Independent Review of the Principal Deferred Income Annuity (DIA)
What Will Be Covered in this Review?
In this review, we will be discussing the following information regarding the Principal Deferred Income Annuity (DIA):
- Product type
- Current rates
- Realistic long-term return expectations
- How it is used
- How it is most poorly used
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If you’ve been grappling with making a decision about buying an annuity because you want to ensure that you won’t run out of money in the future, then The Principal Deferred Income Annuity (DIA) may be a good option for you. This is especially the case if you anticipate that you will live a long lifespan.
Deferred income annuities, or DIAs – which are also often referred to as longevity annuities – are a type of annuity product where you contribute a lump sum of money with an insurance carrier, in exchange for a guaranteed lifetime income stream that begins at a future date…in some cases, not for 30 or even 40 years.
Because of that, DIAs can sometimes be used as a pension of sorts for those who don’t have a defined benefit plan through an employer, or those who may lose other pension income due to the loss of a spouse.
However, while this lifetime income stream may sound ideal, before you run out and purchase the Deferred Income Annuity from The Principal – or any annuity, for that matter – it is important that you first have a good understanding of how the product works, and how it may (or may not) work well for you.
Over the past decade or so, annuities have become much more popular, primarily as a method of generating an ongoing income stream for those who are in retirement. Yet, due in large part to this increased demand, there are many insurance carriers that have introduced more products out into the marketplace, and unfortunately, this can make what is already a confusing product even more so!
With that in mind, unless the insurance or financial advisor you currently work with specializes in annuities, then it is recommended that you conduct some additional research on these products, as they will usually require you to commit a large amount of your savings to them.
This is where we can help.
Annuity and Retirement Income Planning Information You Can Trust
If you have never been to our website before, then please allow us to personally welcome you here. We at Annuity Gator make up a team of experienced financial experts who are dedicated to helping you decode the complicated world of annuities. Here, we strive to create unbiased, yet highly comprehensive, annuity reviews – and we have been at this for far longer than most of those “copycat” websites out there.
Annuities are a unique product in that they are the only financial vehicle that can make the promise of providing you with a lasting, lifetime income stream. Unfortunately, though, some advisors – albeit unintentionally – will tend to make them sound better than they actually are. One reason for this is because, in order to obtain the nice benefits, there are oftentimes also some tradeoffs that you need to make.
Many annuity sales reps and even many of the annuity websites that you’ll see online will make some pretty bold claims about the performance of the annuities that they offer, such as:
- 7 to 8% return
- Low Fees
- Guaranteed income for life
- No market risk
The goal of the annuity reviews that you’ll find here on AnnuityGator.com is to provide you with information on the features and benefits inside the annuity, and to help you better understand what the benefits could mean to you and your financial situation – both now and in the future.
So, if you’re ready to get started, let’s dive in!
The Principal Deferred Income Annuity (DIA) at a Glance
|Product Name||Deferred Income Annuity|
|Type of Product||Deferred Income Annuity (DIA)|
|S&P Rating||A+ (Strong)|
|Phone Number||(800) 986-3343|
Opening Thoughts on the Principal Deferred Income Annuity (DIA)
The Principal Financial Group (often simply referred to as The Principal) is a global financial investment management leader that is headquartered in Des Moines, Iowa. Founded in the late 1800s as an insurance company, The Principal has grown and expanded exponentially over the years.
As a member of the Fortune 500, Principal (as of the third quarter of 2017) holds approximately $655 billion in total assets under management and has brought in roughly $1.8 billion in net income as of September 30, 2017.
With a DIA, the volatility of the stock market does not affect the amount of income that you’ll receive in the future. When you purchase a DIA, you decide when you wish to start receiving your income, and the insurance company will then guarantee you a set income that will start at your chosen date in the future.
Many deferred income annuities will also let you make subsequent contributions into the contract. However, the way that these are factored into your future income can vary from one DIA to another. It can also be dependent on the frequency of such subsequent contributions into the annuity.
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. The Principal 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 more details 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 The Principal Describes the Deferred Income Annuity (DIA)
The Principal describes the Deferred Income Annuity as a financial vehicle that allows you to put money aside now so that you will have a steady stream of income later. When you purchase a DIA, you can choose when to begin your income, and how often you want to receive it.
This is because a Deferred Income Annuity allows you to essentially “buy” an income stream. In this case, you contribute a lump sum into the annuity now (or you also have the option of making a series of deposits over time), in exchange for a guaranteed “paycheck” that begins down the road.
DIAs are not invested in the stock market. This means that you won’t be exposed to the constant volatility of the market over time – and in turn, what you will receive is a predictable, continuous income payment that is guaranteed for the remainder of your life (regardless of how long that may be).
