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Product Review:
Midland National RetireVantage®10 Growth Fixed Index Annuity

By , with Annuity FYI

Here you have an annuity that can potentially beat many stock funds over its 10-year life. And, unlike stock funds, you don’t have to sweat out the bad times because you are protected from losses.

Here’s a Fixed Index Annuity That Could Rival the Unbridled Performance of the Stock Market.

Given the backdrop of a pandemic and the accompanying recession, mostly everybody knows this has been a good year so far for the stock market.

But next year? Who knows? A vaccine is unlikely to reach the masses before mid-year and even if the federal fiscal stimulus is refreshed, in 2021 – like 2020 – it would last only a matter of months. So, somber investors cannot ignore the strong possibility of a negative market next year…

This brings us to fixed indexed annuities (FIAs) and, in particular, Midland National’s highly attractive MNL RetireVantage® 10 growth FIA. Like all FIAs, it protects its owners against the possibility of losses. Admittedly, nothing new here. What sets this FIA apart from the competition, however, is truly generous participation rates – 165% on a low-volatility fund if you invest at least $75,000 and agree to two-year index performance crediting.

Momentarily putting aside the fact that this is an annuity we’re talking about, it sounds more like a super-charged stock-oriented mutual fund with some extra bells and whistles.
It isn’t, of course, but nonetheless, here you have an annuity that can potentially beat many stock funds over its 10-year life. And, unlike stock funds, you don’t have to sweat out the bad times because you are protected from losses.

“This FIA is not actually designed to match or beat the stock market, but in fact it could deliver double-digit returns,” says one annuity professional familiar with the product. “It is best for people who do not want to put up with the volatility of the stock market but who want to beat the interest rate environment and are willing to invest their money for 10 years.” (10 years being the life of the fund.)

Some important details are in order.

  • For starters, this fund is indeed best for those who can invest at least $75,000. Prospective investors can instead invest as little as $20,000, but then the index participation rate drops to 140% with two-year crediting. (The participation rate drops still further for those who want one-year crediting, as is the case for $75,000-plus investors, but this is a negligible plus in a 10-year product.)
  • Equally important, it is worth repeating that the MNL RetireVantage® 10 invests in a low-volatility index – specifically, the S&P 500 MARC 5% index. It provides multi-asset diversification by investing in bonds and commodities, as well as stocks. This may not be a negative. This year through mid-October, the MARC index returned 7.4%, beating the S&P 500 at 6.1%. (Last year, however, the S&P 500 trounced the MARC index.) While nothing is certain, low volatility funds are generally less volatile than stock market indexes, as the name suggests, and investors pay for that feature by accepting a somewhat lower return.
  • Also important to note is that MNL RetireVantage® charges a 1% annual fee in exchange for providing such high participation rates. (The fees would be returned if the annuity doesn’t produce a profit over 10 years.)

Notwithstanding the fees and any other feature investors might not particularly like, it’s hard to bypass taking a good look at this product because interest rates are sitting at all-time lows and, if the Federal Reserve is to be believed, won’t be rebounding to any degree for years.

One example of the allure of MNL RetireVantage® is the participation rates being offered by other FIAS on low volatility indexes – 70 to 90%, far worse even though they don’t charge a “generosity” fee. The typical FIA participation rate on the S&P 500 is 20 to 30%, down from 35 to 40% at the start of the year and 45 to 50% at the start of 2019.

Meanwhile, the true competitor to FIAs – plain vanilla fixed annuities – are offering no more than 3.00% annually.

Given how low interest rates are and virtually certain to remain, investors might want to look at MNL RetireVantage as a partial replacement for bond fund investments. Ibbotson Associates, a unit of Morningstar and a leading authority on asset allocation, has said just this regarding all competitive FIAs.

Parent Midland National, which has been around more than a century has a stellar A+ rating from A.M. Best.

Prospective buyers might want to take a hard look at MNL RetireVantage sooner than later because it has already trimmed its participation rates twice this year.

For more information about the product mentioned in this article contact us here:

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