Nationwide Peak® 10 fixed indexed annuity

[LakeRat1]

Thinking outside the box a bit ..... Curious on your thoughts ...... 62 Married, DW is 70.... I would like a steady income stream of 48k, so I was thinking of putting 750K in the Nationwide Peak 10 fixed indexed
annuity ...... Based on their publications it looks promising with never running out, as well as based on the investment, there most likely would be a death benefit to our kids should we live into our 90s above and beyond the initial 750k........ Does anyone have any thoughts on this Annuity, Pros / Cons?


https://www.nationwide.com/personal/investing/annuities/fixed-indexed/types/nationwide-peak-10

 

[ncbill]

another equity-indexed (now renamed "fixed-indexed") annuity.

the insurance company keeps all dividends for themselves & caps your return to single digits (e.g 7% even if the underlying index rises double-digits that year!)

note that the cap rate can be lowered at their discretion...that provision is usually well-hidden in the fine print.

and of course, their illustration will project your return at the maximum (capped) rate.

also, IIRC, that's a deferred annuity, not immediate, which adds its own complexities.

 

[TheWizard]

The only "good" immediate variable annuities that I'm aware of are from TIAA. Unfortunately, only certain categories of employment are eligible to invest with TIAA.

Note: one of my annuity income streams is based on CREF Stock and I've been happy with that...

 

[LakeRat1]

This is the part that interests me .... I was thinking ... waiting one year, then begin a draw of 52k ...... > Option 2: Bonus Income+ Rider
This might be a better fit if you know you’ll
need your annuity to provide retirement
income and you want the additional benefits
this option offers.
• Cost: 1.00% for single life; 1.30% for the
Joint Option
• A 20% bonus credit to the original
income benefit base (your premium)
• After the bonus is credited to your
income benefit base, it offers an 8%
simple interest roll-up rate from there
for 10 years or until your first lifetime
withdrawal, whichever is first
• You’re guaranteed to receive lifetime
withdrawals, and they won’t decrease,
even if your contract value drops to zero
• There’s no waiting period — your lifetime
withdrawals can begin at any time

 

[mathjak107]

you need to really look at the details .

generally the bonus and guarantees go into a phantom account which you can’t use or take for any other reason except to serve as a base amount when you annuitize it .

then comes the catch . they control how much of that phantom account you get to draw .

in the mean time the real account gets eaten away by low returns and expenses

our bank tried to sell me the typical deal that has these high guarantees..

it was a variable annuity consisting of choices in investments where you could put your money.

they guaranteed no matter what your portfolio did they would guarantee you a minimum of 10% for 10 years.

sounds great so far right?

it started out with them promising me a minimum of 10% a year return for 10 years if the annuity was on myself or 5% a year min if it extended to marilyn too.. if my variable investments were worth less they would increase me to either a 5% minimum return or 10% min depending which i took. . if i died my wife gets to continue the plan and she gets the 5% minimum option.

now for the gotchas.


i asked if i could take that bonus money out at the end of the 10 years and of course no you cant. you can take your own once the surrender fee ends but not the money they added to boost your return.

that 10% a year guarantee are only "bonus bucks " ill call it good towards an annuity conversion into a lifetime income stream if at retirement age instead of taking your money and going you decide to stay on, give them that money and annuitize that money into an income stream and you get to keep that extra dough..

however heres the catch. you pay expenses on your average yearly account value which includes those phantom bucks.. those bonus bucks after 10 years have your expenses running double because they are based on that phantom value.

if you started with 100k had 3600.00 a year in expenses before the fund expenses those bonus bucks after 10 years have you paying 7200.00 a year plus fund expenses .

there were options everywhere you needed to add to the basic model if you were going to get these guarantees and spousal protection. each option added to the plan increased expenses.

as best as i could tell without an mba is here are the expenses,and keep in mind historically the return on a 50/50 mix is about 7% when not in an annuity.

the expenses below are based on the total account value with the phantom bucks being included they give you.

mortality and expense risk charge 1.10%...

administrative fee .20%

combination enhanced death benefit .45%

beneficiary protector .35%

10% lifetime income option charge 1.2%

10% spousal continuation charge .30%

total 3.60% but we havent included the fund expense fees so tack on another .45 to 1.94% depending what funds you picked..

thats 4-5% in expenses on around a 7% return.


thats a horrible deal when all is said and done.

when someone says they are getting an 8 % return, 10% return or even a draw down thats so much higher then common sense sense says makes sense my first question is whats in your prospectus your not following.

