American General Life Insurance Co. Power Select Builder Annuity Review
byAnnuityRatesHQ Staff
Mon Apr 08 2024
Introduction
Fixed Index Annuities are contracts between the annuitant and an insurance company in which the insurance company pays interest based on the performance of a certain stock market index. Fixed Index Annuities have an inbuilt capital protection feature, so your principal will remain safe even if the index goes down, this is typically called the annual lock-in. Every year on the contact anniversary the earned interest is locked in, and you cannot lose the value of that interest or principle. Annuities are complex products, and many advisors often do a poor job of relating the complexities to their customers. And worse, often do not take the customers’ full financial context into consideration when making their sales pitch. It is imperative to educate yourself on these products and not solely depend upon the annuity agent’s oversimplified and uncontextualized sales pitch.
In this article, we delve into the American General Life Insurance Company’s Power Select Builder fixed indexed annuity. The Power Select Builder “offers…the opportunity to grow your retirement assets and income, while guaranteeing your principal will never decline due to market volatility.” Following comprehensive due diligence, this report aims to present an objective analysis of this financial product.
Company Info
The Power Series of Index Annuties is issued by the American General Life Insurance Company which is a now a part of Corebridge Financial2 (formerly AIG Life & Retirement). Corebridge was spun off AIG in 2022 and was listed the same year on the NYSE: CRBG. As of the end of 2022 they managed or administered $357.2 billion in client assets. According to their 2022 annual report3, “For the year ended December 31, 2022, our businesses generated spread income of $3.3 billion, fee income of $2.1 billion and underwriting margin of $1.4 billion, resulting in a balance mix of 49%, 31% and 20% respectively, among these income sources. We are well-diversified across our operating businesses with our Individual Retirement, Group Retirement, Life Insurance and Institutional Markets businesses representing 30%, 15%, 27% and 23% of total adjusted revenue, respectively, for the year ended December 31, 2022.”
Financial Strength and Credit Ratings4
Power Select Builder Product Description1
The Power Select Builder is an FIA that provides the annuitant the opportunity to earn returns tied to a market index, without exposing them to the downside risks of the market (interest earned is never zero in flat or down markets). This plan may be particularly fitting for those nearing retirement, who have dual objectives of growing and preserving their retirement savings. For risk-averse investors seeking alternatives to bank CDs, indexed annuities offer a very good fit.
| Tenure | 10 Years |
|---|---|
| Issue Age | 18 - 78 |
| Minimum Initial Purchase Amount | $25,000 |
| Withdrawal Charges | Withdrawals in excess of the Free Withdrawal Amount are subject to the following charges that decline over 10 years: 9-9-8-7-6-5-4-3-2-1-0% or 10-9-8-7-6-5-4-3-2-1-0% (applicable to: AK, CA, CT, DE, FL, MA, MN, NJ, ND OH, SC, SD, TX, UT, WA) |
| Indexes | See below |
| Death Benefit | Greater of the annuity contract value or Minimum Withdrawal Value |
| Free Withdrawals | After the first contract year, you can withdraw up to 10% of your contract value (based on your prior anniversary value) without incurring any company-imposed charges (see withdrawal charges) |
| Cash Surrender Value | Greater of the contract value (adjusted if applicable) or the Minimum Withdrawal Value, if fully surrendered. |
| Terminal Illness or Time of Need | Charges and Market Value Adjustments may be waived if diagnosed with a terminal illness, have extended care needs, confined to a nursing home or in an assisted living facility. Talk to your representative about restrictions/limitations that may apply. |
| Riders | No guaranteed living benefit rider. |
How does the Power Select Builder Annuity Work?
Any annuitant (maximum age at the time of policy issue: 78) can purchase this annuity with a minimum initial purchase amount of $25,000, and in return, will earn market index returns (calculated through a formula that we will discuss shortly), credited as per the chosen crediting period.
