What will we be covering in this review of the American Equity Guarantee 5 MYGA Annuity?
What will we be covering in this review of the American Equity Guarantee 5 MYGA Annuity?
- Type of annuity
- Realistic performance expectations
- Where the annuity is best used
- How the annuity 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.
Committing to any financial product can be a big decision – particularly if it will impact your future retirement income, and ultimately, your life. As an example, an annuity can provide you with a nice, steady stream of guaranteed income that you can count on for a set period of time – or even for the remainder of your lifetime, no matter how long that may be.
On the other hand, though, if you end up choosing an annuity – or for that matter, any financial related product – that really doesn’t fit your particular needs, then it could have a negative impact.
In the case of an annuity, you may need to contribute a fairly large chunk of your savings in order to generate a viable income stream. But because most annuities have surrender penalties for withdrawing your funds – some for more than ten years – it can cost you dearly if you purchase an annuity and then soon afterward determine that a different product would be better.
Annuities can be somewhat confusing to understand – even for well-educated consumers (as well as for some financial and insurance advisors). As “new and improved” annuities hit the marketplace, there can be a plethora of “small print” that comes along with these vehicles, sort of like an owner’s manual.
But have you (or anyone you know, for that matter) ever really sat down and read an owner’s manual word for word?
The answer is likely no.
The “small print” that is associated with almost any product or service can oftentimes seem a bit daunting. Therefore, most people will simply move forward with their purchase and hope that everything turns out ok.
When it comes to your future income, though, hope is definitely not the best strategy. That’s where Annuity Gator can help.
Annuity and Retirement Income Planning Information That You Can Actually Trust
If this is the first time you have visited our website, then please allow us to welcome you to Annuity Gator. We make up a team of annuity and retirement income specialists who focus on educating people on how annuities work, as well as whether or not a particular annuity is right for you and your specific needs.
We’ve been doing this for quite some time now – far longer than our competitors. Because of this, we have come to be known as a highly trusted source of annuity information. Over the past several years or so, though, many “copycat” websites have started to spring up, mimicking what we do. While that can be somewhat confusing for consumers, we take it as “imitation being the highest form of flattery.”
If you have spent any amount of time on the world wide web looking for information about annuities – including the American Equity Guarantee 5 MYGA (multi-year guarantee) annuity – you may have run across some highly conflicting information regarding these financial vehicles.
This isn’t too surprising, though, because there are many “flavors” of annuities out there today in the marketplace – and just about everyone has some sort of opinion about them. Some people love them, some people hate them. And some just don’t really care.
But the reality is there are situations where annuities work, and situations where annuities don’t work. That’s the premise of our annuity reviews – to make sure that you have enough information to make a well-informed annuity purchasing decision.
With that in mind, if you are looking for all of the in-depth details about the Guarantee 5 annuity from American Equity Investment Life Insurance Company, then you are definitely in the right place. That’s because we don’t hold back any of the information about how this annuity works, and what you can expect if you make a purchase.
So, if you’re ready to begin, let’s go ahead and dive in!
The American Equity Guarantee 5 MYGA Annuity at a Glance
|Product Name||Guarantee 5|
|Issuer||American Equity Investment Life Insurance Company|
|Type of Product||Fixed Index Annuity|
|S&P Rating||A – (Excellent)|
|Phone Number||(888) 221-1234|
Opening Thoughts on the Guarantee 5 MYGA Annuity from American Equity
Through its headquarters in Des Moines, Iowa, American Equity Investment Life Holding Company and its subsidiaries specialize in the sale of fixed index and fixed rate annuities. In fact, American Equity Life Insurance Company’s mission is “to become the premier insurance company specializing in retirement savings and income products.”
American Equity Investment Life actually offers a variety of different annuities, including:
- Fixed Index
Fixed index annuities can offer principal protection in any type of market, while at the same time giving you the opportunity to grow your account value based on an underlying market index (or multiple market indices), such as the S&P 500, the S&P 500 Dividend Aristocrats Daily Risk Control 5% Index, the Dow Jones Industrial Average, and/or the 10-Year U.S. Treasury Bond.
Regular fixed annuities – while they typically offer a lower fixed rate of return – can be enticing for those who want to ensure that their principal is protected and that they have guarantees when it comes to growth in the account, as well as a future income stream.
For more than 25 years, American Equity has provided quality wealth accumulation and protection products, as well as retirement income generating vehicles. Today, the company has 500,000 active contract owners and assets in excess of $53.7 billion.
American Equity is licensed to offer its products in all 50 of the U.S. states, as well as the District of Columbia. The company is considered to be strong and stable financially, and because of that, it has earned high ratings from the insurer rating agencies.
