Independent Review of the Transamerica Variable Annuity Series B-Share
What’s covered in this Review?
In this review we’ll cover the following information on the Transamerica Variable Annuity Series B-Share:
- Product Type
- Current Rates
- Realistic long term investment expectations
- What to expect, and what not to expect
The Transamerica Variable Annuity Series B-Share advertises investment benefits that include automatic asset re-balancing, dollar cost averaging, and guaranteed lifetime payments; however, as a single investment trying like heck to achieve two different goals, things get pretty complicated and expensive.
The Series B-Share is a classic variable annuity sometimes described as being a “hybrid” investment vehicle because of these two goals. It can invest your money and structure it for income later, and all for lower fees as compared to the other nine variable annuities offered by Transamerica.
As a long-term investment, this particular variable annuity breaks these features into two time periods: the accumulation phase and the income phase. The accumulation phase is when you are investing and growing money; the income phase is when you want to structure those investments for regular pension-like payouts.
This is also a good way to look at your own financial life.
Before deciding on a long-term investment like an annuity, it’s important to identify what financial phase you are in and your corresponding goals. Why? Because inside a single investment, the two goals of investing and structuring income basically work against each other, which is what makes these variable annuities so fee-heavy.
If your goal is to grow money for retirement, you should know there may be cheaper ways to capture market gains. More importantly, if you are a retiree wanting to secure a portion of your savings for future income, then you will want to be aware of how this annuity achieves this at your expense.
Annuities can offer attractive benefits. No other investment can give you the guaranteed income benefits they offer. How much income and at what price all depends on the kind of annuity that you chose. There are literally hundreds of different kinds out there, and much of the confusion that exists about these products have a great deal to do with how these investments are sold.
This is where we come in.
Annuity and Retirement Income Planning Information That You Can Trust
Welcome to Annuity Gator, a comprehensive database of annuity reviews. As a team of experienced financial professionals, we are dedicated to publishing the most complete, non-biased annuity reviews available on the World Wide Web today.
If you’ve been searching the Internet for information about annuities, then you’ve likely seen a lot of advertisements that promise attractive benefits and features such as:
- High Payouts
- Low Fees
- Top Rated Companies
- Guaranteed Income For Life
- Professional money management
- Earn 7-8% Returns With NO Market Risk
Annuity Gator is the place to go if you want to find out whether or not these claims are true. How the benefits of annuities are calculated and what they can actually give you in terms of an income for your hard-earned dollar is often misrepresented. Financial salespeople that sell variable annuities can make it sound as if these products easily earn you returns upwards of 7 or 8% with no risk to your principle. They make these claims because there are many details leave out.
It’s the details that can make the difference between a comfortable retirement and running out of money, which is why we at Annuity Gator believe you deserve to know about the details.
It is our goal to educate and empower current and aspiring retirees so you can decide for yourself whether or not an annuity like this one is in your best interest. We research the product and take a magnifying glass to the fine print, so to speak, and then we translate our findings into easy to understand language.
Are you ready to learn more? Let’s begin:
Transamerica Variable Annuity Series B-Share at a Glance:
|Product Name||Variable Annuity Series B-Share|
|Issuer||Transamerica Life Insurance Company
|Standard & Poor’s Rating||AA‐ is 4th highest of 21 ratings (as of May 12, 2016)|
|Phone Number|| 1-800-797-2643
Opening Thoughts on the Transamerica Variable Annuity Series B-Share
From its humble beginnings in 1904 from a converted saloon to the Transamerica Center that currently encompasses nearly one city block, the message of the Transamerica insurance company has remained strong: financial security should be available to everyone. The now iconic Transamerica pyramid has claimed its place in the San Francisco skyline as a symbol of inclusiveness, and this is reflected in the breadth of financial services offered by this highly rated company.
The fear of inflation and rising health care costs has many retirees looking for a place to put their savings where it can earn aggressive returns while also being protected. Variable annuities offered by strong companies like this one are often sold as the solution because they can do two things:
- Grow your money.
- Provide guaranteed income.
In order to accomplish both goals inside one investment, things get complicated, and the Transamerica Variable Annuity Series B-Share is one of the more complicated annuities out there. To help decode the benefits offered by this annuity, let’s take a minute to define a few terms.
