Independent Review of the American Equity Bonus Gold Annuity with LIBR – [November 2018 Update]
What’s Covered in this American Equity Bonus Gold Annuity Review?
In today’s review, we’ll be covering the following information on the American Equity Bonus Gold Annuity with Lifetime Income Benefit Rider (LIBR). In order to truly understand this annuity and how it works, we will be going over:
- Product type
- Current rates
- Realistic long term investment expectations
- How this annuity is best used
- How it is most poorly used
The Bonus Gold annuity from American Equity is a fixed index annuity that also offers optional riders that can provide lifetime income guarantees. There are elements of this type of annuity that some conservative retirees and pre-retirees may find desirable, but there are also details that some sales agents might say about its potential performance that may not be entirely true.
So, before you go full steam ahead and complete an American Equity Bonus Gold annuity application, it’s important that you understand the differences (between what advisors say, and how the product really works), so you can determine if it really is a good fit as part of your financial plan.
Annuity and Retirement Income Planning Education You Can Actually Trust
For readers who have found this website for the first time and don’t know much about us, well, you have definitely come to the right place.
If you’ve been Googling “annuities”, it’s very likely that you’ve visited annuity marketing websites offering “Annuity Info Kits and DVDs” make the following bold claims in order to collect your contact information:
- Highest Payouts
- Lowest Fees
- Top Rates A+ Companies
- Guaranteed Income for Life
- Get Your Quote Now!
- Get 7-8% Returns with NO Market Risk
We’ve discovered that none of these “benefits” really even matter without first understanding your primary reason for buying an annuity in the first place. Furthermore, under further scrutiny, many of these annuities cannot actually provide 7-8% returns for most consumers.
Other websites are adamantly opposed to annuities but have no idea how they really work.
Both of those approaches are flawed and don’t benefit you in any way.
It is also possible that you have recently attended an annuity seminar hosted by a financial salesperson. In return for a “free” lunch or dinner, the annuity sales agent likely spent a considerable amount of time discussing annuities and all of their many benefits. Unfortunately, as the old saying goes, “There is no such thing as a free lunch.”
Here again, whoever invited you to the annuity seminar may be vying for you to schedule an appointment with them so that they could sell you an annuity. Sadly, we chat with folks all the time, that have been steered into an annuity regardless of whether or not the product actually fit in with their financial goals.
Landing on the website you are on right now may have even been the catalyst that led you to obtain additional annuity information so that you could better understand how these financial vehicles work.
You will find that the site you are on today is totally different from the others. Here at AnnuityGator.com, we publish the most comprehensive independent and objective annuity reviews on the web – and we have been doing so for longer than any of the (now many) copycat sites out there…So, you can ultimately decide for yourself if an annuity makes sense for you, or not.
Ready to learn the real truth about the American Equity Bonus Gold Annuity?
Great! Let’s dig in!
American Equity Bonus Gold Fixed Index Annuity – The Basics
|Product Name||American Equity Bonus Gold Annuity|
|Type of Product||Fixed Index Annuity|
|Issuer||American Equity Investment Life Holding Company|
|A.M. Best Rating||A- (Excellent)|
Opening Thoughts on the Bonus Gold Annuity with Lifetime Income Benefit Rider (LIBR)
American Equity Investment Life Holding Company is considered to be a leader in the fixed and fixed index annuity marketplace. In fact, according to Wink, American Equity is the #3 seller of fixed indexed annuity products – and the company currently has more than 600,000 active contract owners.
As of 2018, the company held nearly $52 billion in assets. Considered strong and stable financially, American Equity has very high ratings from the insurer rating agencies, which include an A- (Excellent) from A.M. Best Company, and an A- (Strong) from Standard & Poor’s.
According to American Equity, the company “does not have big stadiums with the American Equity logo on them, and they don’t buy pricy television advertising or have a funny mascot. What they do have that puts them ahead of the competition is a commitment to conservative investment practices that keep your money safe, and customer service that cannot be outperformed.”
For quite a few years, many people purchased fixed index annuities because these products were pitched as a way to get market linked upside with no market downside. However, with interest rates being historically low over the past decade or so, the upside on these products has been severely limited.
