Top 7 Best Variable Annuity Plans for Your Retirement

Key Highlights

As you plan for your retirement, navigating the myriad of investment options can feel overwhelming. Among these, variable annuities stand out as a flexible choice that can provide not only a steady income stream but also opportunities for growth. However, with so many plans available, how do you determine which one is the best fit for your financial goals? In this blog post, we’ll explore the top seven variable annuity plans in the United States, highlighting their unique features and benefits. From understanding the structure of variable annuities to comparing costs and determining suitability, we’ll equip you with everything you need to make informed decisions about your future. Join us as we delve into this essential aspect of retirement planning!

Introduction

Are you looking for a way to build your retirement savings and ensure you have money for the rest of your life? A variable annuity could be a powerful addition to your retirement plan. This unique financial product blends investment growth with the security of an insurance contract. It allows you to invest in a range of subaccounts, similar to mutual funds, while offering the potential for a guaranteed income stream when you retire, helping you feel more confident about your financial future.

The Top 7 Best Variable Annuity Plans for Your Retirement in the United States

Choosing the right variable annuity can feel overwhelming with so many annuity products on the market. The “best” one truly depends on your personal financial goals and what features matter most to you. Some variable annuities are better than others due to their lower fees, wider range of investment options, and the financial strength of the issuing insurance company.

Companies like Jackson National, Prudential, and New York Life are often rated highly for their variable annuity offerings. These industry leaders provide strong customer service, a variety of products, and excellent financial strength ratings, giving you confidence that they can meet their future obligations for your retirement income. Let’s explore some of the top plans available today.

1. Jackson National Perspective II Variable Annuity

Jackson National’s Perspective II is a standout in the variable annuity market and is currently the top-selling product nationwide. One of the main reasons for its popularity is its lower-than-average fees compared to many competitors. This means more of your money can stay invested, potentially increasing the long-term growth potential of your contract value.

This plan offers impressive flexibility with access to more than 100 professionally managed investment options. This variety allows you to tailor your portfolio to match your risk tolerance and financial objectives. Whether you are focused on aggressive growth or a more conservative strategy, you can build a mix that works for you.

Additionally, the Perspective II variable annuity includes optional benefits that can help secure your financial future. You can add riders for a death benefit to protect your beneficiaries or a lifetime income stream to ensure you never outlive your savings. Its combination of low costs, investment choice, and strong financial strength makes it a favorite among financial advisors.

2. Prudential Premier Retirement Variable Annuity

Prudential is a well-established insurance company with a long history of financial stability, boasting an A+ rating from AM Best. This strong reputation gives you peace of mind when planning for your retirement income. Their annuity products are known for providing a balance of growth opportunities and security features.

The Premier Retirement Variable Annuity is designed to help you navigate market risk while building a source of guaranteed income. It offers a diverse selection of investment options, allowing you to create a portfolio aligned with your goals. The company is a leader in annuity sales, reflecting consumer confidence in its products.

Prudential also provides useful benefits and riders to customize your contract. For instance, you can add features that guarantee a minimum level of income in retirement, regardless of how your investments perform. This flexibility, combined with competitive fees and strong backing from a major insurance company, makes it a compelling choice for many retirees.

3. Lincoln Financial i4LIFE Advantage Annuity

Lincoln Financial is a top-tier provider of income annuities, known for its high financial strength and consistent performance in the market. The company’s products are designed to provide a reliable source of lifetime income, helping you manage your finances during retirement without worrying about market fluctuations.

The i4LIFE Advantage Annuity focuses on creating a regular, predictable income stream tailored to your specific income needs. It gives you control over your payments while still allowing your remaining assets to stay invested for potential growth. This hybrid approach is ideal if you want both income security and the opportunity to grow your nest egg.

With Lincoln Financial, you benefit from a company that has strong ratings for its claims-paying ability. Their commitment to providing dependable income solutions makes their annuities a solid choice for retirees who want to ensure their savings last for their entire life.

4. Allianz Vision Variable Annuity

Allianz is a globally recognized annuity company with a reputation for innovation and financial strength. While well-known for its fixed index annuities, the company also offers powerful variable annuity types designed to meet a variety of retirement goals. The Allianz Vision Variable Annuity is a great example of their commitment to providing flexible and robust products.

This annuity provides a wide array of investment options, allowing you to build a portfolio that matches your personal risk tolerance. Whether you are an aggressive investor seeking maximum growth potential or a conservative one looking for stability, you can find subaccounts that fit your strategy. This flexibility is a key advantage for long-term retirement planning.

Allianz also offers unique features and riders that can enhance your contract. You can add benefits for income protection or to lock in market gains, providing an extra layer of security. The blend of strong investment choices and protective features makes this annuity a compelling option for those looking to balance growth and safety.