With The Principal Deferred Income Annuity, you can select a date to start receiving your income that is anywhere from 13 months to 30 years in the future (based on your age). And, if your needs should happen to change before you start receiving your income from the annuity, the Deferred Income Annuity from The Principal will allow you a one-time option to change your income start date.
There are a number of different income payout options available on this DIA, including:
- Life Only
- Life with Guarantee Period
- Life with Cash Refund
- Life with Installment Refund
With this annuity, there may also be a death benefit included. Here, if the owner (and the joint owner, if applicable) of the annuity pass away prior to the income payout start date, then a named beneficiary could receive the total of the premium payments that were made as of the date of death. (Once the income payments have begun, the death benefit – if any – will depend on the annuity option that you have selected).
There are some additional features that may be included with this annuity at no added cost. These include the following:
- Payment Advancement – This feature allows you to advance up to six income payments and receive them in a lump sum. (And, you can do this up to four times throughout the life of the contract).
- Inflation Protection – With the inflation protection feature, you may elect to have your income payments increase each year by 1%, 2%, 3%, 4%, or even by 5%. Alternatively, the payments may be adjusted annually for increases (if any) in the Consumer Price Index. If this option is chosen, the initial income payments will be lower than they would be without this feature.
How an Insurance or a Financial Advisor Might “Pitch” the Principal DIA Annuity
When it comes to our money, it’s nice to have guarantees. The Principal Deferred Income Annuity can offer you some nice income-related guarantees, which can, in turn, allow you to sleep better at night, knowing that you won’t run out of income in your lifetime.
Because of these guarantees, it is likely that an insurance or financial advisor who is discussing this annuity with you will key in on the guaranteed income feature. In addition, DIAs will oftentimes offer higher income payments that regular immediate annuities.
This is because your age when you start such payouts is typically older than it would be if you take income from a regular deferred and/or immediate annuity. Therefore, this too is a feature that an advisor might focus on when discussing this – or any – DIA annuity with you.
However, prior to moving forward and making a long-term commitment to purchase this annuity, there are a few items that you should know, which may or may not deem this to be the best product for you.
For instance, when you purchase a DIA, you will typically need to forfeit your principal in exchange for the future income stream you’ll receive. It is also important to note that deferred income annuities are not liquid financial vehicles. When you invest in this type of an annuity, you will usually completely forfeit the initial premium.
In addition to that, because it could be many years before you start to take your income stream, it is possible that you may not live long enough to collect on the income stream. With that in mind, you really need to determine whether or not you want to take this big of a chance with your retirement savings.
The Annuity Gator’s End Take on The Principal Deferred Income Annuity
Where this annuity works best:
The Principal Deferred Income Annuity (DIA) may be a good choice for you if you are:
- Anticipating a long lifespan
- Need retirement income in the distant future
- Are seeking a source of guaranteed lifetime income down the road
Where this annuity works the worst:
The Deferred Income Annuity from The Principal, alternatively, may not work well for you if you:
- Have a shorter life expectancy
- Need to keep your money liquid for potential emergencies
- Do not plan to use the lifetime income feature
Because deferred income annuities (DIAs) will oftentimes provide a higher amount of income (as versus an immediate annuity), these financial vehicles can be attractive to many who are retired or who are approaching that time in their lives.
But, just as you would likely do before making any other high ticket purchase, you must understand whether or not the product is appropriate for you, as annuities are not a one-size-fits-all vehicle. And, if you find out after you’ve committed that it really is not right for you, it could be quite an expensive mistake.
If you are still considering the purchase of The Principal Deferred Income Annuity (DIA), then you can be assured that you will have an income stream in the future that you cannot outlive. But, even with these nice guarantees, this annuity could quite possibly still fall somewhat short – and there could be a better alternative out there for you.
In reality, the only way to truly know if this annuity may perform the way you want it to is to have it tested. We can do that for you by running the numbers through our annuity calculator, and can then provide you with a spreadsheet showing the results. In order to receive this information, just simply contact us via our secure online contact form here.
Do You Have Any More Questions on the Principal Deferred Income Annuity (DIA)? Did You Notice Any Mistakes?
We know that this annuity review has run a bit on the lengthy side. Yet, we feel that it is always much better to provide a bit “too much” information that not to provide you with enough. With that in mind, if you found this review to be beneficial, please feel free to forward it on and share it with anybody whom you think might also benefit from it. Likewise, if this annuity review has led you to have even more questions about the Deferred Income Annuity from The Principal, then please also let us know.
Are there any other annuities that you would like to see reviewed?
If so, great! There are many annuities available today on the market. So, if there is one (or more) that you would like to see included in our Annuity Gator Annuity Review Database, then please let us know that, as well, and our team of highly trained annuity “geeks” will get right on it!
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