 

[LakeRat1]

THANK YOU VERY VERY MUCH ..... This Annuity sounded to good to be true ...... In the perfect world, I would like to draw 42k to 50k per year from a portfolio of 1mil.... At the same time, I want peace of mind, to know that if I want to draw a 100k, I have that option. I would like to see the 1mil, continue to grow for the next 11 years, as then I would be 73 and would have to begin taking RMDs, then I would adjust my annual draw ...... I am 62, most of the money I want to draw out will go back into short term CDs, safe investments, while paying taxes on the draw ....... Any thoughts appreciated

 

[DuluthGA]

you need to really look at the details .

thats a horrible deal when all is said and done.

when someone says they are getting an 8 % return, 10% return or even a draw down thats so much higher then common sense sense says makes sense my first question is whats in your prospectus your not following.

I fell for one of those about 15 years ago when the market was recovering from the 08 crisis. On average it increased about 1% per year while the market was flying thanks to fees. When it came time to start taking money the payout on the “Higher free money level” was lower than what I could get just buying a SPIA through broker (thanks Stan). The inflated withdrawal amount only lasted to my portion of the account was drained then dropped about 1/3 for the rest of my life. The SPIA I bought started with a higher payment to begin with that goes to my or DW life. We don/t have a ton of assets and DW wanted security of income even if it’s not COLA’d.

I wouldn’t do it again,

 

[Sunset]

THANK YOU VERY VERY MUCH ..... This Annuity sounded to good to be true ...... In the perfect world, I would like to draw 42k to 50k per year from a portfolio of 1mil.... At the same time, I want peace of mind, to know that if I want to draw a 100k, I have that option. I would like to see the 1mil, continue to grow for the next 11 years, as then I would be 73 and would have to begin taking RMDs, then I would adjust my annual draw ...... I am 62, most of the money I want to draw out will go back into short term CDs, safe investments, while paying taxes on the draw ....... Any thoughts appreciated

What you want to do, is the very thing a 60/40 brokerage account would do. Invest in VTI + SCHD + Treasuries / CD's at the brokerage, and you are done.

 

[pb4uski]

THANK YOU VERY VERY MUCH ..... This Annuity sounded to good to be true ...... In the perfect world, I would like to draw 42k to 50k per year from a portfolio of 1mil.... At the same time, I want peace of mind, to know that if I want to draw a 100k, I have that option. I would like to see the 1mil, continue to grow for the next 11 years, as then I would be 73 and would have to begin taking RMDs, then I would adjust my annual draw ...... I am 62, most of the money I want to draw out will go back into short term CDs, safe investments, while paying taxes on the draw ....... Any thoughts appreciated

What you want to do, is the very thing a 60/40 brokerage account would do. Invest in VTI + SCHD + Treasuries / CD's at the brokerage, and you are done.

You could invest $425k in ~4.5% treasury or CD ladder with 11 rungs of $50k each in maturity value that would provide $50k each year for 11 years. Then invest the remaning $575k consistent with your risk tolerance.

 

[tim0476]

Found this thread and thought it was most appropriate to ask my questions and make comments here because of the related topic. I too am looking at the Nationwide Peak 10 Fixed Index Annuity and here is why:

Here is a quick background and some relevant info:
58 year old male; spouse is 60 (both are trying to retire 1/1/2025)
Built up good savings in 99% qualified (401K) accounts
No pension; both plan to wait until 70 to maximize SS benefits
Planning to ages 91 and 94 for me and my wife
Considering very conservative returns (3%) on savings; not quite able to meet expenses
Savings draws down prior to end of plan.

This is how I am thinking about the annuity. I have heard all the arguments against them, and I certainly know I MAY be able to make more investing the money on my own, but consider this:

1) I need more guaranteed income, and even the minimum income guarantee from the rider provides that.
2) I don't want to count on the crazy stock market totally. I think that is bad for anyone unless you have tons of money.
3) I am talking about putting 25% of my portfolio in the annuity, 75% stays invested in 60/40 stocks bonds.
4) I don't really want to pay an advisor annual fees to manage my money buckets either, but may have to consider that.
5) Bad timing and sequence of returns is a real concern for me because I have to draw down that savings, and my expenses call for more than 4% withdraw each year.
6) I know my 3% return on savings is much less than what the market has done over periods of time, but I need to plan for worst case. If I can get that to look good, then everything else is gravy.
7) Sure, if I change the projected rate of savings to 5%, then it looks like I don't need the annuity and the plan works with just the savings. But can you really count on that?

Investing 25% of my portfolio in the NW fixed index annuity gives me $87K annually starting at my age 65 for the rest of my life and my wife's. This $87K makes the plan work, especially with SS coming in at age 70, because it does not draw down the savings as fast, and in some cases does not draw it down at all. Yes, the $87K is level and not adjusted for inflation and is worth much less in 20 years, but again, it still makes the plan work.

So, tell me, why is this annuity so terrible for someone who needs it for income, considering what I have said above. If the minimum guarantee of $87K makes the plan work and it cannot go below that, why do I care about the contract value, fees, etc...

All this said, I am very concerned about going into this annuity. There are people much smarter than me and many are saying annuities are just terrible and stay away.