5. Pacific Life Pacific Odyssey Variable Annuity

Pacific Life has over 150 years of experience and holds a stellar A+ rating from AM Best, signifying its excellent financial stability. The Pacific Odyssey Variable Annuity is one of its flagship products, offering a blend of investment flexibility and valuable protection features designed to help you meet your long-term financial goals.

One of the standout features of this annuity is its extensive menu of investment options. You can choose from a wide range of subaccounts managed by well-known investment firms, which operate much like mutual funds. This variety lets you create a diversified portfolio that aligns with your risk appetite and growth objectives.

The Pacific Odyssey also offers generous benefits. It has a shorter surrender charge period than many competitors, typically around five years. Additionally, you can add optional riders for a guaranteed income stream or an enhanced death benefit, ensuring your beneficiaries are protected. These features make it a versatile tool for both wealth accumulation and retirement security.

6. Nationwide Destination Variable Annuity

Nationwide is another major player in the annuity market, holding an A+ rating from AM Best for its financial strength. Their Destination Variable Annuity is a deferred annuity designed to help you grow your retirement savings over the long term while offering options for a future income stream.

This annuity provides a solid selection of investment choices to help you build your nest egg. What makes it particularly attractive are its optional benefits. You can add a robust death benefit to protect your loved ones or select an income rider that guarantees a certain level of payments in retirement, regardless of market performance.

Of all the annuity types, a deferred variable annuity like this is ideal for individuals who are still some years away from retirement. It allows your money to grow tax-deferred, maximizing its potential before you need to start drawing an income. Nationwide’s strong ratings and flexible features make this a reliable choice for long-range planning.

7. TIAA Retirement Choice Variable Annuity

TIAA has a long-standing reputation, especially among those in the academic and non-profit sectors, for providing sound retirement planning solutions. As an annuity company, it earns top marks for financial strength and customer satisfaction, making it a trusted choice for financial professionals and individuals alike.

The Retirement Choice Variable Annuity is known for its low costs and straightforward approach. It offers a curated selection of investment options designed to help you build wealth for retirement. Unlike some complex products, TIAA focuses on providing transparent and effective tools for long-term growth.

When you’re ready to retire, you can convert your savings into a steady stream of income payments. TIAA offers various payout options, including lifetime income, which functions similarly to immediate annuities. This focus on creating reliable income, combined with its strong industry reputation, makes TIAA a dependable partner in your retirement planning journey.

Key Features to Consider When Comparing Variable Annuities

When you start comparing variable annuities, it’s easy to get lost in the details. To find an annuity that fits your retirement strategy, you should focus on a few key features. Look closely at the investment options, income guarantees, and any death benefit provisions included in the contract.

These core components determine how your money can grow and how you’ll receive it in retirement. Does the annuity offer a guaranteed lifetime withdrawal benefit? What happens to the remaining value if you pass away? Answering these questions will help you find the right product for your needs. We’ll explore these features in more detail below.

Investment Options and Flexibility

A major advantage of a variable annuity is the range of investment options it offers. These options, often called subaccounts, work like mutual funds and allow you to invest in a diversified portfolio of stocks and bonds. The flexibility to choose your investments lets you align your annuity with your personal risk tolerance and growth expectations.

Unlike a fixed or indexed annuity that offers more principal protection, a variable annuity exposes your investment to the market. However, this also means you have a higher potential for growth. When comparing plans, look at the number and quality of the subaccounts available. A good plan will offer a broad selection from reputable fund managers.

Consider the types of funds you can access. Most variable annuities provide a mix of choices, including:

• Stock funds for higher growth potential
• Bond funds for more stability and income
• Balanced funds that mix stocks and bonds
• International funds for global diversification

Income Riders and Guaranteed Lifetime Withdrawal Benefits

One of the most valuable features you can add to a variable annuity is an income rider. These optional benefits are designed to provide a guaranteed income stream, giving you peace of mind that you won’t outlive your savings. The most popular type is the guaranteed lifetime withdrawal benefit (GLWB).

A GLWB rider ensures you can withdraw a certain percentage of your benefit base each year for the rest of your life, even if your account value drops to zero due to market performance. This creates a secure source of future income you can count on. Many top annuity providers offer competitive GLWB riders that can help secure your retirement.

When you purchase a rider, you are essentially buying insurance on your future lifetime income. While it comes at an additional cost, usually a percentage of your contract value, the security it provides can be priceless. It allows you to stay invested for growth while knowing a guaranteed income is waiting for you.

Death Benefit Provisions

A standard feature of most variable annuity products is a death benefit. In its most basic form, this provision ensures that if you pass away before you start taking income, your beneficiaries will receive at least the amount of your original investment, less any withdrawals. This protects your heirs from losing the principal if the market declines.

