What’s Covered in this Review of Lincoln Legacy Variable Annuity?In this review, we will cover the following information on the Lincoln Legacy 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.You may notice that, just like most any other annuity, the Lincoln American Legacy annuity can perform very well in some areas. However, there are other situations where it may not perform up to par. This will depend primarily on your unique risk tolerance, time horizon, and overall investment goals.
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Lincoln American Legacy Variable Annuity at a Glance
|Lincoln Financial Group
|Type of Product
|Standard & Poor's Rating
Opening Thoughts on the Lincoln American Legacy Variable AnnuityOverall, a variable annuity is designed to perform two main tasks. These are to grow principal in the account and to produce income. However, the reality is that variable annuities are not typically very good at producing income. One of the key reasons for this is due to the risk that they present to investors, as well as to the insurance companies that offer them. Because the value of a variable annuity tends to fluctuate so much, it is not out of the ordinary for an insurance carrier to guarantee a lesser amount of income from a variable annuity – even though it presents the opportunity for more growth – than it will for a “safer” (and potentially a lower returning) option like a fixed annuity. So essentially, for each dollar that is invested into a variable annuity, it actually has the potential to promise you less in income than a fixed, or a fixed indexed, annuity would for the exact same amount of deposit that is made. Given this potential, if you have a primary objective of using an annuity for retirement in the future, then this annuity may not be your best answer. When it comes to using a variable annuity for growing principal, these financial vehicles can provide investors with an opportunity for unlimited return. The American Legacy annuity provides investors with access to all of the investment options in the American Funds Insurance Series – which is one of the largest, and most respected, money managers in the United States. However, as most – if not all – market investors are aware, along with the opportunity for growth will also be downside risk. In addition to that, in a variable annuity, there are also a wide array of fees to contend with. For example, what many investors may not realize is that, in addition to the annuity fees that are charged, there also fees within the investments (i.e. the mutual funds) that are inside of the variable annuity. Because of this, along with the continued volatility of the market itself, it can make “beating the market” somewhat difficult. 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.
Before we get into the gritty details, here are some legal disclosures…This is an independent annuity product review. It does not constitute any recommendation to either purchase or to sell an annuity product. Lincoln Financial Group has not endorsed this review in any way, nor do I receive any compensation for offering this review. The information is simply meant to be an opinion so that readers can view my personal perspective when they are determining the potential advantages and/or the drawbacks of this particular annuity, as well as how it may or may not fit in with their financial goals. Before purchasing any type of financial vehicle, it is essential to pursue your own due diligence, as well as to consult with a licensed and competent financial advisor prior to moving forward. In doing so, you may more precisely ensure that the product or service that you are considering may fit in with your specific financial circumstances. All of the names, trademarks, and materials that were used in this annuity review are the property of their respective owners.
How Lincoln Financial Group Describes the American Legacy Annuity
- Based on Lincoln Financial Group’s website and literature, the American Legacy annuity is described as being a long-term investment vehicle that can help investors to meet the challenges of inflation, taxes, and market volatility, while at the same time achieving their retirement savings goals.
- The Lincoln American Legacy annuity is further described as being the only variable annuity suite that provides investors with access to all of the investment options in the American Funds Insurance Series, which is one of the largest and most respected money managers in the U.S.
- Further, the American Legacy annuity offers flexible options for both guaranteed growth and income, providing tax-efficient income features for the after-tax money, as well as tax-free transfers between investment options, and death benefit protection for loved ones. Because the Legacy Annuity is a variable annuity, it can potentially help investors with outpacing inflation.
- The American Legacy annuity offers five different options to choose from for investors, depending on their goals. These include B-Share, C-Share, L-Share, Bonus, and Shareholder’s Advantage.
How Financial Advisors Might “Pitch” This AnnuityFor many years, the American Funds have been a well-respected name in mutual funds. Many of these funds have done quite well over time. They are one of the largest, oldest, and most respected money managers in the U.S., with more than 70 years of experience. The fact that these funds are included within the American Legacy variable annuity is one of the key selling features, so it is more than likely going to be on the top of an agent’s list when pitching this product – as is the fact that investors can have access to all investment options in the American Funds Insurance Series. The product also offers the ability to protect principal from market downturns. However, it comes at an additional cost. There are also multiple death benefits that can be chosen in order to protect beneficiaries – also at an added cost. Therefore, all of these aspects need to be considered in terms of just exactly how much additional cost an investor wants to take on in terms of a “tradeoff” for the potential for a higher return. The pitch for this annuity – as well most annuities – will also likely include the guaranteed lifetime income benefit. Because people are living so much longer these days, one of the biggest fears on the minds of many retirees is that of outliving their savings. So, guaranteed income for life is always a big selling feature, too. However, if you plan to use this – or any variable annuity – as a source of guaranteed lifetime income, you need to closely examine it. This is because, due to the potential risk to principal, there can be an effect on the income you actually end up receiving in the future. With that in mind, if income is, in fact, your goal, there may be other products that are actually better suited to your needs.
What About the Fees?When it comes to fees, variable annuities tend to be one of the more expensive products out there in the market. And, the Lincoln American Legacy annuity is no different in that vein. For starters, there will be a front-end load (which we’ll explain further), which will start you off with an immediate loss. For example, the American Legacy Shareholder’s Advantage annuity has a front-end sales charge of 5.50%. So, right off the bat, you are starting from a negative position. If you initially deposit $50,000 into this annuity, you’re really only starting with $47,250 as a beginning balance. Then there are other fees as well. For instance, there is an annual Mortality and Expense Risk charge of between 1.00% and 1.15%. There is an administrative charge of 0.10%. And, there is the Total Separate Account Expense of between 1.10% and 1.25%. If you opt for any additional riders such as living benefits, there will also be additional charges for those, too. The mutual funds themselves that are inside of the annuity will also charge you fees. These can range all over the board. But generally speaking, for the American Funds mutual funds that are in the American Legacy Shareholder’s Advantage annuity, the management fees, before any waivers/reimbursements, can range anywhere between 0.15% and 0.72%. As with other annuities, the American Legacy annuity will also pose surrender charges to an investor if you withdraw your funds early. In this case, the surrender charges go out for ten years.
The Annuity Gator’s End Take on the Lincoln American Legacy Variable AnnuityWhere it works best:
- When considering the Lincoln American Legacy annuity, it can often work best in situations where an investor wants to be invested in the market, but yet is concerned with taking on too much risk. This is because the contract will provide the ability to invest in a wide variety of different American Funds mutual fund options, while at the same time providing downside risk (albeit for an additional cost).
- These products can also provide the ability to continue investing in tax-deferred vehicles, even after other tax-advantaged accounts such as an employer-sponsored retirement plan and IRA accounts have already been “maxed out.”
- In addition, variable annuities – or any annuity – may be good options for those who are concerned about outliving their savings or income in retirement, because they can provide a guaranteed lifetime income.
- However, because there are surrender charges incurred for withdrawing funds in the early years of this contract, investors need to consider the Lincoln American Legacy annuity as being a long-term financial endeavor.
- For those who need to have substantial liquidity with their financial assets (this does have liquidity, but just not 100% without in current penalties during the surrender period)
- For those seeking maximum long-term growth
- For those expecting real returns of greater than 7% per year on average