As a result, many insurance companies have pivoted to make their products more about lifetime income guarantees that account holders cannot outlive. In terms of index annuities, many have done this by adding “riders” that add an income benefit to the original chassis.
While most insurance companies aren’t fond of the term, there are quite a few agents that use the term “hybrid annuity” when describing this updated version of the original index annuity. Be careful though with this term. “Hybrid Annuity” is just a marketing term. It’s nothing special and in reality annuities (for the most part) have always been hybrid in nature (they do more than just one thing).
In the case of the American Equity Bonus Gold product, it comes with the option to choose from a few variations of their Lifetime Income Benefit Rider (LIBR).
Let’s take a closer look at how this rider actually works.
American Equity Bonus Gold Lifetime Income Benefit Rider
The LIBR essentially guarantees a lifetime income for the contract owner regardless of how long the owner lives or what the market does. Even if the underlying investments go to zero, the LIBR keeps on paying income. If the annuity owner defers this rider the future income is higher based on a “roll-up rate.”
A roll-up rate though is not an actual return. This is supremely important – and if you watch the detailed video below that illustrates how the rider really works you’ll see why.
Income riders like the LIBR have been really popular largely because of the volatility of the stock market, and also because low-interest rates have made it tough to find high paying fixed investment alternatives.
The problem though is the actual returns of these riders is easily misinterpreted. The bonus rates, roll up rates, and distribution rates are NOT the real returns to the investor.
In order to truly get an idea of whether or not a fixed indexed annuity such as the American Equity Bonus Gold annuity is right for you, click here so that you can access our free annuity buyer’s guide.
You’ll see why later in this review, most specifically in the 35-minute video we created that shows exactly how it really works. In the video, we illustrate how to calculate the real returns of the income guarantee, as well as provide some insight into what the upside potential is with the market linked annuity component.
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 product review, not a recommendation to buy or sell an annuity. American Equity has not endorsed this review in any way nor do I receive any compensation for this review. This review is meant to be an independent review at the request of readers so they could see my perspective when breaking down the positives and negatives of this particular model annuity. Before purchasing any investment product be sure to do your own due diligence and consult a properly licensed professional should you have specific questions as they relate to your individual circumstances. All names, marks, and materials used for this review are the property of their respective owners.
How American Equity Describes The Bonus Gold Annuity
Based on the information that is outlined in the American Equity Bonus Gold Annuity brochure, the key highlights of this annuity include:
- Safety of Premium
- Deferral of Income Taxes
- Avoidance of Probate
- Guaranteed Income
- Flexible interest crediting options
There’s a few more bells and whistles, but those are the basics. If you’re looking for the full brochure, you can find it here.
Based on the additional information that is also provided by American Equity regarding the LIBR, this too is touted to provide a number of benefits, such as:
- Lifetime Income
- Control of the money that remains in the annuity
- The choice of a Rate / Benefit option that best suits your specific needs
- An available spousal income benefit
- Level or increasing payment options
You may also find that the American Equity Bonus Gold annuity offers additional features, like a Wellbeing Rider. These riders can be beneficial – provided that they fit in with your specific financial goals. It is always important to keep in mind that there are no one-size-fits-all retirement savings or income solutions, so checking out a product thoroughly is the best route to take before committing a large chunk of your retirement savings…especially because once you’ve purchased an annuity, it can be difficult, and costly, to get back out.
For more in-depth information regarding the Lifetime Income Benefit Rider (LIBR), as well as the other options related to the American Equity Bonus Gold annuity, you can find that here.
The Bonus Gold a lot like other annuities that annuity sales agents call a hybrid annuity. In the past few years, some insurance agents have fallen in love with the term “hybrid annuity.” Even though the insurance companies don’t seem to like the term a whole lot, I guess the cool sounding name makes it easier to sell annuities, so it’s caught on nonetheless. When agents use the term “hybrid,” they are referring to an annuity that has multiple annuity features rolled into a single product.
In the case of the Bonus Gold Annuity, it combines a lifetime income guarantee with the possibility of higher returns linked various market linked crediting methods; hence some advisors may call it a hybrid annuity.