Living Benefits are benefits offered by an annuity that you can take advantage of while you are still alive. Pretty simple, right? The living benefits specific to this product are called lifetime withdrawal benefits, AKA – income. You are given three different options as to how your income will be protected with corresponding fees that range from 1.25% to 2.30% annually.
Lifetime withdrawal benefits are listed as optional benefits, however, if you want anything guaranteed inside this investment, then you’ll have to choose one of these options and pay the fee. This fee is pretty standard with all annuities, but if you are in the accumulation phase of your life, then why would you want to pay this additional fee?
If the answer has something to do with security or guarantees, here’s what you need to know:
Variable annuities invest in the stock market, which means the funds inside this annuity can lose money. At the same time, the insurance company is preparing to guarantee you a lifetime supply of income, so they will have to do something to protect themselves so they can afford to these guaranteed payouts. People are living longer and the market is becoming more and more volatile. So how does the insurance company protect themselves?
By charging you higher fees and limiting your investment options and income payout amount.
Sorry for the bad news, but this is something you might not be told. The way the income payouts and fees for this annuity are calculated can get pretty complex and are based on the underlying fund performance of the investments. Because these investments are all in the stock market, the only way to guarantee your income is by selecting a living benefit, and once the income payments start, your money is annuitized.
To annuitize is when you trade a lump sum of money for a guaranteed income. For the Transamerica B-Share annuity, the funds are annuitized once you begin receiving the income, and this action is permanent and irreversible. That means you lose access to the money you have saved up. The only way to get your money is through the income payments.
This can be okay if you have other investments and access to liquid funds, but you should know that there are other annuities out there with much lower fees that offer similar living benefits while still giving you access to your money.
Before we get into more of these little details, let’s take a break to go over some legal disclosures…
This is an independent product review, not a recommendation to buy or sell an annuity. Transamerica has not endorsed this review in any way nor do we receive any compensation for this review. This review is meant to be an independent review at the request of readers so they could see our 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 Transamerica Describes the Variable Annuity Series B-Share:
Transamerica advertises the benefits and features of this annuity on their website as follows:
- Investment options that include a comprehensive lineup from some of the most recognized money managers in the industry.
- Automatic asset rebalancing to achieve investment objectives.
- Dollar cost averaging strategies.
- Free transfers between sub-accounts during the accumulation phase.
- Annuitization or the opportunity to receive guaranteed lifetime income payments through a variety of payment schedules and options.
There are also a few other perks such as nursing care and terminal care waivers, but that covers the basics. If you want to find the website and/or prospectus, you can click HERE.
How Financial Advisors Might Present This Annuity to You
It’s been our experience that consumers are sold variable annuities as being the solution to all their retirement planning problems without having the product fully explained. While the website for this particular annuity warns the consumer that this product “does NOT guarantee profits or prevent losses in a declining market,” it can often be sold to investors under a different light.
Here are the three main concepts you’ll hear advisors talk about when they explain this variable annuity, followed by an explanation of what that means to you.
- This investment performs better than other annuities out there.
- It will give you security by providing a guaranteed lifetime income.
- The income will grow or step-up every year that you wait to access it.
Let’s start with performance. The investments offered inside this variable annuity are diverse, but there is a management fee associated with each fund and these fees can weight down their performance. We’ll talk about these fees later, but know this: because a variable annuity is a securities product backed by a life insurance company, you, the investor, are going to get hit twice when it comes to fees.
What you’ll hear from your advisor or salesperson, however, is that these annuities perform so well, they make up for the high fees. They can say this because, in their mind, they are thinking about the enhancements you get when you purchase those living benefits we talked about earlier.
The living benefits offered by this annuity provide the investor with a different way to calculate the returns so they are guaranteed more protection. The way the insurance company guarantees these returns is by charging you a risk fee in addition to the management fee. Furthermore, they also limit the amount of risk your investments are exposed to AND they put a limit on the earnings that you can receive.
According to the prospectus, when you elect one of the living benefit riders, you must designate 100% of your policy value into one or more of the approved investment options. Allow us to translate that for you: the insurance company doesn’t want your fund to lose too much money, or they won’t be able to guarantee you that income, and so they are going to limit the aggressiveness of your investment options.
Wait a minute – wasn’t this variable annuity sold as an investment with no limit to the upside of the market, with returns and market gain better than other annuities?
