Atlantic Coast Guaranteed Income Annuity Review

Product Policy

How does the Atlantic Coast Guaranteed Income Annuity policy work?

Any annuitant (maximum age at the time of policy issue: 85) can purchase the Atlantic Coast Guaranteed Income Annuity with a minimum initial purchase amount of $5,000, and in return, they will earn a guaranteed stream of income and have the option to grow their account through market-linked interest crediting. The policy provides structured growth and income potential, including a premium bonus at the time of purchase, which varies based on the chosen rider. Additionally, annuitants have the flexibility to add premiums during the first 12 months, allowing for further growth in the policy's benefit bases.

The Atlantic Coast Guaranteed Income Annuity offers multiple rider options, including the Guaranteed Lifetime Withdrawal Benefit (GLWB) Rider, Legacy Benefit Rider, and Accumulation Benefit Rider, each designed to meet specific retirement goals, whether they be income, legacy, or growth-focused. This structure ensures that annuitants can tailor their annuity benefits to align with their personal financial objectives, all while enjoying protections like a 0% floor against market losses and access to funds through waivers in cases of nursing home confinement or terminal illness.

Guaranteed Lifetime Withdrawal Benefit (GLWB) Rider: Designed for retirees seeking predictable, lifelong income, the GLWB Rider provides a consistent stream of income that the policyholder cannot outlive. It includes an 11% bonus to the Income Account Value at the outset, boosting the starting value. Additionally, an 8.5% compound roll-up rate applies to the Income Account Value for the first 10 years, supporting significant growth in income potential. The GLWB also includes a Home Healthcare Increase Benefit, doubling income payments for up to five years if the policyholder is unable to perform certain daily living activities.

Legacy Benefit Rider: This rider is ideal for those prioritizing legacy planning, as it establishes a Legacy Benefit Base, which grows annually by a net interest rate plus an additional 4%. The Legacy Benefit Base receives an initial 10% bonus and can grow up to 250% of the first-year premium. This rider allows beneficiaries to receive the greater of the account value or 80% of the Legacy Benefit Base as a lump sum, or 100% of the Legacy Benefit Base paid out over five years.

Accumulation Benefit Rider: For retirees who want flexibility to decide between income or legacy benefits later, the Accumulation Benefit Rider grows based on 175% of the net interest rate earned on the account value for the first 10 years. This rider does not charge fees and allows policyholders to choose between lifetime income or a death benefit payout to beneficiaries when needed.

Guaranteed Lifetime Withdrawal Benefit Rider

The Guaranteed Lifetime Withdrawal Benefit (GLWB) Rider in the Atlantic Coast Guaranteed Income Annuity is crafted to provide annuitants with a stable and guaranteed income stream that they cannot outlive, addressing one of the primary concerns for retirees: reliable lifetime income. Here’s a closer look at the key features of this rider:

Immediate 11% Bonus on the Income Account Value: Upon electing the GLWB Rider, the annuitant’s Income Account Value receives an immediate 11% bonus, enhancing the base used to calculate future income. This initial boost helps maximize the income potential from the onset, providing a higher starting point for growth. The premium bonus is subject to the following vesting schedule.

8.5% Annual Compound Roll-Up Rate: For the first 10 years of the policy, the Income Account Value compounds at an 8.5% roll-up rate each year, further increasing the amount available for income calculations. This roll-up rate is guaranteed, providing predictable growth within the Income Account Value. After the initial 10-year period, the rate may be renewed, with a minimum guaranteed roll-up rate of 2%.

Lifetime Income Payouts: Once the annuitant elects to begin income withdrawals, the GLWB Rider guarantees lifetime payouts based on the Income Account Value and the payout factor associated with the annuitant's age at the time income withdrawals commence. This payout factor is pre-set, providing transparency and allowing annuitants to make informed decisions regarding their income.

Example Scenario

Suppose an annuitant, Alex, is 55 years old and purchases the Atlantic Coast Guaranteed Income Annuity with a $100,000 premium. Alex opts for the GLWB Rider to ensure a steady lifetime income beginning at age 65.