There are two ways to help provide growth in this FIA5,7,8:
Earn interest based on your choice of indices:
Index Interest Accounts based on risk managed, multi-asset indices
AB All Market Index – “To help weather all markets, this index adapts exposures across an array of growth and defensive assets using a rules-based, momentum-driven approach designed to deliver stable growth.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Participation Rate
Annual Point-to-Point Enhanced Participation Rate, Tier 1
2-Year Point-to-Point with Enhanced Participation Rate, Tier 1
Annual Point-to-Point Enhanced Participation Rate, Tier 2
2-Year Point-to-Point with Enhanced Participation Rate, Tier 2
Dimensional US Foundation Index Interest Accounts – “[E]mphasizes diversified exposure to small-cap, value and high profitability stocks to pursue higher expected returns than the overall market. The Index also evaluates price changes in commodity futures and targets widening yield spreads in US Treasury bonds to help generate higher growth potential while maintaining a targeted level of volatility.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Participation Rate
Annual Point-to-Point Enhanced Participation Rate, Tier 1
2-Year Point-to-Point with Enhanced Participation Rate, Tier 1
Annual Point-to-Point Enhanced Participation Rate, Tier 2
2-Year Point-to-Point with Enhanced Participation Rate, Tier 2
ML Strategic Balanced Index – “A hybrid index that seeks growth and risk management by actively allocating to equities, fixed income and cash. Allocations between equities and fixed income are rebalanced semiannually, while cash positions are adjusted on a daily basis to help manage risk.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Spread
PIMCO Global Optima Index – “A quantitative, rules-based index that seeks to provide upside return potential by dynamically adjusting its allocations to a diverse range of global equity and U.S. fixed income markets.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Spread
Index interest accounts based on equity market indices
Russell 2000 – “An equity index that tracks the performance of U.S. small-cap stocks with market capitalizations that average $2 billion.”
Credit Period
Annual Point-to-Point Participation Rate
S&P 500 Index – “The S&P 500® is an equity index that tracks the performance of 500 of the largest companies in the U.S. It is a product of S&P Dow Jones Indices LLC (“SPDJI”) and has been licensed for use by American General Life Insurance Company (“AGL”) and affiliates.”
Credit Period
Annual Point-to-Point
Annual Point-to-Point Performance-Triggered
2-year Point-to-Point Participation Rate
1-Year Fixed Interest Account
$100k or more – 5.00%
Less than $100k – 4.75%
Rates and Costs5
The earnings crediting formula is the most important part of almost any annuity discussion. It is important to know that we don’t simply get the index return credited to the annuity. There are a few rates and caps that the company has in place that affect earnings. These rates tend to change over time, and the updated rates can always be checked with the help of your advisor. You can also check the latest rates on their website. Note, annual fees may also apply.
From the above it should be noted that there are several types of rates across this fund and the rates are dependent upon the amount purchased (greater than or less than $100k). An index rate cap applies for the S&P 500.
With most fixed index annuities, you can allocate the money to one or more of the indexes listed above. At the contract anniversary date, the index performance is measured, and the interest rate is calculated using the applicable formula for the indexes selected. This annual reset means that the index performance is reset and re-measured at the next contract anniversary and your account value is locked in.
Key terms are defined, and example calculations given below:
Index Rate Cap: Maximum percentage of index performance that can be credited as interest over an index term. For example: 10% index change > 5% cap = 5% interest earned.
Participation Rate (PAR Rate): Percentage of index performance that is used to calculate interest. For example: 10% index change x 50% PAR rate = 5% interest earned.
Premium: Money used to purchase the annuity.
Spread: Minimum percentage/threshold that the index performance must exceed to credit interest.
Performance-Triggered: Initial declared interest rate is credited to the account if index performance is equal to or greater than the minimum index value change. For example: 10% index change → 5% declared interest rate = 5% interest earned.
