What Will We Cover in this Annuity Review?
In this annuity review, we will be covering the following details regarding the Principal Income Immediate Annuity:
- Product type
- Current rates
- Realistic long-term return expectations
- How it is 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.
Back in the early 1900s, life expectancy was somewhere in the neighborhood of 41 years. Today, however, many people life twice that long, meaning that it is possible to spend a decade, two, or even three, in retirement. But, while that may provide you a nice long retirement, it can be difficult at best to live comfortably if you don’t have enough money coming in each month to pay your living expenses.
One way to help you ensure that you not only have an ongoing retirement income but one that could last for the remainder of your life, is to purchase an annuity. These products, issued by insurance companies, will typically offer a lifetime income option that guarantees you an incoming cash flow for as long as you need it.
But, before you run out and sign on the dotted line for an annuity, it is important to understand that not all annuities are alike. In addition to that, these products will often come with a myriad of “fine print”, so while you may think that the product will offer you certain benefits, you may actually need to endure certain fees, charges, and/or tradeoffs in order to get the benefits you had anticipated.
So, because many annuities can require that you deposit a significant chunk of money into them, you really need to know what you’re getting into – and what happens if you want to get out of it.
That’s where the Annuity Gator comes in!
Annuity and Retirement Income Planning Information That You Can Trust
If this is your very first visit to our website, then please allow us to officially welcome you to AnnuityGator.com. We are a team of experienced financial professionals who provide highly comprehensive, and non-biased, annuity reviews.
We have been doing this for many years now – much longer than some of the other annuity websites that you may have run across in your search for annuity information. In fact, there are a number of copycat sites out there that will make bold claims about their annuity offerings but are really just looking for your name and contact information.
We’ve been at this for quite some time now, and because of that, many consumers look to us as a highly trusted source of annuity information – especially if they are not quite sure what to look for in a possible annuity purchase.
If, by chance, during your quest for more details, it is likely that you have noticed certain sites that tout their “low fees,” “high-income payouts,” or “top-rated annuity carriers.” Unfortunately, although these claims may initially sound very enticing, these websites are only telling you some of the information. So, prior to moving forward with a decision – either to buy or to move on – just be certain that you have all of the pertinent facts.
So, if you’re ready to get started, let’s dive in!
Principal Income Immediate Annuity at a Glance
|Product Name||Income Annuity|
|Type of Product||Immediate Annuity|
|S&P Rating||A+ (Strong)|
|Phone Number||(800) 986-3343|
Opening Thoughts on the Principal Income Immediate Annuity
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.
Today, with so many employers getting rid of their defined benefit pension plans, it has really become the responsibility of individuals to make sure that they convert their savings over into an income stream – and that the income continues to last throughout the remainder of their lifetime.
An immediate fixed annuity such as the Principal Income Immediate Annuity will allow you to deposit either qualified or non-qualified fund, and then, within one year, convert that money into an income that you can count on.
However, it is also important to remember that, just like any other financial product, not all annuities are the same. So, it is highly recommended that you take a good, close look at this – or any other annuity that you are considering – before you commit to it.
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 Principal Describes the Income Annuity
The Principal describes the Income Immediate Annuity as a product that allows you to deposit a single lump sum of money into the contract and in exchange, receive a guaranteed income stream for a certain time. This includes the opportunity to receive payments for life, or for another length of time that you choose.
These income payments can begin within one year of contract issue – and, income can be paid to one person, or two. This annuity also has a one-time withdrawal option of up to 100% of the contract value.
There are other additional, optional features. These include a Liquidity Rider and an income payment increase option that has three different alternatives that you can choose from. The Liquidity Rider comes automatically with the annuity contract, at no added premium cost. With this rider added, you can take a one-time withdrawal any time after your first contract anniversary and before the end of your guarantee period. This can come in handy if an unexpected financial emergency comes up.
There are also different payment increase riders available. (Only one of these may be selected). The Annual Increase rider allows you to choose either a 1%, 2%, 3%, 4%, or 5% automatic increase in your income payments each year throughout the life of the contract. As an example, if you were to choose a 3% automatic increase every year for a ten-year time period, the increase in your income would be as follows:
Alternatively, the Consumer Price Index rider – which is only available at the time of issue – gives you the opportunity to increase your benefit payments based on the Consumer Price Index for All Urban Consumers (CPI-U). With this rider, there is no limit on the number of total increases over the lifetime of the contract.