 

[Closet_Gamer]

Found this thread and thought it was most appropriate to ask my questions and make comments here because of the related topic. I too am looking at the Nationwide Peak 10 Fixed Index Annuity and here is why:

Here is a quick background and some relevant info:
58 year old male; spouse is 60 (both are trying to retire 1/1/2025)
Built up good savings in 99% qualified (401K) accounts
No pension; both plan to wait until 70 to maximize SS benefits
Planning to ages 91 and 94 for me and my wife
Considering very conservative returns (3%) on savings; not quite able to meet expenses
Savings draws down prior to end of plan.

This is how I am thinking about the annuity. I have heard all the arguments against them, and I certainly know I MAY be able to make more investing the money on my own, but consider this:

1) I need more guaranteed income, and even the minimum income guarantee from the rider provides that.
2) I don't want to count on the crazy stock market totally. I think that is bad for anyone unless you have tons of money.
3) I am talking about putting 25% of my portfolio in the annuity, 75% stays invested in 60/40 stocks bonds.
4) I don't really want to pay an advisor annual fees to manage my money buckets either, but may have to consider that.
5) Bad timing and sequence of returns is a real concern for me because I have to draw down that savings, and my expenses call for more than 4% withdraw each year.
6) I know my 3% return on savings is much less than what the market has done over periods of time, but I need to plan for worst case. If I can get that to look good, then everything else is gravy.
7) Sure, if I change the projected rate of savings to 5%, then it looks like I don't need the annuity and the plan works with just the savings. But can you really count on that?

Investing 25% of my portfolio in the NW fixed index annuity gives me $87K annually starting at my age 65 for the rest of my life and my wife's. This $87K makes the plan work, especially with SS coming in at age 70, because it does not draw down the savings as fast, and in some cases does not draw it down at all. Yes, the $87K is level and not adjusted for inflation and is worth much less in 20 years, but again, it still makes the plan work.

So, tell me, why is this annuity so terrible for someone who needs it for income, considering what I have said above. If the minimum guarantee of $87K makes the plan work and it cannot go below that, why do I care about the contract value, fees, etc...

All this said, I am very concerned about going into this annuity. There are people much smarter than me and many are saying annuities are just terrible and stay away.

Why not just do a simple, immediate annuity? I think that would achieve your goals without the complexity?

 

[pb4uski]

^^^ Yes, or just a plain vanilla deferred income annuity... pay premium a now at age 58 and start life annuity benefits at 65. You'll know today what you pay and what you will get... no guesswork needed. You can find them on immediateannuities.com

 

[VanWinkle]

A fixed indexed annuity purchased by SO in 2013 during a pretty good 10 year market returned a little over 2.5% a year after expenses. Once it hit the out of penalty phase, SO did a 1035 exchange into a MYGA ladder at 5.85% and is very happy to be out of the fixed indexed annuity. They are products that are sold to people based on fear.

 

[OldShooter]

@LakeRat1, I suggest that you get a PDF copy of the prospectus and text search for words like "fee," "charge," "penalty," etc. I did this once and found fees for putting money in, fees for taking money out, annual fees, and other delights.

The other thing to check is the "investment" calculation. One common trick is to base the investment calculation on the reported price change of the S&P over a period like a year. This ignores the dividends, which the issuer slips into his pocket, and it understates the performance of the investment, hence your yield, by several percent.

One thing I tell students in my adult-ed investment classes is: "The more complicated an investment product is, the more likely it is that it was designed to make money for the seller, not to make money for you." That prospectus that I studied was 208 pages of fine print !!

 

[mathjak107]

this breakout is something the insurer will never let you see .

this is the prudential bond linked index . it promises you a guaranteed 5.50% at a time rates were zero .

it’s linked to a bond index and you get the higher of the guaranteed amount or the index


of course the index amount has almost 3% in fees while the guaranteed amount does not .

so off the bat the index is not likely to be higher .


this is an example of how the variable ones linked to an index work . the only thing that changes is how long the payments last , the index and the guarantee's but the mechanics are the same .

you can see if you give them 100k at age 55 and let it sit and compound at 5.50% by age 65 you have 180,209.00 dollars . that is excellent growth based just on the min guarantee .

but that virtual account can only be used for drawing an income . it is never yours .

so by waiting those 10 years to start drawing your hundred grand grew from 100k to 180,209.00 and your draw grew from 3.50% a year to 4.50% a year at age 65 .

so it is great they are giving you 5.50% but you can only access it at a growth rate of 1/10% a year for each year you gain another 5.50% .

so you see , if you or your spouse live to age 76 your return is still zero , as they are handing you back the 100k you gave them . you see your first penny of return at age 77 .

at 85 you see 3.31% roi . in fact if you live to 95 you still never see 5.50% as a roi .