The Guarantee Series of fixed annuities from American Equity Investment Life offers several options to choose from in terms of guaranteed rate periods. Here you can lock in a rate guarantee for 5, 6, or 7 years.
Over the past several years, due in large part to the continuous ups and downs of the stock market, the demand for fixed annuities has increased substantially. This includes multi-year guarantee annuities or MYGAs.
One key reason for this is because, in addition to keeping principal safe (in any market condition), these financial vehicles can also provide you with a guaranteed rate of growth for a specific period of time, as well as a set amount of income that could last you for the remainder of your lifetime.
Yet, even though this might sound like a win-win-win situation, the reality is that if something sounds like it may be too good to be true, then it typically is – so you should ideally get as much in-depth detail as possible if you are considering committing to it for the long term.
Before we get into the gritty details, here are some necessary legal disclosures…
This is an independent annuity product review. It is not a recommendation to purchase or to sell an annuity. American Equity Investment 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. Before purchasing any type of insurance and/or investment product, it is important that you do your own due diligence, and that you consult a properly licensed professional if you should have any specific questions that relate to your individual situation. All of the names, marks, and materials that were used for this annuity review are the property of their respective owners.
For more information on how to compare annuities in order to determine which one may be the best for you and your financial circumstances, click here to obtain our free annuity report.
How American Equity Describes the Guarantee 5 Multi-Year Guarantee 5 Annuity
American Equity Investment Life Insurance Company describes the Guarantee 5 annuity as a single premium deferred annuity with a market value adjustment (MVA).
As a fixed annuity, the Guarantee 5 can provide you with a long list of benefits, such as:
- Protection of principal
- Guaranteed income
- Tax-deferred growth
- Some liquidity
- Avoidance of probate
The Guarantee 5 will lock in a guaranteed interest rate for a full five years. Then, within 30 calendar days after the end of the guarantee period, you can choose from several different options in terms of what to do next.
- Applying your contract value to a settlement option (with no surrender charges incurred)
- Taking a partial withdrawal, and then moving the remainder of the funds into a new guarantee period (also without incurring surrender charges)
- Renewing the entire contract for a new guarantee period
If you do not choose any of these options, the contract will be continued automatically for a new guarantee period of the same length of the original period. (In this case, for five years).
It is important to note, though, that if you move some or all of your funds to a new guaranteed interest rate period, the rate may or may not necessarily be the same as your previous rate.
There are some added “bells and whistles” associated with this annuity. These include a death benefit, where the proceeds are paid out to a named beneficiary (with no surrender charges). These funds are typically paid out as a lump sum (although there are some other potential payout options). Note here, though, that unlike a death benefit that is paid out from a life insurance policy, an annuity’s death benefit proceeds can be taxable to the recipient.
A provision for qualified care needs is also included in the Guarantee 5 MYGA annuity from American Equity. In this case, if – after the third contract anniversary – the annuitant is confined to a qualified nursing care center for a 90-plus day consecutive period of time, a 100% penalty-free withdrawal is available (provided that this confinement occurs in the second or third contract year).
To take a look at the American Equity Guarantee 5 MYGA brochure, go here.
How an Insurance or Financial Advisor Might “Pitch” You the Guarantee 5 Fixed Annuity
If you are approaching retirement, you may be torn between going with financial vehicles that have more risk in order to increase your opportunity for growth, or instead, going with something “safe” so that you don’t lose any of your hard-earned retirement funds.
For instance, rather than trying to turn $1 million into $2 million, your focus may instead be on keeping $1 million from becoming $500,000. That exactly what a multi-year guarantee fixed annuity can do for you.
Because many pre-retirees today are concerned about not losing what they’ve already saved, having certain guarantees can be comforting – so if you have been presented the Guarantee 5 Multi-Year Guarantee Annuity by an insurance or financial advisor, it is likely that they keyed in on the safety features of this product, along with the ability to earn a higher return if or when rates rise in the near future. So, in many ways, this annuity can allow you to potentially increase the returns on your “safe money.”
But there are some tradeoffs that you need to be mindful of. For example, even though you can earn more than the guaranteed rate on this annuity, the reality is that you still may not be able to beat, or even meet, the rate of inflation.
In the case of the American Equity Guarantee 5 MYGA annuity, you could be essentially locked into a certain rate guarantee period – in this case for full years – during which time you may have to pass up other, higher interest-earning financial opportunities.
So, on the one hand, even though it might be nice to know how much you’re going to earn in the next few years, what happens if interest rates go up? In this case, you’d be left behind, earning a lower rate for the remainder of the guarantee period!
What About the Fees on the American Equity Guarantee 5 Annuity?
