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Product Review:
The American Equity IncomeShield10

By , with Annuity FYI

Many retirees want to know or would like to know that they will remain financially secure as they continue to age. This annuity fits this goal to a tee.

Most retirees spend little or no time thinking about what age they will live to. After all, who is comfortable thinking about that? But they should give this some thought, especially when they turn 65 years old or thereabouts and are in relatively good health.

This projection is useful in terms of curiosity and lifestyle, and could be very significant in the financial planning arena.

As it turns out, relatively healthy retirees of this age tend to live a surprisingly long time in comparison to how long many think they will live. According to the U.S. Centers for Disease Control and Prevention – the nation’s leading science-based and data-driven public health service organization – the average 65-year-old man will live an additional 18 years and a woman of the same age 20 more years. Moreover, according to the U.S. Census Bureau, 16% of these men and 34% of these women will live to age 90, obviously adding a number of additional years to longevity.

This is why retirees interested in annuities might want to take a hard look at American Equity IncomeShield 10, an income-focused fixed indexed annuity that offers an unusually generous guaranteed payout over at least a decade for those who invest a minimum $100,000 in the product. Many retirees want to know or would like to know that they will remain financially secure as they continue to age. This annuity fits this goal to a tee.

“This is one of the most generous annuities available today for at least an extended period or a lifetime,” says an annuity broker familiar with the product.

The trick is to purchase the annuity and then defer income for a few years. Because insurance companies are sharply attuned to actuarial tables, they pay more annually to folks who won’t receive payouts for as many years. IncomeShield 10 simply pays out even more. As a good example, a 65-year-old single man living in Florida who pays $100,000 for this annuity and defers income payouts the first three years receives $9,605 annually indefinitely. This works out to a 9.6% annual payout.

An investor or investors willing to defer payments for four years would pocket $10,445 a year and somebody willing to defer t31his for five years would pocket $11,264. By comparison, the average FIA competitor would pay out roughly $1,000 less per year. 

IncomeShield 10 buyers also initially receive a 10% investment bonus. It’s applicable to both the annuity’s account value – the actual dollar value of the annuity – and the so-called benefit base – the money investors actually receive monthly. Most head-to-head competitors that offer bonuses apply it only to the benefit base, which means the annuity’s beneficiary wouldn’t receive as much money, assuming the account value isn’t exhausted.

Also important to note is that this is highly likely to be an opportune time to consider the purchase of IncomeShield 10, notwithstanding the strong likelihood that the Federal Reserve, which has been sharply increasing rates to fight inflation for well over a year, will continue to boost interest rates at least a bit more. Often, the higher the interest rates, the higher the payout rates among annuities. In addition, however, it’s extremely likely that interest rates will decline in coming years as inflation continues to decline, making sky-high interest rates no longer necessary.  

For example, Trading Economics, a prominent economic forecasting firm that provides its members with access to millions of economic indicators for 196 countries, including the U.S., forecasts that Fed rates, now 5% to 5.25%, will decline to 4.25% in 2024 and 3.25% in 2025. Other economics firms project that rates will be even a bit lower by the end of 2025.

In the interest of being fully above-board, it’s also important to note that parent American Equity has an A- financial strength rating from A.M. Best – good, but not as good as the ratings of some competitors. In addition, the Des Moines-based company was also founded in 1995. This makes it newer than many competitors, which also could be an issue for some prospective customers. 

On the other hand, American Equity has maintained its A- rating virtually its entire life. Its steady hand is “a plus,” our annuity broker says, given that the ratings of a number of insurance companies fluctuate over time. (The company’s quarterly sales typically exceed $1 billion.)

The minimum investment in IncomeShield 10 is $5,000. Its annual fee is 1.1%, marginally higher than most competitors. The current interest rates are guaranteed over the annuity’s 10-year contract. “No matter what happens, these rates are locked in,” says our annuity broker. “This is a contractual guarantee.”

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