Yes, BUT – the risky investments inside the annuity conflict with the goal of guaranteeing income, and so a compromise has to be made. If you are in the accumulation phase of your life with the goal of growing as much money as possible, then this might not be the best choice of investment.
Now let’s talk about income. Just because your income account is guaranteed not to lose money doesn’t mean this annuity can give you more income than other annuities. What you want to look at is the income payout rate. This is the percentage of your account used to determine what your actual income payment will be. The Transamerica Variable Annuity has some of the highest income payouts we’ve seen –for the first few years. After a set amount of years, the income amount goes down to 3.5% or 4%, depending on if you need income for a single life or joint life, for you and your spouse.
Remember, once you start receiving this income, you cannot access the money in the guaranteed account except as income payments. This might be a great thing if income is what you need.
What About the Fees?
Variable annuities have to charge more fees than other kinds of annuities because of the risk inherent in this investment. This makes it one of the most expensive kinds of annuities that you can own.
The Transamerica Variable Annuity Series B-Share will charge an annual fund facilitation fee of up to .30% every year, assessed daily as a percentage of the value of certain investment options.
As mentioned earlier, the living benefit options that give you lifetime withdrawal benefits (known as income riders) range from 1.25% to 2.30%. These fees can increase, but Transamerica promises they won’t go up more than .75 % higher than the initial rider fee percentage.
If you don’t need income, you might be offered death benefit options instead that can step-up or grow your money for your beneficiaries. These fees range from 1.15% to 1.50% with optional additions for .25% to .55% more.
They also offer a Liquidity Rider (if you need to access your money) for .50%.
The insurance company is also going to charge you an administrative charge (in addition to the mortality and expense risk charge which is 1.00%) deducted from your account the day you purchase the annuity. This charge is .15% of the deposit amount.
On the investment side of things, there is a fund facilitation fee of .20% to .30% applied only to the policy value in the sub-accounts. There are also portfolio operating expenses deducted from the portfolio assets that include management fees, distribution and/or service 12b-1 fees and other expenses, and these fees range from .54% to 10.38% depending on how many funds you choose.
What does all of this look like when you add them up? Here is a breakdown of all the fees:
- Mortality and Expense Risk Fee: 1.00%
- Administration Charges: 0.15%
- Front-End Sales Load on Purchases Payments: 0%
- Annual Service Charge: 0 to $50
- Optional Death Benefit Expenses: 1.15% to 1.50%
- Optional Lifetime Withdrawal Benefit Riders: 1.25% to 2.30%
- Fund Facilitation Fees: .20% to .30%
- Portfolio Operating Expenses: .54% to 2.86%
Fee Total: 4.29% to 8.11%.
The Annuity Gators End-Take on the Transamerica Variable Annuity Series B-Share.
Where it works best:
- A guaranteed income source that’s delivered by a reliable company.
- Benefits that can continue for a spouse and cannot be outlived.
- For the investor who has a family history of longevity
- For a hands-off approach to retirement income.
Where it works WORST:
- For investors who need access to their money.
- For someone who does need the guaranteed income options
- For an investor who doesn’t want to lose money.
- For investors who don’t want to pay a lot of fees.
This variable annuity is a long-term investment designed to appeal to investors who want to capture the growth of market gains while saving for retirement, and then once retired, to turn that money into an income stream. Unfortunately, as a single product trying to accomplish both goals, the Transamerica Series B-Share is an expensive annuity to own, and it doesn’t meet either of these goals as well as other more specialized investments might.
In terms of growth, the protected income amount promised by advisors who sell this annuity is NOT an interest rate on money you can withdraw as a lump sum. The living benefits for this annuity are annuitized, which means you can only access the money as a guaranteed income payment.
As an income producing investment, this annuity promises portfolio rebalancing, dollar cost averaging, and money management, but the fees for these services are high AND all the market risk it’s exposed to makes it difficult to provide the guarantees required by the income producing component. This adds, even more, fees from the insurance side of things.
So what does all this mean to you? If your goal is to find an investment that can hedge against inflation while providing income, this investment can provide that by charging you much higher fees than other annuities that can give you the same benefits without the risk component.
Thanks for bearing with us on this rather long post. If you found it helpful, please spread the word and share it with others.
Lastly, like all humans – we do make mistakes. If you see one on this review please reach out and let us know since this annuity’s terms may have changed since we published this review. We are 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. We can’t always get back right away, but we can usually clear up any questions within a day or two.
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