The amount of the income payment is calculated annually. If the CPI-U has increased during the year and offsets any negative changes from the previous year (or years), your payment will increase on your contract anniversary. Your payments will not decrease if the CPI-U is negative from the prior year. If the CIP Rider is elected, you may only defer your initial payment up to six months.
How an Insurance or Financial Advisor Might Pitch this Annuity to their Customers
If you’re like most people, you enjoy getting a guarantee – particularly when it comes to your money. The Principal Income Immediate Annuity can offer you a guarantee when it comes to income in retirement. This includes providing you with an income stream that will last throughout the remainder of your lifetime, as well as the life of another individual if you so choose.
With that in mind – particularly as most retirees have a concern about running out of income – it is probable that a financial or insurance advisor who is presenting you with this annuity will focus on its income guarantee.
However, while this may very well put your mind at ease about having income for the rest of your life, the truth is that there are some other features related to this annuity that may not fare so well for you.
First and foremost, once this annuity has been converted to income, the decision is non-reversible. This means that you will not be able to dig into your lump sum of cash – even if you have a financial emergency. Given that, it is imperative to keep in mind that the purchase of an annuity is a long-term decision.
Also, even though there is no additional fee for the optional cost of living riders, payments for the same premium will be lower in the early years than those annuity contracts without one of these riders. So, you will need to get a very clear idea of just how much income you can anticipate each month if you choose to go with one of these riders. Otherwise, you could be sorely disappointed.
What About Any Taxes and/or Fees on the Principal Income Immediate Annuity?
You could also face some taxes and/or fees on the Principal Income Immediate Annuity. Here, if you purchase an immediate annuity with after-tax dollars, then each of your annuity income payments that are made will consist of both a taxable income portion and a return of premium portion (which is non-taxable).
The Annuity Gator’s End Take on the Principal Income Immediate Annuity
Where this annuity works best:
While an immediate annuity might not be the best option for everyone, the Principal Income Annuity could be a viable alternative for you if you are looking for the following benefits:
- A reliable income stream right away (or one that starts within 12 months after purchasing the annuity)
- A place to move funds from an IRA, 401(k), or another type of retirement plan so that you can convert it from a lump sum of savings into income
- A solution to the worry about running out of income in retirement
Where it works the worst:
Even though the Income Immediate Annuity from New York Life offers some nice benefits, this particular annuity may not be for you if you:
- Have less than $10,000 to deposit
- Feel that you may need some (or all) of your funds for other needs
- Do not plan to use the annuity for income
If you’ve been considering the purchase of an immediate annuity, but you are still unsure about moving forward because you just don’t know if this is the right financial vehicle for you, then it is imperative that you further your understanding of this product, and that you get all of your questions answered. We can assist you with any of the questions or concerns that you may have. Please feel free to reach out to us directly via our secure online contact form here.
With regard to this particular annuity, the good news is that you can be assured that you will have income for as long as you need it, based on the income payout option that you choose.
This income may also be set to cover two lives – so in this case, for instance, both you and your spouse could be covered with a known income stream for as long as each of your lives. In addition, there are also potential legacy options here for your named beneficiaries.
Even so, though, the only way to really know whether or not this annuity will work well for you and your situation is to have it tested. We can perform this testing for you, using our annuity calculator, and we will provide you the results at no charge or obligation. If you are interested in this information, just simply let us know here through our secure online contact form.
Do You Need Any Additional Information on the Principal Income Immediate Annuity? Did You Notice Any Mistakes in this Annuity Review?
We know that this annuity review may seem to be quite lengthy. So, given that, we truly thank you for sticking with us through thus far. However, we would much prefer to give you “too much” information in these reviews that not to give you enough. Therefore, if you felt that this annuity review was beneficial, please feel free to share it and forward it on to anybody else that you think may also be helped by it.
We also understand just how fast financial and insurance product information can – and does – change. So, if you did happen to notice any information in this annuity review that was out of date or needs updating, please let us know that, too, so that we can get it revised as soon as possible.
Are there any other annuities that you would like to also see reviewed?
If you have been shopping for annuities, it is possible that you’ve been presented with several different options. So, if you’ve come across any other annuities that are not included in our review database, please let us know that, too so that we can do our research and analysis, and add it to our site.
The Annuity Gator