Many insurance companies offer enhanced death benefit riders for an additional fee. These riders can provide a higher payout, such as the highest contract value your annuity ever reached on a specific anniversary date or your contributions plus a certain interest rate. This can be a valuable tool for legacy planning.

When considering a death benefit, the financial strength of the insurance company is crucial. You are relying on the company to fulfill its promise to your beneficiaries years or even decades in the future. Always check the company’s financial ratings to ensure it has a strong ability to pay claims.

How Variable Annuities Work and What They Offer

At its core, a variable annuity is a contract with an insurance company that helps you save for retirement. It has two main phases: an accumulation phase where you invest and grow your money, and a payout phase where you receive income. Unlike other annuity types, a variable annuity allows you to choose from various investment options, giving you control over your growth potential.

However, this control comes with market risk, as your contract value will fluctuate with the performance of your chosen investments. A variable annuity is just one part of a comprehensive retirement plan, offering tax-deferred growth and a range of income solutions. Let’s look closer at its structure and benefits.

Basics of Variable Annuity Structure

A variable annuity is typically structured as a deferred annuity, meaning you contribute money over time and let it grow before you start receiving payments. You can fund your annuity with a single lump sum or through a series of payments. During this accumulation period, your money is invested in subaccounts you select.

The value of your annuity, known as the contract value, will rise and fall based on the performance of these investments. This differs from immediate annuities, where you pay a lump sum and begin receiving income right away, or deferred income annuities with a fixed return. The variable structure is designed for long-term growth.

When you’re ready to retire, you can “annuitize” the contract, which converts your contract value into a stream of regular payments. You can also choose to take systematic withdrawals or access your money in other ways, depending on the terms of your contract. This flexibility makes it a versatile tool for retirement planning.

Tax Deferral Advantages

One of the most significant benefits of a variable annuity is tax deferral. While your money is invested in the annuity, you don’t pay any taxes on the earnings, dividends, or capital gains. This allows your retirement savings to grow faster, as the money that would have gone to taxes remains invested and continues to compound.

This tax-deferred growth can make a substantial difference in your final nest egg, maximizing your growth potential over the long term. You only pay taxes when you start taking withdrawals, at which point the earnings are taxed as ordinary income. If you withdraw money before age 59½, you may face a 10% tax penalty from the IRS on the earnings portion.

Key advantages of tax deferral include:

• Your earnings compound without being reduced by annual taxes.
• You can trade between subaccounts without triggering a taxable event.
• It allows you to potentially build a larger source of future income.

Payout Options at Retirement

When you decide to retire, your variable annuity offers several payout options to turn your savings into an income stream. The choices you make will determine how and for how long you receive your money. Understanding these options is key to making your annuity work for your retirement lifestyle.

One common choice is annuitization, where you convert your contract value into a guaranteed stream of payments. You can choose to receive these payments for the rest of your life, for a joint lifetime with your spouse, or for a set period, such as 10 or 20 years. Some options may offer a guaranteed minimum income, protecting you from poor market performance.

Alternatively, you might opt for systematic withdrawals instead of annuitizing. This allows you to keep your money invested while taking regular payments. The amount can be a fixed dollar figure or a percentage of your account value. Popular payout options include:

• Lifetime Income: Payments that last for the rest of your life.
• Period Certain: Payments for a specified number of years.
• Systematic Withdrawals: Flexible withdrawals while your money stays invested.

Fees, Costs, and Charges Associated with Top Variable Annuity Providers

Variable annuities are known for having higher fees than many other investment products, and these costs can impact your overall returns. It’s crucial to understand the different charges before you invest. Common fees include mortality and expense fees, administrative fees, investment management fees, and potential surrender charges if you withdraw money early.

Asking your financial advisor to clearly explain each fee is a wise step. Comparing costs between annuity company providers can reveal significant differences. Some companies, like Jackson National, are known for lower-than-average fees. Here’s a breakdown of typical charges:

Mortality and Expense Fees

The mortality and expense (M&E) fee is one of the core charges in a variable annuity. This fee is charged annually as a percentage of your contract value and compensates the insurance company for the risks it takes in providing the annuity’s guarantees, such as the standard death benefit.

On average, the M&E fee is around 1.25% per year. This charge covers the risk that you might live longer than expected (mortality risk) and covers administrative costs associated with annuity sales and marketing (expense risk). It’s the price you pay for the insurance component of the product.

When comparing annuities, look at the M&E fee closely, as it can vary between providers. A lower M&E fee means more of your money stays invested, which can lead to better long-term growth. However, don’t choose an annuity based on this fee alone; also consider the company’s financial strength ratings and the quality of its features.

Administrative Fees

In addition to mortality and expense fees, many variable annuities also include administrative fees. These charges cover the day-to-day costs of maintaining your account, such as record-keeping, processing transactions, and mailing statements. This fee is often a flat annual amount, like $50, or a small percentage of your account value.