With just about any type of financial product, there will be at least some charges or fees to content with. This is no different for the American Equity Investment Life Insurance Company’s Guarantee annuities.
In the case of the Guarantee 5, if you withdraw more than 10% of the contract’s value during the surrender period (of five years), you will incur a surrender charge of:
|Surrender Charge %||9||8||7||6||6|
In addition to a possible surrender fee – and taxes on the gain in the account – you could also incur an additional 10% “early withdrawal” penalty from the IRS if you make a withdrawal prior to turning age 59 ½. So, it is really important to consider this a long-term financial commitment.
The Annuity Gator’s End Take on the American Equity Investment Life’s Guarantee 5 Multi-Year Guarantee Annuity
Where this annuity works best:
Just like all product or service offerings, there will usually be some pros and some cons with annuities, meaning that the item or service may work well for some, and not-so-well for others. So, if you are still considering the purchase of the Guarantee 5 MYGA annuity from American Equity, then it could work well for you if you are seeking the following benefits:
- Guaranteed growth (for a period of 5 years, as well as another rate guarantee period thereafter)
- Protection of principal – no matter what occurs in the stock market
- Lifetime income in retirement
Where it works the worst:
On the other hand, this particular annuity may not be the right one for you if:
- You want the opportunity to earn a higher rate of return in order to keep better pace with future inflation
- You want to access more than just a small percentage of the contract’s value during the surrender period
- You do not plan to use the guaranteed lifetime income feature
When you’re thinking about how to best position your savings for the future, there are a number of different criteria that you should ideally consider. For instance, with annuities, you will definitely need to make sure that the product allows you the opportunity to earn a nice return (at least enough to meet or beat inflation), while also keeping your money safe in any type of market environment.
In addition to that, if you’re seeking a future income stream – including one that you cannot outlive, regardless of how long that may be – then you also need to know how the annuity will pay out when you need to convert the funds into ongoing income.
So, if you are still leaning towards the Guarantee 5 Multi-Year Guarantee Annuity (MYGA) from American Equity, you can be assured that your money will be safe, no matter what goes on with the stock market. You can also count on an ongoing income stream down the road, alleviating the worry about running out of money before “running out of time.”
However, while this annuity can certainly provide you with some nice benefits, the reality is that it could still fall somewhat short – and quite honestly, there may very well be a better alternative out there for you. This is even more true if you are looking for a way to keep your money safe, while still having the opportunity to earn a higher rate of return.
The only way to truly get an idea of how this annuity may perform – based on your specific situation – is to have it tested. We can do this for you by running the numbers through our annuity calculator, and we can then provide you with a spreadsheet of the results. In order to receive this information, just simply contact us through our secure online form here and let us know.
Have Any Additional Questions About the American Equity Guarantee 5 MYGA Annuity? Are There Any Other Annuities You’d Like to Have Reviewed?
While we know that this annuity review was a bit on the long side, we feel that providing “too much” information is far better than not enough. That being said, we appreciate you sticking with us here to the end of this annuity review for the American Equity Guarantee 5 MYGA annuity.
We also realize that, because everyone’s situation is different, there may have been some questions that went unanswered in this review. If this is the case and you still have any additional questions or concerns, please feel free to reach out to us here.
In addition, if you found this annuity review to be helpful, then please forward it on to anyone else that you think may benefit from it, as there is a lot of misconception out there about annuities and how they work.
Is there any other annuity you would like to see reviewed?
If so, we will get right on it!
There is literally a myriad of annuities available in the marketplace today. So, if you don’t currently see an annuity in our online database in AnnuityGator.com that you are considering, then just let us know the name of that annuity (or the names, if there is more than just one), and our team of annuity pros will get to work on it ASAP.
The Annuity Gator
P.S. If you would like to read more of our American Equity annuity reviews here are some links to check out:
- Independent Review of American Equity Investment Life Holding Company
- Independent Review of the American Equity Investment Life Insurance Company IncomeShield 7 Fixed Indexed Annuity
- Independent Review of the American Equity 7 MYGA Annuity
- Independent Review of the American Equity Choice 10 Fixed Index Annuity
- Independent Review of the American Equity Investment Life AssetShield Fixed Index Annuity
- Independent Review of the American Equity Life Insurance Company IncomeShield 10 Fixed Indexed Annuity
- Independent Review of the American Equity Investment Life RateShield 10+ Fixed Annuity with IncomeShield Rider
- Independent Review of the American Equity Investment Life Insurance Company’s RateShield 7 Fixed Annuity
- Independent Review of the American Equity Guarantee 6 MYGA Annuity
- Independent Review of the American Equity Foundation Gold Fixed Index Annuity
- Independent Review of the American Equity Foundation Gold Annuity with Income Rider LIBR 6%