Initial 11% Bonus on Income Account Value: As soon as Alex adds the GLWB Rider, the Income Account Value receives an 11% bonus. This means Alex’s initial Income Account Value is now $111,000 (11% of $100,000), which forms the basis for future income calculations.
8.5% Annual Roll-Up Rate (Years 1–10): For the first 10 years, Alex’s Income Account Value grows at a guaranteed 8.5% compound annual roll-up rate. By age 65, after 10 years of compounding, the Income Account Value has grown substantially. Here’s how the growth unfolds:
Income Account Value after 10 years = $111,000 × (1 + 8.5%)^10 ≈ $250,970
Payout Factor Based on Age: At age 65, Alex decides to begin lifetime income withdrawals. Suppose the payout factor at age 65 is 5.7% (this factor is based on Alex’s age at the time of first withdrawal and is predefined in the policy).
Calculating the Annual Lifetime Income: With an Income Account Value of $250,970 and a payout factor of 5.7%, Alex’s guaranteed annual income will be calculated as:
Annual Income = $250,970 × 5.7% ≈ $14,305
Annual Income = Income Account Value × Payout Factor
This means Alex will receive $14,305 each year for life, regardless of how the market performs or the remaining account value.

Home Healthcare Increase Benefit: The GLWB Rider includes a unique Home Healthcare Increase Benefit feature. If the annuitant becomes unable to perform at least two out of the six basic activities of daily living (ADLs), this feature will double the annuitant’s lifetime income withdrawal for up to five years. This increased payout can offer valuable support in situations requiring additional care, helping to alleviate the financial burden of healthcare expenses.

Continuing with our example, years later, if Alex becomes unable to perform two out of six daily living activities, the GLWB Rider’s Home Healthcare Increase Benefit will activate. For up to five years, Alex’s income doubles, providing approximately $28,710 annually, which can be invaluable for covering healthcare needs.

Income Continuation Despite Account Value Depletion: A significant advantage of the GLWB Rider is that once income withdrawals begin, annuitants will continue to receive income for life, even if the policy’s accumulation value falls to zero. This lifetime income guarantee ensures that the annuitant has a steady income stream regardless of market performance or account depletion.

Age Flexibility for Starting Income Withdrawals: Income benefits under the GLWB Rider can begin any time after the annuitant reaches age 50. This feature offers flexibility for those who may require early access to income in retirement, as well as for those who prefer to delay withdrawals for potentially higher payouts.

Costs and Considerations

The GLWB Rider comes with an annual fee, which is calculated as a percentage of the Income Account Value. The fee starts at 1.25% annually for the first five years, increasing to 1.60% in years six through ten. This cost is deducted from the policy’s accumulation value. Annuitants should carefully consider this cost against the benefits to ensure the GLWB Rider aligns with their financial goals.

In Summary, the GLWB Rider in the Atlantic Coast Guaranteed Income Annuity provides dependable, lifetime income along with valuable features, such as the initial bonus and the Home Healthcare Increase Benefit, making it a strong option for retirees focused on income security. This rider effectively addresses longevity risk by guaranteeing payments for life, regardless of market conditions or account value, thereby providing peace of mind and financial stability in retirement.

Legacy Benefit Rider

The Legacy Benefit Rider in the Atlantic Coast Guaranteed Income Annuity is specifically designed for annuitants who prioritize leaving a financial legacy for their beneficiaries. This rider offers a structured approach to building a death benefit over time, allowing policyholders to grow their legacy while protecting the principal. Here’s a detailed look at how the Legacy Benefit Rider functions:

Key Features of the Legacy Benefit Rider

Immediate 10% Bonus to the Legacy Benefit Base: Upon electing the Legacy Benefit Rider, a 10% bonus (for issue age below 71) is immediately applied to the Legacy Benefit Base, setting a higher starting point for growth. This initial bonus helps maximize the potential value for beneficiaries right from the policy’s inception. For issue ages 71-80, the bonus percentage is 5%, and for ages 81-85, it is 3%.
Annual Growth through Net Interest Rate and Additional Credit: The Legacy Benefit Base grows annually, benefiting from two types of credit:
The net interest rate earned by the account value (Guaranteed to be a minimum of 2.75%)
An additional 4% interest credited on top of the net interest rate.

