Axiom ll annuity offers investors a wide variety of investment options so that they can obtain the opportunity for accumulation and growth on a tax-deferred basis. One of the other key features of this particular annuity is that it will automatically “re-balance” the asset allocation in the account on a regular basis in order to maintain the investor’s objectives that were initially set. Yet, even though this regular rebalancing takes place, it may still not be done often enough to make a difference in a falling – or even in a rising – market. This is because, in order to truly take advantage of equities that are moving in any direction, changes should ideally be made in real time. And, while another way that advisors may pitch this annuity is on the basis of guaranteed lifetime income, the truth of the matter is that variable annuities are not typically known for providing this particular feature as well as fixed, or even fixed indexed annuities are. This is because, due to the risk that is presented in a variable annuity – both to the investor, as well as to the insurance carrier – the amount of income that is ultimately provided to the investor could essentially be better if he or she goes with a fixed product that does not fluctuate and end up losing value. With that in mind, if your primary goal is to use the Axiom II annuity as a source of income, you may wish to carefully consider some of the other options that are available to you that can offer you protection from market downsides. 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 Transamerica Axiom II Annuity’s Fees?When it comes to the charging of fees, the variable annuity can be one of the most expensive products out there in the marketplace – and the Transamerica Axiom II annuity is no exception. This starts with the front end load. The Axiom II annuity product also charges an annual mortality and expense fee (M&E) of 1.00%. In addition, there is an annual service charge of $35, up to a maximum of $50. (Although up to $35 can be waived with net premiums paid or a policy value of $50,000 or more – and up to $50 can be waived if your policy value is $250,000 or more). Although the Axiom II is known for having one of the shorter surrender periods for a variable annuity, it still locks in the investor for five years – beginning with a 5% surrender charge in Year 1, grading down to a 1% surrender in Year 5. The surrender charge will then drop to 0% in Year 6 and beyond.
The Annuity Gator’s End Take on the Transamerica Axiom II Variable AnnuityWhere it works best:
- When it comes to the Transamerica Axiom II, it can often work best if an investor is seeking additional tax-deferred growth after having “maxed out” his or her employer-sponsored retirement plan, as well as their IRA, and they are still wanting additional tax-deferred investment growth options.
- This product can also provide an option for those who are worried about outliving their income in retirement because it does offer a guaranteed lifetime income feature – however, the amount of that income would be dependent upon the performance of the investment account.
- Because of the surrender charges during the first several years of the contract, it is important to keep in mind that the Transamerica Axiom II annuity should still be considered as a longer-term investment endeavor.
- If planning to use the Axiom II annuity for the income benefit, then this may not be the best plan, as there are other more suitable alternatives that could likely provide more stable and predictable income for you.