Independent Review of the Allianz Life Index Advantage Annuity
What We Will Cover in this Annuity Review
In this review, we will be discussing the following information regarding the Allianz Life Index Advantage Annuity:
- Product Type
- Current Rates
- Realistic long-term return expectations
- How it is used
- How it is most poorly used
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We make the complex, simple.
If you’ve been considering the purchase of an annuity because you want to your money to grow, while at the same time you want the assurance of having an ongoing lifetime income stream in retirement, then the Allianz Life Index Advantage variable annuity could be a good option for you.
However, prior to moving full steam ahead with the purchase of this, or any, annuity product, it is highly recommended that you first do a bit of research on how the product works, and on how it may or may not ultimately work out for you and your specific financial goals.
Throughout the past decade or so – and especially since the U.S. market downturn of 2008, 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 option is to consider investing in what is oftentimes termed as a “buffer” annuity.
These products – which are essentially a type of “cross” between a variable and an indexed annuity, provide a measure of downside protection in return for a “cap” on the product’s upside performance. One of the key attributes that make these annuities different from an indexed annuity product is that buffer annuities attain some of their growth via exposure to structured financial entitles like options contracts.
In many cases, a buffer annuity will actually be structured very similarly to an indexed annuity in that it does not invest directly in a market index. Typically, a buffer annuity will place around 90 or 95% of its funds into fixed income securities, with the remainder going to derivatives like options and/or futures.
Being relatively new to the insurance marketplace, buffer annuities started entering the market after the economic crisis roughly ten years ago. These annuities have helped cater to those investors who wanted a higher cap than those available via indexed annuities while the U.S. continued to linger in its low-interest rate environment.
Yet, even though this can sound like a great way to hedge inflation, and to accumulate funds on a tax-advantaged basis, annuities can be extremely confusing – especially “hybrid” products like buffer annuities. Given that, it is even more important that you know just exactly what it is that you’re getting into with this or any other similar financial vehicle.
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.
You may also have recently attended a seminar about annuity products. During this workshop, the presenter may have touted information about the Allianz Life Index Advantage annuity (or some other similar annuity) and why the product may be right for you. This could have even been the catalyst that led you here to our website, in search of additional product details.
Although 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
Sound familiar at all?
Yet, while these claims may sound appealing, it is all the more important to know whether or not these claims are true. This is where our website can help. In fact, if you have come here in search of more in-depth details on the Index Advantage annuity, you are certainly in the right place. We dare say that the website you are on right now is the only place where you can find out all of the information – the good, the bad, and yes, even the ugly. Knowing the whole picture, though, can help you in determining whether this product will be right for you.
Just to be perfectly clear, here, a fixed indexed 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!
Allianz Life Index Advantage Annuity
|Product Name||Index Advantage Annuity|
|Type of Product||Variable Annuity|
|Standard & Poor's Rating||AA|
|Phone Number||(800) 950-5872|
Opening Thoughts on the Allianz Life Index Advantage Annuity
Allianz Life Insurance Company is a well-regarded entity in the insurance and financial services arena. This company was initially established back in 1890, and since that time, it has grown into a large conglomerate with more than 82 million customers in roughly 70 countries around the globe.
This company has maintained a very positive reputation, with an A+ Better Business Bureau grade, as well as high ratings from the insurer rating agencies, including:
- A+ from A.M. Best
- AA from Standard & Poor’s
- A2 from Moody’s
Due to the constant volatility of the stock market over the past several years, those who are saving for retirement have become much more concerned about the protection of principal, even though they know that they also need to keep their money growing. Based on this, some consumers feel torn between the opportunity for the growth that a variable annuity can offer and the principal protection that is found in a fixed indexed annuity. Now, with the Allianz Life Index Advantage annuity, they may find that they can essentially have both.
However, while this might sound highly enticing, whenever you hear something that sounds a bit too good to be true…it usually is. So, with that in mind, it can be extremely advantageous to check out how exactly this product works before diving in head first to something that you may not be able to get out of down the road.
Before we get into the gritty details, there are some required legal disclosures here…
This is an independent annuity product review. It is not a recommendation to purchase or to sell an annuity. Allianz Life 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.
For additional information 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 Allianz Describes the Index Advantage Annuity
Allianz Life describes the Index Advantage Annuity as offering a combination of variable options with three innovative index strategies.” So, while technically the Index Advantage is a variable annuity, it can still provide you with a nice balance between a level of protection and growth in today’s uncertain market environment.
With this annuity, there are three variable options and three innovative index strategies that can help with meeting your financial needs. Each of the index options is the combination of a crediting method – which is also referred to as an index strategy – and the index.
