Debunking the myth that variable annuities are too expensive.
Let’s take a closer look at variable annuities.
The truth:
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.
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%
Mortality expenses (M & E)
0.60%+
Administrative fees
0.15%+
Fund expense
0.50%+
Return of premium death benefit* optional
0.35%
TOTAL
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.
Want to learn more?
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.