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4 MIN READ | OCTOBER 2022

Debunking the myth that variable annuities are too expensive.

This is the first in a series of articles to help you overcome common objections to variable annuities. Each month we’ll tackle a common myth and offer facts and information to help you build trust in variable annuities.
A financial advisor compares the cost of a variable annuity to a client's other investment options.

Let’s take a closer look at variable annuities.

You’ve probably heard plenty of misconceptions about variable annuities (VAs) and may think they’re too expensive to recommend to clients.

The truth:

Like all financial products, there are fees associated with VAs. But they aren’t necessarily more expensive than other investment products. Principal® Pivot Variable Annuity (Principal Pivot Series) can actually be a lower cost annuity alternative for your clients.1

Consider what your client gets in return.

The real question is: What do clients get in return for those fees? Variable annuities can offer benefits beyond their account value, and depending on your clients’ goals, they might be an appropriate product to consider.

  • Riders can provide future retirement income for life. These riders often include step-up and bonus options that can help build account value even if the market’s down. In these volatile times, your clients who are near retirement, actively investing, and don’t want to delay their retirement due to market losses, VAs can help them secure guaranteed income.2
  • VAs offer insurance components—such as death benefits—that can help provide for your clients’ beneficiaries or help create a multigenerational financial legacy.
Depending on your clients' goals, the fees associated with VAs and their features might be worth the expense.

Look for lower-cost investment options.

VAs often offer a large selection of funds, including lower cost options. While it’s important to consider other fees that might apply to an annuity, it’s still possible for VAs to be a lower cost investment options.

Ready to do the math?

Principal Pivot Series has more than 90 investment options, with expenses ranging from 0.49% to 2.38%—and 30 of those options cost between 0.49%–0.85%. Your client could create a portfolio for a total annual cost well under 2%.

For example, if you allocate 100% to a fund with a 0.50% expense fee, and included the Return of Premium death benefit, the cost would be 1.6%.

Mortality expenses (M & E)

Administrative fees

Fund expense

Return of premium death benefit* optional

TOTAL

0.60%+

0.15%+

0.50%+

0.35% 

1.60% 

*Principal Pivot Series has two optional enhanced death benefit rider options. Return of premium: 0.35%. Annual step-up: 0.45%.

While variable annuities do have a surrender charge period, once that ends, clients can withdraw their money at no additional charge. Principal Pivot Series has a five-year surrender charge period but allows a free withdrawal amount even during that time.3 Visit the rates and values section of principal.com for more information about fund expenses.

Variable annuities comparison calculator

You can use our calculator below to determine the cost of options within the Principal Pivot Series compared to your client’s existing investment expenses.

Your clients have many options available to help with their retirement goals. Their best solution will depend on their goals for retirement, income needs, risk tolerance, and time horizon.

1 Morningstar, Inc., 2020 Morningstar Annuity Intelligence Research.
2 Guarantees are based upon the claims-paying ability of the issuing insurance company.
3 The free withdrawal amount is the greater of contract earnings or 10% of the premiums paid (less any withdrawals since the last anniversary.)

For financial professional/institutional use only. Not for distribution to the public.

Appropriateness of an annuity is based on the client’s investment profile, which includes but is not limited to their age, other investments, annual income, tax status, investment objectives, investment experience, time horizon, liquidity needs, and risk tolerance.

Annuity products and services are offered through Principal Life Insurance Company. Securities offered through Principal Securities, Inc., member SIPC, and/or independent broker/dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.

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This information is educational only and provided with the understanding that Principal® is not rendering consulting, legal, accounting, investment or tax advice. You should consult with appropriate individuals including counsel, financial professional or other advisors on all matters pertaining to business, legal, tax, investment or accounting obligations and requirements.


Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group®, Des Moines, IA 50392.

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