If you hear it described as a “hybrid annuity” – there are a few different ways it might be presented. Our experience, however, is that most sales agents will focus on two main components:
- The safety combined with return potential of the bond market
- The guaranteed income for life (LIBR) that makes the worst case scenario pretty desirable
While those are true statements, this annuity is not perfect (nor all bad). It can work well when used correctly but has shortcomings just like any other financial product. One of the biggest issues I’ve run into is that many agents misrepresent how this annuity will actually perform. That’s a problem.
From the many people we’ve talked to personally about their experience with agents, many have been told this annuity will perform “better” than other annuities. Because the roll-up rate on LIBR can be as high as 6.0% per year, and the payout rate can be over 5%, some people seem to think that is the actual return. Combined with a potential bonus of 10%, it is easy for many to think their worst case return will be more than 5% per year.
Is any of that true? Eh, not exactly.
If your financial salesperson explains this annuity correctly, you should never get the impression you’ll earn more than 6% (in today’s low-interest rate environment). Based on our testing, we feel that the most realistic expectation is closer to the 2% to 5% range. And, it could actually only produce a return of less than 1% – and if you happen to cancel the annuity before the surrender period ends, you could actually end up losing money!
If bigger returns than that are part of your agent’s sales pitch, then RUN, don’t walk, to find a more honest financial advisor.
Unfortunately, even though most insurance and financial professionals work hard to do what is right for their clients, because index annuities have so many “moving parts,” there may be some insurance sales agents in the field who do not fully understand how they work – and in turn, they end up providing their clients with incorrect information, and incorrect expectations of how these products work.
If you really don’t know the person who offered you this annuity – or, even if you just want to do a bit of a background check on your financial advisor – you can easily do so by going to Brightscope and entering in your advisor’s name, city, and state. Doing so can provide you with a sense of relief if they check out ok, or a reason to find another advisor if they don’t.
The reality is that the only real way to determine if the American Equity Bonus Gold annuity – or any annuity, for that matter – may be right for you, is to use an annuity calculator that takes into account your specific situation, time frame, and other factors about YOU. To go to our American Equity Bonus Gold annuity calculator, and to receive a free spreadsheet that can help you in making your decision, just click here.
Complete Video Review of the American Equity Bonus Gold Annuity
If you find that your head is starting to swim from reading all of these annuity details, we’ve created a video that also outlines the features and benefits – as well as the potential drawbacks – of the American Equity Bonus Gold annuity. In this video, we go into more detail about how this annuity works – as well as who it may or may not be suitable for. So feel free to grab a bag of popcorn and enjoy the show.
Warning: We tend to get pretty in-depth and a little geeky with video reviews. This particular video is very thorough and will show you exactly how to calculate the annuity performance. Enjoy, but consider yourself warned ;).
Information in the video as of May 9, 2017.
American Equity Bonus Gold Commission and Other Fees
As with any other annuity issuer, American Equity incurs expenses for the selling and the issuing of its contracts – which can include the payment of a commission to insurance or financial advisors. The good news is that this commission won’t come directly out of your deposit into the annuity.
Where you do need to be careful, though, is with the potential charges that you could incur if you withdraw more than 10% of your contract’s value during the surrender period – and in this case, it’s a long one!
With this annuity, you are essentially “locked in” for 17 years. Here is a schedule of the year-by-year American Equity Bonus Gold Annuity surrender charges:
With that in mind, be sure that you understand that the American Equity Bonus Gold annuity – and quite frankly, any annuity – is a long-term financial commitment. So, the money that you put into this product should be funds that you won’t need any time soon in the event of an emergency.