For example, the Index Performance Strategy is a crediting method that provides the potential for higher performance with a level of protection from smaller index losses. This could be a viable alternative if an investor is seeking a level of protection for principal, while at the same time maintaining the potential for growth opportunities.
In this case, if the annual index return is positive, you will receive an annual performance credit that is equal to that return – up to a limit or cap. If, however, the annual index return is negative, then you could receive an annual negative performance credit – but only when the loss is greater than a specified percentage which is referred to as a buffer.
The Index Protection Strategy is an alternate crediting method. Here, you’ll have the protection of principal, along with the potential for some growth. With this particular strategy, there are only two possible outcomes on each index anniversary.
If, for instance, the return on the index is positive or flat, then you will receive what is referred to as the DPSC, or Declared Protection Strategy Credit. This is the amount of potential return that may be credited in any given year. However, if the annual return is negative, nothing will be credited to the account.
There is also the Index Guard Strategy. This can be a good option for those who are seeking a level of protection from more severe index losses, while also continuing to maintain the potential for more growth.
In this case, if the annual return is positive, then you will receive an annual performance credit that is equal to that return – up to a stated cap. If, however, the annual index return is negative, then you will receive a negative performance credit – however, this negative performance credit will never be less than a specified percentage called a floor.
This floor helps to provide a limit on losses by limiting any negative index return to no less than -10%. Therefore, any negative index returns that are beyond the -10% floor will not reduce the value of the annuity contract. Also, the amount of the floor will never change once your annuity contract has been issued.
There are some other features of this annuity, too, such as a death benefit whereby a named beneficiary (or beneficiaries) will receive the greater of the contract value, or purchase payments adjusted for withdrawals, upon the death of the owner if this occurs prior to receiving the entire contract value or annuitizing the contract.
How a Financial Advisor Might “Pitch” this Annuity
Just like when buying a brand new car that offers a plethora of different amenities, the Allianz Life Index Advantage annuity may be appealing to a broad spectrum of investors, as it provides the opportunity for growth, along with a floor, or maximum amount of annual losses.
Because of that, it is likely that a financial advisor will key in on this vast appeal when pitching this product. Also, because this type of annuity is purchased primarily for accumulation (as versus predominantly for income), it can also be appealing to those who may have already “maxed out” other tax-advantaged retirement savings options like IRAs and/or employer-sponsored retirement plans, but who still want to add to that type of saving.
But there are a few things that you’ll need to be mindful of before moving forward with the Index Advantage – starting with the fact that there can still be a risk of loss to your money here. And, while there is a floor that can help to prevent catastrophic losses, this type of annuity will also “cap” your gains – so you may or may not truly benefit, especially if the underlying investments in the contract have a stellar performance in any given year.
In addition, if you take a partial withdrawal during an index year, you will not be able to receive a credit on the following index anniversary. And then, don’t forget about the fees…
What About Fees on the Allianz Life Index Advantage Annuity Product?
Variable annuities are known for the fees they charge – and the Index Advantage annuity from Allianz Life is no exception. For starters here, there is the annual product fee of 1.25%. This, and any other fee can and will have a negative impact when it comes ot your overall return.
As with other variable annuities, not only will you be exposed to fees that pertain to the annuity itself, but there are also management fees charged in relation to the underlying investments themselves.
For example, the variable options that are available on this annuity include the AZL Government Money Market Fund, the AZL MVP Balanced Indexed Strategy Fund, and the AZL MVP Growth Index Strategy fund. The annual expense of the variable options can run you between 0.65% and 0.73%.
If you opt to take more than 10% of the contract value out within the first six years, you will incur a withdrawal charge (and, if you are under the age of 59 1/2 when you do so, you can also be hit with an additional 10% “early withdrawal” charge from the IRS). Likewise, if you choose to transfer your money within the annuity contract, you will have 12 charge- free transfers allowed, after which you will be charged $25 per each transfer thereafter.
The Annuity Gator’s End Take on the Index Advantage Annuity from Allianz Life
Where it works the best:
- For accumulating funds, without the risk of a catastrophic loss of the contract value
- For adding money to a tax-advantaged account – especially if other options such as an IRA and/or employer-sponsored retirement plan has been maxed out
- For attaining a higher cap than a fixed indexed annuity, along with the potential for some protection of principal
Where it works the worst:
- For those who have a low tolerance for risk (i.e., those who want no loss of principal at all)
- For those who want an annuity for the primary purpose of generating a lifetime income in retirement
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.
As time goes on, the need for the financial services industry to add new products is evident – and in the case of the buffer annuity, a “gap” was filled that the caps on fixed indexed annuities just simply were not filling.
The Allianz Life Index Advantage 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 Allianz Life Index Advantage Annuity?
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 to 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 “hybrid” 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.
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