Some annuity companies waive administrative fees if your contract value exceeds a certain threshold, such as $1 million. When you’re working with financial professionals to develop your retirement strategy, be sure to ask about these fees and any potential waivers. While they may seem small, they can add up over time.

It’s important to get a full picture of all the fees associated with an annuity before you commit. A good financial advisor will provide a transparent breakdown of every cost, helping you understand how they fit into the overall value proposition of the product. Don’t hesitate to ask for clarification on any charge you don’t understand.

Surrender Charges and Penalties

Variable annuities are long-term retirement products, and taking your money out too soon can result in surrender charges. A surrender charge is a penalty for an early withdrawal made during the surrender period, which is a set number of years after you purchase the annuity, typically five to seven years.

This charge is usually a percentage of the amount you withdraw, and the percentage decreases each year until it disappears. For example, the charge might be 7% in the first year, 6% in the second, and so on. Most annuity products allow you to make an annual penalty-free early withdrawal of up to 10% of your account value.

Understanding the surrender schedule is critical before you invest. If you think you might need access to a large portion of your money in the near future, a variable annuity with a long surrender period may not be the right fit for you.

• Surrender Period: The length of time surrender charges apply.
• Declining Charges: The penalty percentage typically goes down each year.
• Free Withdrawal: Most contracts allow a 10% withdrawal each year without a penalty.

Who Should Consider Investing in a Variable Annuity?

A variable annuity is best suited for someone with a long-term investment horizon who wants tax-deferred growth and the potential for a guaranteed retirement income. If you have a moderate to high risk tolerance and have already maxed out other retirement accounts like your 401(k) or IRA, a variable annuity can be a great next step.

However, it’s not for everyone. Yes, there are risks involved, primarily market risk, which means your investment can lose value. These products are complex and come with various fees. It’s important to align the features of an annuity with your specific income needs and financial goals before investing.

Ideal Investor Profiles

So, for whom does a variable annuity fit best? The ideal investor is someone who is planning for retirement years down the road and wants to supplement their existing retirement savings. This person has likely already contributed the maximum amount to their 401(k) and IRA and is looking for another tax-deferred vehicle to continue growing their nest egg.

This investor also has a moderate tolerance for risk. They understand that the contract value will fluctuate with the market but are comfortable with this in exchange for higher growth potential compared to fixed annuities. Their primary financial goals include accumulating wealth over the long term and creating a reliable income stream in retirement.

Finally, they value the insurance-based guarantees that annuities offer. The idea of a guaranteed lifetime income or a death benefit for their heirs is appealing. They see the fees associated with these benefits as a worthwhile trade-off for the security and peace of mind they provide.

Risk Factors and Suitability

The primary risk associated with a variable annuity is market risk. Because your money is invested in subaccounts tied to the market, your contract value can decrease if those investments perform poorly. During periods of high market volatility, you could see significant fluctuations in your account balance, and it is possible to lose money.

This is a key difference from other annuity types, like fixed annuities, which protect your principal. Before choosing this type of annuity, you must be comfortable with the possibility of investment losses. It’s one of the most important risk factors to consider when determining if this product is suitable for you.

A financial advisor can help you assess your risk tolerance and decide if a variable annuity is appropriate. Be sure to discuss the following risk factors:

• Investment Loss: Your principal is not protected from market downturns.
• Complexity and Fees: These products can be complex and have multiple layers of fees that reduce returns.
• Liquidity: Surrender charges can make it expensive to access your money in the early years.

Conclusion

In summary, selecting the right variable annuity plan is a crucial step in securing your retirement. The options explored in this blog highlight the diverse features and benefits that can cater to different financial needs and goals. As you evaluate these plans, consider factors such as investment options, income guarantees, and associated fees to make an informed choice. Remember, the best variable annuity for you will align with your risk tolerance and retirement objectives. Take the time to research thoroughly, and don’t hesitate to seek professional advice if needed. If you’re ready to explore your options further, feel free to reach out for a free consultation to help guide your decision-making process.

Frequently Asked Questions

What are the main advantages and disadvantages of variable annuities?

The main advantages of a variable annuity are its tax-deferred growth potential and the option to add riders for a guaranteed income in retirement. The primary disadvantages are the market risk, which means you can lose money, and the various fees that can reduce your overall returns.

Are there risks involved with buying a variable annuity?

Yes, there are risks. The biggest is market risk, as your contract value can fall if your investments perform poorly. There’s also the risk that the insurance company could face financial trouble, though this is rare. Unlike other annuity types, your principal is not fully protected from market downturns.

Where can I compare different variable annuity options easily?

The best way to compare variable annuity products is to work with qualified financial professionals. They have access to annuity sales data, can explain the details of different contracts, and compare features and financial strength ratings from multiple providers to help you find the right fit for your needs.