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Independent Review of the Nationwide Defined Protection (SM) Annuity

What will we be going over in this review of the new Nationwide Defined Protection annuity?

In this review, we will discuss the following information about the Defined Protection annuity from Nationwide Insurance Company:

nationwide_logo

  • Type of Annuity
  • How the annuity works
  • Surrender charges and other fees
  • Where the annuity could work well
  • Where the annuity may not be a good fit

Annuities can be complex. That’s where having an Annuity Investigator who loves math comes in.
We make the complex, simple.

If you’re looking for a way to keep your principal safe, while at the same time receiving an income that not only flows in regularly but also allows your future purchasing power to rise over time, then the new Nationwide Defined Protection Annuity (DPA) could be an option for you.

But, before you make a commitment to purchase this – or any – annuity, it is important that you have a good understanding of how it works, and whether or not it will really help you to achieve your financial goals.

Throughout the past decade or so – and especially since the U.S. market downturn of 2008 and the 2020 Coronavirus pandemic – many investors have been pretty leery about diving into equity-related financial vehicles. (This is particularly the case if you still feel the sting of losing a significant chunk of your hard-earned retirement savings in the recession).

Yet, in order to keep your money, and your future purchasing power, up to speed with future inflation, most of the “safer” fixed financial options just simply won’t work either. So, what can you do?

One possible option is to go with an inflation-protected annuity.

What exactly is an inflation-protected annuity (IPA)?

These annuities guarantee a real rate of return that is either at or above the rate of inflation. The “real” inflation is the nominal return, then, minus the inflation rate. So, the annuitant – as well as the beneficiary – are protected from inflation.

This type of annuity is similar to an immediate annuity (i.e., one that pays out immediately, or very soon after, it is purchased). However, unlike traditional immediate annuities, the income payments are indexed to the rate of inflation.

It is important to note, though, that oftentimes – similar to with a fixed indexed annuity – there is a cap, or maximum, beyond which the investor won’t receive payments that are beyond the percentage rise in the inflation rate.

With that in mind, is the Nationwide DPA annuity really all that great of a deal?

That’s what you will find out in this review.

Annuity and Retirement Income Planning Advice that You Can Trust

If this is the first time you have been to our website, we would like to personally welcome you here to AnnuityGator.com. We are a team of experienced financial professionals who are dedicated to providing non-biased and in-depth reviews of annuity products.

We’ve been at this for a number of years now – far longer than most of our “copycat” competitors – and because of this, we have come to be known as a highly trusted source of annuity information.

If you’ve been seeking information about annuities online, it is likely that you have come across many conflicting details about these financial vehicles. This isn’t really very surprising, though, because there are a lot of opinions (both positive and otherwise) about these products floating around the Internet.

Just to be perfectly clear, here, this type of annuity can provide you with some nice benefits. This, however, is really only the case if the product fits in with your specific financial plans. With that in mind, you should also know why you’re going with the annuity – and why you are choosing it over a long list of other potential annuities that may be available to you.

So, if you’re ready to learn more, then let’s jump in!

The Nationwide Defined Protection Annuity (DPA) at a Glance

Product NameDefined Protection Annuity (DPA)
IssuerNationwide Insurance Company
Type of ProductRegistered Index Linked Annuity (RILA)
A.M. Best RatingA+
Phone Number(877) 669-6877
Websitehttps://nationwide.com

Opening Thoughts on the Nationwide Defined Protection Annuity

Nationwide has a history of strength that has lasted for more than 90 years, and today it is one of the largest insurance and financial services companies in the world. The company specializes in annuities, as well as mutual funds, retirement plans, and life insurance coverage for both individuals and companies.

There are numerous Nationwide affiliate companies, too, throughout the United States, including those that specialize in property and casualty insurance, life insurance, financial services, and strategic investments.

Nationwide Life and Annuity Insurance Company has high ratings from the insurer rating agencies, including a(n):

  •  A+ from A.M. Best Company
  •  A+ from S&P
  •  A1 from Moody’s

Nationwide does a fair amount of television advertising, so the company is familiar to many people. You may have even found yourself humming its now-famous jingle, “Nationwide is on Your Side.”

The Defined Protection Annuity is the first offering in the registered index-linked annuity (RILA) category. Over the past few years, RILAs have seen significant growth. One reason for this is because the combination of features that are found in RILAs makes them uniquely positioned to succeed in today’s unpredictable financial markets.

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. Nationwide Insurance Company 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.

Want to know more about how annuities really work? Contact us to receive our updated annuity report.

How Nationwide Describes the Defined Protection Annuity

Nationwide describes the Defined Protection Annuity as a “variable indexed annuity.” Annexus, an annuity design firm, helped the insurance carrier with designing this new annuity offering. The DPA annuity will be sold primarily via banks, wirehouses, and independent broker-dealers.

This annuity provides three defined protection levels, which ultimately limit negative performance. According to the annuity’s prospectus, the DPA annuity is designed to help you invest on a tax-deferred basis and meet long-term financial goals. Investors may select one or more investment options, each linking to the performance of a specific market index, and including a defined level of protection against loss.

Currently, each strategy is linked to one of the following market indices:

  •  S&P 500 Index
  •  J.P. Morgan Mozaic ll Index
  •  MSCI EAFE Index
  •  NYSE Zebra Edge Index

Each of these strategies has a specific start and end date. (The duration between those two dates is referred to as the “strategy term.”) The annuity contract can gain or lose value, based on the performance of the strategies. At the end of the strategy term, you may reinvest in the same strategy, or alternatively, you can transfer your money to another strategy that is available for investment.

