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The Midland Summit Navigate May Be Your Cup of Tea


By , with Annuity FYI

In planning for retirement, there are few guarantees, especially if you want some growth potential, and guaranteed income. Depending upon your annuity investment priorities, Midland Summit Navigate may be for you.

In planning for retirement, there are few guarantees, especially if you want some growth potential, as well as guaranteed income — an important piece of the investment pie given that at least some inflation is inevitable.  

Among a relatively small number of annuities that address this issue is Midland Summit Navigate, which markedly improved its offering less than a year ago and essentially combines annual payouts with the performance of the S&P 500 over time. It’s not the only annuity offering this. But the potential growth of its equity component is much more generous than what the competition offers, and prospective  buyers get the best deal available with a modest investment as low as $10,000. 

This is rare — and particularly appealing to folks living on a serious budget.

Before divulging more details, some background is in order.

Unbeknownst to most annuity owners and prospective owners, these are halcyon times for the annuity industry. Sales in America have been setting records since 2022, and they continue to do so in 2024, even though they were expected to slack off this year, largely reflecting the widespread belief that interest rates – and the attendant rates that annuities offer – will decline somewhat as the year progresses.  

In the first quarter of 2024, for instance, total U.S. annuity sales were $106.7 billion, an increase of 13% increase over a year ago, according to annuity watcher LIMRA.

Why are annuities on such a roll? The answer, according to pundits, is growing pressure on Social Security; an enhanced desire for protection against market volatility with at least some focus on income security, particularly among baby boomers; and heightened concern about the financial implications of longer-than-expected longevity. In addition, the broad-based demise of pensions, predictably, has enhanced fears about outliving savings.

In a nutshell, prospective annuity owners have become wiser, and annuity pundits have taken notice. “An annuity can only reduce the risk of an unknown lifespan. But it  can also allow retirees to spend their savings without the discomfort generated by seeing one’s nest egg get smaller,” David Blanchett, a managing director at Prudential Financial, said in a recent article.

Building on this, Olivia Mitchell, an economist at the Wharton School of Business, wrote that she considers this issue a “bus problem.”  Retirees increasingly buy annuities, she wrote, “but some are afraid they’re going to walk outside and get hit by a bus. The reality? You might also live to be 105 years old.”

The upshot of all of this is that prospective annuity buyers should not relatively quickly purchase a product in the booming annuity industry. Instead, they need to do some annuity research. They should also ask brokers they deal with some good questions, and make sure these result in intelligent and helpful answers.  

This brings us back to Midland Summit Navigate 5 and 7 – the numbers describing the length of available contracts.  The Midland product has an impressive AM Best rating of A+, but it’s by no means perfect, starting with the duration of the contracts. Readers should know that these two products, while highly competitive in the five- and seven-year timespans, are less competitive against 10-year fixed indexed annuities (FIAs).  This is because insurance companies typically offer better terms on a product with a longer life, even when buyers invest only the required minimum.

(Conversely, some investors prefer locking in investments for a shorter span because of the enhanced uncertainty of what lies ahead.)

Also important to note is that annual Midland Summit Navigate payouts, called “triggers,” are on the low side at four percent annually at the five-year product and 5.45% on the seven-year product.  This money also grows in simple, not compound interest, which means they grow less. On the flip side, these rates are guaranteed to stay put for the lifespan of the annuities. Among FIAs overall, by contrast, it’s common to initially offer their highest payout rates, then decrease them over time.

By far the biggest selling point of Midland Summit Navigate 5 and 7 is what investors get at the end of the contract. They receive 100 percent of all the gains they received over the years (minus any negative years) invested in the S&P 500 Dynamic Intraday index. (This is the S&P 500 with a volatility feature that attempts to mitigate temporary market declines.)  This is far more generous than direct competitors, which instead deliver market payouts every year or two in the standard S&P 500 index for substantially less than 100 percent.

The investor winners here should always underscore that the appeal of this product is the allure of S&P 500 performance over a longish timeframe. The index periodically declines annually, of course, but historically has risen much more than it has declined.  By contrast, Midland Summit competitors would be the winners if the multi-year performance of the S&P 500 is disappointing and is beaten over time by the annual payouts of the annuity.

Lastly, what’s the prognosis for the S&P down the pike?

Nobody really knows, of course, but it’s worth noting a couple of likely developments. The record-breaking stock market is pricey and could easily be due for a correction. Moreover, many market pundits believe that the stock market will grow less in coming years, even after a correction, because they expect economic growth to be modest. There is a problem here, however, because pundits have said this in the past and turned out to be wrong.

As for the more conservative bond market, whose interest rates wind up setting annuity payout rates, it’s well-known that bond rates, and hence annuity rates, are highly likely to decline later in 2024. This would make bonds less attractive.   What is unknowable, however, is how much they will decline in 2024 and thereafter and therefore how much value will they ultimately produce? 

For most annuity investors, then, what counts in the end is which financial asset you prefer investing in, thereby prioritizing an investment in the financial asset in which you are most comfortable.

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