Independent Review of the Lincoln National Covered Choice 5 Annuity

What’s Covered in this Lincoln National Covered Choice 5 Annuity Review?

In today’s review, I’ll be covering the following information on the Lincoln National Covered Choice 5 Single Premium Deferred Fixed Indexed Annuity:

  • Product Type
  • Fees
  • Current Rates
  • Realistic long-term return expectations
  • How this annuity is best 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.

For anyone who is in the process of looking for an annuity that can keep principal safe and provide the opportunity to grow funds based on the performance of an underlying market index – as well as offer a lifetime stream of income in retirement – may want to consider taking a closer look at the Lincoln National Covered Choice 5 Single Premium Deferred Fixed Indexed Annuity.

But, before you go out and make a long-term commitment on this – or on any – annuity, it is always a good idea to first take a closer look at how the product works, and how it may or may not work in your particular situation.

Over the past few years, fixed indexed annuities have become extremely popular, in large part because they can offer you a guaranteed stream of income during retirement, which can, in turn, provide you with peace of mind in knowing that you won’t run out of income, regardless of how long you may live.

Due to the increased popularity of these types of annuities, the number of insurance and financial services reps who are offering them has expanded a great deal. However, this may not be a positive thing. One reason for this is because, while these professionals typically work hard to offer the best possible information for their clients, because fixed indexed annuity products are complex and have a lot of moving parts, even the insurance and financial advisors who sell them may not always be all that familiar with the intricate details about them.

However, because fixed indexed annuities – or for that matter, any annuities – can often times require a large percentage of your overall savings, you really need to know how the product will work because if you change your mind later and want to get out of it, you will find yourself paying a pretty hefty surrender penalty.

Annuity and Retirement Income Planning Advice that You Can Actually Trust

If you’ve never visited our website before, then please allow us to personally welcome you here to AnnuityGator.com. We are a team of annuity experts who are highly focused on offering in-depth, yet non-biased, annuity reviews. We have been doing this for quite some time now – much longer than our competitors – and because of that, we have come to be a trusted source of annuity information.

If you have been looking for details about annuities via the Internet, then it is probable that you have run across a lot of very conflicting opinions about them. This, however, is not really all that surprising. That is because there are many different annuity products available, and many people – both consumers and financial advisors alike – will often have differing thoughts.

It is possible that you may also have recently attended an annuity seminar where, in return for a free lunch or dinner, the presenter provided you with a great deal of information about the Lincoln National Covered Choice 5 or some other similar annuity. You might even have set a follow-up meeting with the presenter, which in turn, has led you here to the Internet in search of more detailed information about this (and/or other annuities).

Even though there are many very good websites out there online that are keyed in on offering annuity products and information, there are some that will attempt to “lure” visitors in by making some pretty bold claims, such as the following:

  • Lowest fees
  • Highest income payouts
  • Guaranteed lifetime income
  • Top-rated companies

Sound familiar?

However, while these claims may sound very enticing, it makes it all that much more important to know whether or not these claims are actually true. This is where we come in. In fact, if you have come to our site in search of more information on the Lincoln National Covered Choice 5 annuity, then you are definitely in the right place. Here you will not only find the nice, rosy details about everything good that this annuity offers, but also the factors that may be considered as drawbacks. That is because we feel that knowing the entire picture is really the only way to make a well-informed decision as to whether or not the annuity will be right for you.

If you’ve done any amount of investing in the past, you may notice that insurance and financial advisors will often tend to happily give you all of a product’s benefits, yet will simply gloss over the disadvantages – if they even discuss them at all.

When it comes to fixed indexed annuities, for instance, advisors will usually be going into great depth about how the product offers the opportunity for higher growth than that of a fixed annuity, while at the same time keeping your principal safe. We don’t think it’s right to be just one-sided, though.

In order to be perfectly clear here, we do feel that annuities can provide investors with some very nice benefits. However, this is only the case if the product fits in with your specific short- and long-term goals.

The review that you are in the process of reading right now was created with the intent of assisting you with better understanding all of the “fine print” that is associated with the Lincoln National Covered Choice annuity.

So, if you are ready to begin, then let’s go ahead and dive in!

Lincoln National Covered Choice 5 Annuity at a Glance

Product NameCovered Choice 5
IssuerLincoln Financial Group
Type of ProductFixed Indexed Annuity
S&P RatingAA-
Phone Number(800) 672-4822
Websitewww.lfg.com

Opening Thoughts Regarding the Lincoln National Covered Choice 5 Annuity

The Lincoln Financial Group was established back in 1905. Over the past 110+ years, Lincoln has grown into a well-respected financial and insurance provider. Lincoln Financial Group consists of several entities, including the following:

  • Lincoln National Life Insurance Company (Fort Wayne, Indiana)
  • Lincoln Life and Annuity Company of New York
  • Lincoln Financial Distributors
  • Lincoln Financial Advisors
  • Lincoln Financial Securities Corporation
  • Lincoln Financial Foundation

The company has been ranked highly among its peers, and it is also considered to be strong and stable from a financial standpoint. Because of that, as well as the company’s timeliness in paying out its policy holders’ claims, it has been provided with high ratings from the insurer rating agencies, includes an:

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

Due to the constant volatility of the stock market over the past several years, fixed index annuities have become extremely popular with investors as a way to both grow and protect principal, as well as to obtain an ongoing income in retirement. However, while these features may seem highly attractive at first glance, it is important that you look at the whole picture because there is typically some type of “tradeoff” required.