There are some other bells and whistles offered on the DPA annuity. One is a death benefit whereby, if the annuitant dies before the annuity has been converted to an income stream, a named beneficiary will receive the remaining contract value (minus any withdrawals or fees). It is also possible to access funds from the annuity penalty-free if you have a qualifying terminal illness or injury event, or a long-term care need that requires you to remain in a nursing home for at least 90 days or more.

For more in-depth detail on the Nationwide Defined Protection Annuity, you can view its prospectus.

How a Financial Advisor Might “Pitch” the Nationwide DPA Annuity

Financial salespeople do a good job of making their products sound fantastic – and there are some great features associated with the Defined Protection Annuity from Nationwide Insurance Company. This includes the opportunity for growth, as well as some amount of protection from market downturns.

But sometimes, these same advisors may leave out some of the other features that may dim the positive light on their products. For instance, there are some factors that can limit the benefit you receive with the DPA annuity. These include a participation rate, as well as a spread.

  •  The participation rate acts as a multiplier because it has the effect of multiplying the performance of the index – positively or negatively. For example, if the participation rate is greater than 100%, it increases the upside potential – but also the risk of loss. Conversely, if the participation rate is lower than 100%, it can decrease the upside and the downside potential. Investors in the Defined Protection Annuity from Nationwide may select how much of their investment will be protected from market losses and how to determine their performance opportunities. Their percentages are 90%, 95%, or 100%.
  •  The strategy spread refers to an annualized percentage that is used as a “deduction” in the calculation of gains and losses. If the strategy spread is greater than 0%, its application will operate to negatively impact the performance of the strategy. This means it will reduce gains, and potentially increase losses. So, the strategy spread can result in losses – even if the linked index has increased in value.

So, even if the underlying index has stellar performance, you won’t necessarily be able to take part in the full amount of growth in the underlying index(ex). In addition, while the DPA annuity from Nationwide Insurance Company provides you with some protection against loss, it is still possible to lose money in this annuity. So, be sure that you invest (or not invest), based on your objectives, as well as your risk tolerance.

Are There Any Fees or Charges with the Defined Protection Annuity from Nationwide?

Ah, the fees. Being a variable annuity, the Nationwide Defined Protection Annuity will charge a number of fees – and these, in turn, can ultimately reduce the performance even more. For instance, you may incur various state taxes (depending on your state of residence). In addition, there can be other annual administrative and investment management fees.

There is also a surrender charge if you withdraw more than your annual penalty-free access amount within the first six years of the contract.

Surrender Charge Schedule for the Nationwide Defined Protection Annuity

Number of Completed Contract YearsPercentage Charge
08
18
27
36
45
54
6+0

You may also incur taxes on withdrawals. Plus, if you take such withdrawals before you have turned age 59 ½, you could also incur an additional 10% “early withdrawal” penalty from the IRS.

The Annuity Gator’s End Take on the Nationwide Defined Protection Annuity (DPA)

Where is the Nationwide Defined Protection Annuity used the best?

Although this annuity isn’t right for everyone, it may be a good fit for those who are concerned about the risk of inflation decreasing the purchasing power of their money as they get older. It can also provide a way to increase tax-deferred savings – even if you have already “maxed out” your annual contribution to an IRA and/or employer-sponsored retirement plan.

Where the annuity is most poorly used.

The DPA annuity from Nationwide Insurance Company may not fare so well, however, if you have a low-risk tolerance, you want the full upward growth potential, or are seeking 100% protection of your principal in any type of market environment.

In Summary

There are many factors that should ideally be considered when you are thinking about purchasing an annuity. In any case, an annuity should always be considered as a long-term financial decision – and because of that, it is truly important that you are confident about how the product may or may not fit in with your specific financial goals.

The Nationwide Defined Protection Annuity can provide the ability to attain a nice amount of growth, while also limiting the amount of loss that can be incurred in a given time period. But, even with the unique benefits that this product offers for investors, it may still fall somewhat short – and quite frankly, there may be some better alternatives out there for you.

The only way to really know if this annuity will work well for you is to have it tested. We can offer you that, based on figures that pertain to your specific financial situation. Just simply contact us if you would like to proceed with this information.

Any Additional Questions on the DPA Annuity from Nationwide Insurance?

We realize that this annuity review went a bit long, so we appreciate you sticking with us. However, in this regard, we would much rather that you have too much information on this product than to not have enough. So, if you found this annuity review to be beneficial, please feel free to pass it on and share it with other people who could also find value in it.

We also understand that, just like with most other financial vehicles, the information on annuities can change frequently. Therefore, if you did happen to notice information in this annuity review that may need to be updated or revised, then please let us know and we will happily make the necessary updates.

And, if this annuity review had caused you to be more confused about how annuities work – or, if by reading this review, you were prompted with any additional questions – then please click here and let us know that, too.

Is there any other annuity that you would like to see reviewed?

If so, great! Just provide us with the name of the annuity (or annuities), and our team of highly trained annuity experts will get to it as quickly as we possibly can.

Best,

The Annuity Gator

P.S. If you would like to read more of our Nationwide annuity reviews, here are some links to check out:

Independent Review of the Nationwide Defined Protection (SM) Annuity

 

 

 

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