Enhanced Participation Rate (EPR): These accounts are available for an annual fee. You may receive higher interest credits in EPR accounts, but interest credits are not guaranteed. At the end of your contract's withdrawal charge period, if the total amount of EPR strategy fees exceeds the total interest earned in the annuity, the difference will be credited to your annuity. Annuities are issued by American General Life Insurance Company
Surrender Charges
Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal that is above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies, although certain charges and penalties may apply. Any amount withdrawn more than the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule:
| Completed Contract Years | 10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | 2 | 1 |
|---|---|---|---|---|---|---|---|---|---|---|
| Surrender Charge | 9% | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% |
Applicable to AK, CA, CT, DE, FL, MA, MN, NJ, NV, ND, OH, SC, SD, TX, UT & WA:
| Completed Contract Years | 10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | 2 | 1 |
|---|---|---|---|---|---|---|---|---|---|---|
| Surrender Charge | 10% | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% |
Power Select Builder Plus Income Product Description1
The Power Select Builder Plus Income is an FIA that provides the annuitant the opportunity to earn returns tied to a market index, without exposing them to the downside risks of the market (interest earned is never zero in flat or down markets). This plan may be particularly fitting for those nearing retirement, who have dual objectives of growing and preserving their retirement savings. For risk-averse investors seeking alternatives to bank CDs, indexed annuities offer a very good fit.
| Tenure | 10 Years |
|---|---|
| Issue Age | 50 - 78 |
| Minimum Initial Purchase Amount | $25,000 |
| Withdrawal Charges | Withdrawals in excess of the Free Withdrawal Amount are subject to the following charges that decline over 10 years: 9-9-8-7-6-5-4-3-2-1-0% or 10-9-8-7-6-5-4-3-2-1-0% (applicable to: AK, CA, CT, DE, FL, MA, MN, NJ, ND OH, SC, SD, TX, UT, WA) |
| Indexes | See below |
| Death Benefit | Greater of the annuity contract value or Minimum Withdrawal Value |
| Free Withdrawals | After the first contract year, you can withdraw up to 10% of your contract value (based on your prior anniversary value) without incurring any company-imposed charges (see withdrawal charges) |
| Cash Surrender Value | Greater of the contract value (adjusted if applicable) or the Minimum Withdrawal Value, if fully surrendered. |
| Terminal Illness or Time of Need | Charges and Market Value Adjustments may be waived if diagnosed with a terminal illness, have extended care needs, confined to a nursing home or in an assisted living facility. Talk to your representative about restrictions/limitations that may apply. |
| Riders | Guaranteed living benefit (GLB) for an annual fee of 1.10%. |
How does the Power Select Builder Plus Income Annuity Work?
Any annuitant (maximum age at the time of policy issue: 78) can purchase this annuity with a minimum initial purchase amount of $25,000, and in return, will earn market index returns (calculated through a formula that we will discuss shortly), credited as per the chosen crediting period.
There are several ways to help provide growth in this FIA5:
Earn interest based on your choice of indices:
Index Interest Accounts based on risk managed, multi-asset indices
AB All Market Index – “To help weather all markets, this index adapts exposures across an array of growth and defensive assets using a rules-based, momentum-driven approach designed to deliver stable growth.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Participation Rate
Annual Point-to-Point Enhanced Participation Rate, Tier 1
2-Year Point-to-Point with Enhanced Participation Rate, Tier 1
Annual Point-to-Point Enhanced Participation Rate, Tier 2
2-Year Point-to-Point with Enhanced Participation Rate, Tier 2
Dimensional US Foundation Index Interest Accounts – “[E]mphasizes diversified exposure to small-cap, value and high profitability stocks to pursue higher expected returns than the overall market. The Index also evaluates price changes in commodity futures and targets widening yield spreads in US Treasury bonds to help generate higher growth potential while maintaining a targeted level of volatility.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Participation Rate
Annual Point-to-Point Enhanced Participation Rate, Tier 1
2-Year Point-to-Point with Enhanced Participation Rate, Tier 1
Annual Point-to-Point Enhanced Participation Rate, Tier 2
2-Year Point-to-Point with Enhanced Participation Rate, Tier 2
ML Strategic Balanced Index – “A hybrid index that seeks growth and risk management by actively allocating to equities, fixed income and cash. Allocations between equities and fixed income are rebalanced semiannually, while cash positions are adjusted on a daily basis to help manage risk.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Spread
PIMCO Global Optima Index – “A quantitative, rules-based index that seeks to provide upside return potential by dynamically adjusting its allocations to a diverse range of global equity and U.S. fixed income markets.”
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Spread
Index interest accounts based on equity market indices
Russell 2000 – “An equity index that tracks the performance of U.S. small-cap stocks with market capitalizations that average $2 billion.”