The Annuity Gator’s End Take on the American Equity Bonus Gold Annuity
Where it works best:
- For producing a reliable, “pension-like” guaranteed income stream (although there are other annuities with higher guaranteed income at this time)
- For producing an income for life that cannot be outlived by a surviving spouse
- For investors who have a family history of life longevity
- For investors that have no need for their money or generating large returns, but want it to grow safely until transferred to their beneficiaries
- For investors that want increasing income payments via an inflation adjustment to the LIBR
- For investors willing to defer income payments from the annuity for 5 years or longer in order to get maximum benefit from the LIBR rider
Where it works worst:
- For those that do not plan on using the Lifetime Income Benefit Rider (LIBR)
- For those seeking maximum long-term growth
We should also note that we only tested a few of the many ways this annuity can be structured. It has other indexes that the interest can be calculated against, as well as some different options on the income rider, and most importantly – the returns will vary based on each unique person’s circumstances. In general, though, this is a fairly comprehensive review that will hopefully help many people to better understand how the Bonus Gold Annuity from American Equity works.
For even more detail, you can also check out the American Equity Bonus Gold annuity prospectus, as well as additional literature that provides more in-depth information on this particular annuity.
One of the most important things for investors to understand is that the “income growth rate” is not the actual return, nor is the “income percentage” the actual return. It’s highly unlikely that it produce the 5% to 8% return numbers some may use when trying to sell it (NOTE: there are regulatory requirements surrounding product training and disclosure of product information agents should be adhering to. If they do not, it is not at the fault or responsibility of the issuing insurance company).
For someone strictly looking for guaranteed income with no market risk, the Bonus Gold can do the job, though there may be better options available. For someone looking for an investment vehicle that cannot go down, is content with low to mid-single digit returns, and wants the transfer of risk annuities are really good at – this might be a good fit.
In the end, we’re still convinced some agents don’t realize what the real returns are though, and may significantly over-promise what’s realistic – so be especially wary of anyone who suggests this annuity will work better than how it is illustrated here.
If the agents are being upfront and honest, you’ll notice their explanations match very closely (if not exactly) as described in this review. When that happens, you have an agent you can trust. American Equity has actually done a very good job of producing easy to understand literature and in no way misrepresenting their product. They can’t, however, control every word that comes out of every agent’s mouth – so buyer beware!
The only way to know if this annuity is a good fit for you is to have it tested. We do this free at AnnuityGator.com, so just get in touch with us and we’ll use the proprietary software to illustrate for you what returns for your situation are likely to be. If your agent was honest with you the numbers will match up – if not, well then you might want to reconsider who your agent is.
Have Questions on the American Equity Bonus Gold Annuity? See any Mistakes?
If you have any additional questions regarding the American Equity Bonus Gold Annuity with LIBR – or questions or concerns about whether or not any other annuity may be the best fit for you – then please feel free to reach out to us via the Free Annuity Help form here.
We realize that annuities can be somewhat confusing – even for well-informed consumers (and insurance agents!) There are a lot of agents who are pushing investors very hard to buy them. But you really need to know the real facts to make sure if you go that route, you don’t end up regretting it later.
After all, annuities are long-term investments with contracts, surrender penalties, etc. For some people, they won’t make sense at all, but for some, they might.
If you know anyone who has an annuity or is thinking of buying one, please share this post with them. We know a lot of people are getting very conflicting information and our goal in writing this review and making the video was to educate in an objective way.
If you have a Facebook account you can click on the little “Facebook” icon and share this article. That way more people will be able to find it and hopefully, more people will benefit.
Thanks for bearing with us on this rather long post, we hope you found it beneficial in your research.
Lastly, like all humans – we do make mistakes. If you see one on this review please reach out and let us know. We’re always more than happy to make corrections and give credit where it is due. If you’re an investor and this review causes confusion and creates questions feel free to reach out as well. Our team of annuity geeks can clear up those questions within a day or two.
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The Annuity Gator
P.S. We included a few more related links to the American Equity Bonus Gold below that you might find useful:
- American Equity Bonus Gold Complaints
- American Equity Bonus Gold Wellbeing Rider
- American Equity Bonus Gold Statement of Understanding
- Enhanced Death Benefit Rider on the American Equity Bonus Gold Annuity
- Lifetime Income Benefit Rider (LIBR) on the American Equity Bonus Gold Annuity
P.P.S If you would like to read more of our American Equity annuity reviews here’s some links to check out:
- American Equity Choice 10 Fixed Index Annuity
- American Equity Foundation Gold Fixed Index Annuity
- American Equity Foundation Gold Annuity with Income Rider LIBR 6%