PIMCO TBI: Exclusively in Allianz Annuities The PIMCO Tactical Balanced ER Index is designed to tactically balance exposure to U.S. equities, bonds, and cash based on market trends and opportunities. Developed by PIMCO’s Quantitative Portfolios Group, innovative
What is a Bonus Annuity?
Bonus annuities are a type of Fixed or Fixed Index Annuity that pay an upfront premium bonus. The bonus is paid as a percent of your original purchase premium. A rule of thumb is longer annuity contracts usually pay a higher bonus.
If you are looking for an accumulation product that pays a guaranteed interest rate for the entire annuity contract you may want to look at fixed annuity rates instead.
For example, if you purchase a bonus annuity with a 5% premium bonus for $100,000 you would receive a $5,000 bonus – making your annuity’s account value $105,000.
Annuity Providers Offering Bonus Annuities
|Allianz Life Insurance Company of North America||Allianz 222 Annuity||A+||80||$20,000||15%||10 yrs|
|Athene||Performance Elite 15 Plus||A||73||$10,000||15%||15 yrs|
|Athene||Performance Eliete 10||A||78||$10,000||10%||10 yrs|
|Equitrust||Market Power Bonus Index||B++||75||$10,000||10%||14 yrs|
|National Western Life||NWL Ultra Futuer||A||86||$5,000||9%||15 yrs|
|Fidelity & Guaranty Life||Performance Pro w GMWB||A-||80||$10,000||9%||10 yrs|
|North American||Charter 14 Plus||A+||75||$75,000||8%||14 yrs|
|American Equity||Retirement Gold||A-||78||$5,000||8%||10 yrs|
|Oxford Life||Royal Select||A-||80||$10,000||8%||10 yrs|
Back to Fixed Index Annuity Rates
Things to Consider When Buying Bonus Annuities
While a bonus annuity can be a great option for the right circumstance there are also times when they are probably not the best solution. Bonus annuities typically have a longer surrender period than other fixed indexed annuities. For the most part, to get a bonus annuity you must be willing to commit to at least a 7-year contract.
Another point worth noting is the crediting component rates on bonus annuities are typically lower than an annuity without a bonus. For example, a fixed index annuity without a bonus may have an annual cap of 5%, meaning your account is credited up to 5% annually based on the performance of the market index you’ve selected. A bonus annuity of the same quality and duration may have a 4% cap.
So, in essence, you are getting extra interest upfront in exchange for earning potential in the future. This is generally not worth it if your primary objective is accumulation. However, if your objective is to use this portion of your retirement savings for guaranteed lifetime income, a bonus annuity may make sense.
Fixed Index Annuities have a reputation for being complicated, when in fact they are very simple compared to many other investment options. If you are considering a fixed index annuity we suggest reading FINRA’s “The Complicated Risks and Rewards of Indexed Annuities.”
Bonus Annuities Pros and Cons
Bonus Annuity Pros
- Sometimes people find themselves in an investment product that no longer meets their risk tolerance and but there is a penalty to surrender the contract. When that is the case bonus annuities can help offset the surrender charge and help you come out whole.
- If you are purchasing an annuity with an income rider and plan to take income in the first few years a bonus can help boost your lifetime income payments.
Bonus Annuity Cons
- Bonus annuities usually have long surrender charges.
- The bonus usually has a vesting schedule; meaning if you get out of the annuity some of your bonus will be re-captured.
- Bonus annuities usually have lower caps or interest rates giving limiting your future income potential.
Buying a Bonus Annuity
Available Indexes: The stock market indexes are available in the index annuity. We have a list of available stock market indexes available at each insurance carrier for simplicity.
Crediting methods (or limiting factors): used to determine what interest rate is credited to your account annually. For example, cap rate, spread, or participation rate.
Insurer Rating: Financial Ratings are very important because they are an indicator of an insurance company’s ability to fulfill its obligations to its policyholders.
Investment Term: Terms range from 3 years to 10 years. During that period of time, you’ll receive a guaranteed rate but will have limited access to your funds. Usually, the longer the term the higher the yield but that isn’t the case in today’s rate environment.
Liquidity: You’ll notice a column for liquidity at our annuity marketplace; there will either be 10% or interest-only listed. This is the annual free withdrawal amount you can take from your annuity contract each year without a surrender penalty.
The Nasdaq FC Index (BOFANFCC) is a volatility managed index that applies Fast Convergence (FC) technology to Nasdaq-100 TR Index.
Learn how to retire like a millionaire with $500,000 utilizing an annuity strategy as a portion of your retirement income portfolio.
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