Credit Period
Annual Point-to-Point Participation Rate
S&P 500 Index – “The S&P 500® is an equity index that tracks the performance of 500 of the largest companies in the U.S. It is a product of S&P Dow Jones Indices LLC (“SPDJI”) and has been licensed for use by American General Life Insurance Company (“AGL”) and affiliates.”
Credit Period
Annual Point-to-Point
Annual Point-to-Point Performance-Triggered
2-year Point-to-Point Participation Rate
1-Year Fixed Interest Account
$100k or more – 5.00%
Less than $100k – 4.75%
Rates and Costs5
The earnings crediting formula is the most important part of almost any annuity discussion. It is important to know that we don’t simply get the index return credited to the annuity. There are a few rates and caps that the company has in place that affect earnings. These rates tend to change over time, and the updated rates can always be checked with the help of your advisor. You can also check the latest rates on their website.
See the rates and costs section above for more information.
With most fixed index annuities, you can allocate the money to one or more of the indexes listed above. At the contract anniversary date, the index performance is measured, and the interest rate is calculated using the applicable formula for the indexes selected. This annual reset means that the index performance is reset and re-measured at the next contract anniversary and your account value is locked in.
Key terms are defined, and example calculations given below:
Index Rate Cap: Maximum percentage of index performance that can be credited as interest over an index term. For example: 10% index change > 5% cap = 5% interest earned.
Participation Rate (PAR Rate): Percentage of index performance that is used to calculate interest. For example: 10% index change x 50% PAR rate = 5% interest earned.
Premium: Money used to purchase the annuity.
Performance-Triggered: Initial declared interest rate is credited to the account if index performance is equal to or greater than the minimum index value change. For example: 10% index change → 5% declared interest rate = 5% interest earned.
Enhanced Participation Rate (EPR): These accounts are available for an annual fee. You may receive higher interest credits in EPR accounts, but interest credits are not guaranteed. At the end of your contract's withdrawal charge period, if the total amount of EPR strategy fees exceeds the total interest earned in the annuity, the difference will be credited to your annuity. Annuities are issued by American General Life Insurance Company
Surrender Charges
Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal that is above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies; although certain charges and penalties may apply. Any amount withdrawn more than the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule:
| Completed Contract Years | 10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | 2 | 1 |
|---|---|---|---|---|---|---|---|---|---|---|
| Surrender Charge | 9% | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% |
Applicable to AK, CA, CT, DE, FL, MA, MN, NJ, NV, ND, OH, SC, SD, TX, UT & WA:
| Completed Contract Years | 10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | 2 | 1 |
|---|---|---|---|---|---|---|---|---|---|---|
| 10% | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% |
Riders
The Power Select Builder Plus Income offers the Lifetime Income Plus Flex and Multiplier Flex Guaranteed Living Benefit Riders6.
Lifetime Income Plus Flex
For an annual fee of 1.10%, the income base (prior to lifetime withdrawals) will grow by 8.5% every year. An example of how this may work is shown below (from Corebridge literature).
Lifetime withdrawal rates are based on the age of the first withdrawal and marital status at that time (up to 8.7%). The rates are tabulated below (Note that the rates are subject to change, verify with your salesman to get the latest rates):
Key Definitions
Income Base: The value on which guaranteed withdrawals and the annual rider fee are based; it is not part of the contract value or death benefit. The income base is initially equal to the first eligible premium and is increased each time an eligible premium is made. It is also adjusted for withdrawals (prior to activation) and excess withdrawals (after activation). On each contract anniversary, your income base may increase with any available income credits.
Income Credit: An amount that may be added to your income base. It is not a rate of return and is not added to the contract value. It is calculated as a percentage of the income credit base.
Income Credit Base: A component of the rider that is used solely to calculate the income credit.
Enhanced Income Benefit (Confinement Rider): This feature is automatically included at no additional fee. From Corebridge literature, “Beginning on the second contract anniversary, it provides the ability to increase your income up to 200% on or after GLB rider activation, if you are confined to a qualified facility such as a nursing home for at least 90 days. This enhanced income is not treated as an excess withdrawal…The Enhanced Income Benefit is available for up to five contract years or the depletion of the contract value.” Restrictions apply, be sure to check with the salesman or representative for more details.