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. Lincoln National 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 Lincoln National Describes the Covered Choice 5 Fixed Indexed Annuity

The Lincoln Covered Choice is a single premium deferred fixed indexed annuity. This means that, while the annuity offers a fixed account, the return can also be based on the performance of an underlying market index.

The Covered Choice Advisory is the new fixed indexed product, which is available with a five-year option, as well as a seven-year option.

There is the Lincoln Covered Choice 5 and the Lincoln Covered Choice 7. These annuities both follow the performance of the S&P 500 index.  

The Covered Choice 5 offers a five year guaranteed rate on the fixed account, with a tad higher interest rate for those who pay in more than $100,000. Investors can then choose between a performance triggered indexed account, or a one-year point-to-point indexed account.

With the performance triggered indexed account, the value of the S&P 500 index will be compared at the beginning and the end of the one-year indexed term. If the percentage change is zero or positive, then the investor will receive a specified rate of indexed interest. If, however, the difference is negative, then the account will be credited with a 0%.

If the investor chooses the one-year point-to-point indexed account, this has a one-year indexed interest cap. Here, the value at the end of the one-year indexed term is compared to the value at the beginning of the indexed term. If the percentage change is positive, the account will earn the full percentage change – up to an indexed interest cap. If, however, the difference is negative, then the account will be credited with a 0%.

How an Advisor Might Pitch this Annuity

Over the past several years – especially since the 2008 U.S. recession – the safety of principal has been a key concern for many investors, particularly as they inch their way towards retirement. Unfortunately, the more traditional “safe” financial vehicles, such as CDs and regular fixed annuities, can offer safety, however, their rates are so painfully low that they can’t even come close to meeting future inflation, much less beating it.

But enter the fixed indexed annuity.

Because this product can offer the opportunity to return higher than a traditional fixed annuity, while also keeping principal safe – regardless of what happens in the market – advisors have been pitching these “best of all worlds” scenarios. The icing on the cake is the fact that, if the lifetime income option is chosen, the worry about running out of money in retirement has also been taken off the table.

But even though this can make it sound like all of your troubles have been wiped away, there is some small print you need to read over before you dive in head first. For example, because the return on the Covered Choice annuity is “capped”, it is essentially limited in so far as it can rise.

As an example, if an indexed annuity has a cap of 5%, but the underlying index that the annuity is tracking has a stellar year and it returns closer to 10 or even 15%, the return that is credited to the annuity account will be capped at 5. So, while you do have the opportunity to end up with a higher return than a regular fixed annuity with a set rate of interest, the reality is that the 7 or 8% returns that are touted by some of the annuity marketing websites are not all that likely – especially on an ongoing basis.

Also, as with most other fixed indexed annuities, the index that is used is basically a price index, and it will not reflect the dividends that are paid on the underlying stocks in that index. And then there are the fees…..

What About the Fees on the Lincoln Covered Choice 5 Fixed Indexed Annuity?

The Lincoln Covered Choice 5 and Covered Choice 7 each offer options that charge an up-front sales commission, as well as an option for fee-based financial advisors. This way, an investor can choose which model is best for them.

If that happens to be the version with an upfront sales commission, you will be starting out with a negative return and may find yourself swimming upstream for quite a while, depending on how the underlying index performs, and the cap that is imposed on the return.

There is also the surrender charge to contend with if you need to withdraw more than 10% of your money from the annuity during the given surrender period. The Covered Choice 5 and 7 each have a surrender charge that starts at 9%, and then gradually grades down until eventually reaching 0%.

If you do have to take funds out of the annuity, be aware that, if you are under the age of 59 1/2, then you can also face an additional 10% “early withdrawal” penalty from the IRS. This can lessen your overall return even more.

The Annuity Gator’s End Take on the Lincoln National Covered Choice 5 Fixed Indexed Annuity

Where it works best:

This particular annuity will usually work the best for those who are looking for:

  • Safety of principal
  • The opportunity for index-linked growth
  • Guaranteed lifetime income in retirement

Where it works the worst:

The Lincoln National Covered Choice 5 Fixed Indexed Annuity may not be an ideal fit for you if you:

  • Need access to most or all of your money within the first several contract years
  • Do not intend to use the lifetime income feature of the annuity

In order to truly get an idea of whether or not a fixed indexed annuity such as the Covered Choice annuity or similar product is right for you, click here so that you can access our free annuity buyer’s report.

In Summary

There are many factors that should ideally be considered when you are considering the purchase of 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.

When you are considering a fixed indexed annuity, you can be comfortable in that your principal will be safe from market fluctuations, as well as in that you can set it up to provide you with an ongoing retirement income in the future. Given that, you can also attain the security that you won’t run out of income during retirement.

With regard to the Lincoln National Covered Choice fixed indexed annuity product, there certainly can be some advantages available. However, this annuity may still also fall somewhat short, and quite frankly, there may be some better options that are out there for you – primarily if you are in search of guaranteed lifetime income, along with the opportunity for growth.

Have Any Additional Questions on the Lincoln National Covered Choice 5 Fixed Indexed Annuity? Did You Notice Any Mistakes in this Review?

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 that does 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 know that, just as with other financial products and services, the information about annuities can also change quite frequently. So, if you happened to see any information in this annuity review that may need to be updated or revised, then please let us know that, too, and we will be happy to make any of the needed updates.

Are there any other annuities 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

Independent Review of the Lincoln National Covered Choice 5 Annuity

 

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