10% bonus each year!

[mudhound]

Let me clarify one thing right away! I have been offering annuities, Life, Health, and other coverage for almost 30 years. I have sold a few annuities but have never made it my passion.

Now, I am getting close to retirement my self and have a recruit that told me he knows of a killer deal. He says you can get a 10% bonus on money put in and the same 10% bonus years after year. Now, I have seen the up front 10% bonus but NEVER year after year.

Now, he did allow that there was a penalty for early withdrawal. I know that.


Is he full of you know what? I’m I missing out on something?

 

[scagnt83]

The main catch, is the 10% "bonus" each year is not a liquid value.
It is only used to calculate the lifetime income paid via a Lifetime Income Rider.

This is often called a "rollup" instead of a Bonus. The exact term is carrier specific.
This Rider creates a separate account within the policy, that has it's own separate calculation for gains (such as 10% yearly).

BUT, you can only access the Rider Account Value by triggering Lifetime Income Payments that give a certain amount annually. The exact amount is a % of the account, based on your age at the time.

So hypothetically, if you put $100k into one with a 10% Rider Bonus, and the normal account got 5%, it would look something like this after 10 years:

Normal Account that you can "get your hands on" :
$162k
Available for normal withdrawals or lump sum withdrawal

Income Rider Account:
$259k
Used to calculate yearly payments for the lifetime income rider.
Not available for normal withdrawals or a lump sum withdrawal.
Lifetime income payments subtract dollar for dollar from your normal account value.

-----

They can be a great product for someone approaching retirement. But you need to understand that the value the Rider Bonus creates is not liquid. So you would not want to put all of your money into something like this.

Also, shop the market. The age based payout percentage often has a greater effect on income than the Bonus/Rollup rate does.

 

[VolAgent]

Scagent83 pointed out a lot of important things about these type of products.

Really do need to see how it works, but it can be a great product for the right situation. You're basically creating a pension for yourself. Depending upon your retirement assets, you could put enough into it such that the lifetime income plus social security is sufficient to pay all your necessities each month, and the rest of your retirement assets can be used as needed for wants and such.

 

[mudhound]

I really to thank each and every one of you! So it does exist but it is just not that simple. I guess this is way i have never been RED HOT to offer them.

 

[walthamny]

In addition to what Scagnt83 said, there are also products that claim they are 10% bonus because the bonus is payable as a pure death benefit. You put 10k a year, and you get 10% bonus immediately if you die in the 1st year. Nothing to get too excited about but they work for folks who can never get life insurance and need a death benefit.