Interest Credited Rate: The rate of interest that you earn on your interest crediting options. It is adjusted for contract provisions such as rate caps that may reduce or limit the amount of interest earned. The rate will differ each year and may be zero.
Lifetime Income Plus Multiplier Flex
For an annual fee of 1.10% of the income base, annual income credits match (x1) the interest earned (after starting lifetime income) and can last until the earlier of 95 or the depletion of your contract. Prior to activation, the rider offers annual income credits of 2x the interest earned. Once lifetime withdrawals are started the rate drops back to 1x. An example of how this may work is shown below (from Corebridge literature).
Lifetime withdrawal rates are based on the age of the first withdrawal and marital status at that time (up to 7.5%). The rates are tabulated below (Note that the rates are subject to change, verify with your salesman to get the latest rates):
Key Definitions
Income Base: The value on which guaranteed withdrawals and the annual rider fee are based; it is not part of the contract value or death benefit. The income base is initially equal to the first eligible premium and is increased each time an eligible premium is made. It is also adjusted for withdrawals (prior to activation) and excess withdrawals (after activation). On each contract anniversary, your income base may increase with any available income credits.
Income Credit: An amount that may be added to your income base. It is not a rate of return and is not added to the contract value. It is calculated as a percentage of the income credit base.
Income Credit Base: A component of the rider that is used solely to calculate the income credit.
Enhanced Income Benefit (Confinement Rider): This feature is automatically included at no additional fee. From Corebridge literature, “Beginning on the second contract anniversary, it provides the ability to increase your income up to 200% on or after GLB rider activation, if you are confined to a qualified facility such as a nursing home for at least 90 days. This enhanced income is not treated as an excess withdrawal…The Enhanced Income Benefit is available for up to five contract years or the depletion of the contract value.” Restrictions apply, be sure to check with the salesman or representative for more details.
Interest Credited Rate: The rate of interest that you earn on your interest crediting options. It is adjusted for contract provisions such as rate caps that may reduce or limit the amount of interest earned. The rate will differ each year and may be zero.
What Makes these Products Stand Out?
The Power Select Builder Plus Income does offer a somewhat unique optional rider to increase potential returns. But keep in mind that this rider does come with a substantial fee.
Corebridge Financial seems to be doing well as a company and has relatively high ratings.
Good renewal rate history. Data from Corebridge states that 98% of contracts experienced renewal rates that were the same, better or no more than 0.50% worse as compared to initial rates.
What I don’t Like
This has a relatively high initial purchase amount ($25k vs $10k for many).
There are very few indexing options compared to other products.
Relatively high surrender charge compared to some similar products.
Subsequent premiums only allowed in the first 30 days after contract issue
Conclusion
With the advancement in healthcare and technology, the average American today is living longer than ever. At the same time, fewer and fewer companies offer traditional pension plans. The type of plans that can form a solid foundation for a retirement strategy. Thus, it is important to have a steady stream of guaranteed income (aside from Social Security). This not only helps you mitigate the risk of outliving your income but diversifies your portfolio to help smooth the volatility of retirement planning.
The Power Select Builder and Power Select Builder Plus Income annuities are products that, for the right individual or couple, can offer a more secure source of income. And judging by the most recent annual reports, Corebridge Financial is on a solid foundation. In the opinion of this author, these would be good insurance products to investigate if in the market for an index annuity.
We understand that choosing the right annuity can be a complex decision, influenced by a myriad of factors such as market conditions, individual financial goals, and evolving life circumstances. To better serve you in this critical decision-making process, we regularly conduct in-depth reviews of various annuity products, examining features, costs, and potential benefits. To delve deeper into our extensive reviews, click here.
Annuities are not direct investments in stocks or mutual funds. They are life insurance products backed by the claims paying ability of the issuing insurance company. Be sure to read all the fine print and make sure you are aware of all the fees, charges, commissions and potential taxes that could be incurred. Make sure to read reviews of the company and salesman also and ask for references of previous annuitants.
This is a review of this insurance product and does not serve as specific or individual financial advice. Please speak with a qualified financial advisor prior to purchasing any annuity product.