For example, if the net interest rate credited to the account value is 3% in a given year, the Legacy Benefit Base will grow by 7% (3% + 4%) that year. This combined growth rate helps build a substantial death benefit over time.
Cap on the Legacy Benefit Base Growth: The Legacy Benefit Base is designed to grow significantly but has an upper limit to prevent unlimited accumulation. Specifically, the Legacy Benefit Base can grow to a maximum of 250% of the initial premium (in some states, up to 300%), providing a robust legacy value while maintaining policy control.
Flexible Payout Options for Beneficiaries: The Legacy Benefit Rider offers beneficiaries multiple options to receive the death benefit, ensuring flexibility based on their financial needs:
Lump Sum: Beneficiaries can choose a lump sum payout equal to the greater of the account value or 80% of the Legacy Benefit Base.
Five-Year Payout Option: Beneficiaries can opt to receive 100% of the Legacy Benefit Base, paid out over a five-year period. This structured payout can offer tax advantages and support extended financial planning for beneficiaries.

Example Scenario

Suppose Alex, at age 60, purchases the Atlantic Coast Guaranteed Income Annuity with a $100,000 premium and elects the Legacy Benefit Rider to ensure his loved ones receive a significant death benefit.

Initial 10% Bonus: At the start, Alex’s Legacy Benefit Base receives a 10% bonus, raising the Legacy Benefit Base to $110,000.
Annual Growth in the Legacy Benefit Base: Over the years, the Legacy Benefit Base grows annually based on the net interest rate and an additional 4%. If, for instance, the account value earns a 3% net interest rate in one year, the Legacy Benefit Base will grow by 7% (3% + 4%), increasing the Legacy Benefit Base that year to approximately $117,700.
Reaching the Cap: With continuous growth, the Legacy Benefit Base could reach up to 250% of Alex’s initial premium, or $250,000. This cap ensures that the benefit grows significantly but within a structured limit.
Payout for Beneficiaries: Upon Alex’s passing, his beneficiaries can choose between a lump sum equal to the greater of the account value or 80% of the Legacy Benefit Base, or a five-year payout of the entire Legacy Benefit Base, allowing them flexibility in receiving the legacy Alex intended to leave.

Costs and Considerations

The Legacy Benefit Rider carries an annual fee, which is calculated as a percentage of the Legacy Benefit Base. The fee structure is similar to the GLWB Rider, beginning at 1.25% annually for the first five years and increasing to 1.60% in years six through ten. Annuitants should weigh the benefits of the Legacy Benefit Rider against these costs to determine if it aligns with their financial goals for legacy planning.

In summary, the Legacy Benefit Rider within the Atlantic Coast Guaranteed Income Annuity provides an effective way for annuitants to secure a financial legacy for their loved ones. With growth options and flexible payout methods, it offers beneficiaries both financial security and flexibility, making it a solid choice for retirees who want to ensure their assets contribute to their family’s financial future.

Accumulation Benefit Rider

The Accumulation Benefit Rider in the Atlantic Coast Guaranteed Income Annuity is tailored for annuitants who want to protect their retirement assets from market volatility, while also allowing for growth potential and flexibility in deciding whether to use the benefit for lifetime income or as a legacy for beneficiaries. This rider provides a strategic option for individuals who may be undecided about their long-term financial goals and want to keep their options open.

Key Features of the Accumulation Benefit Rider

Interest Crediting Based on Enhanced Rate: The Accumulation Benefit Base grows annually at an enhanced interest rate of 175% of the net interest credited to the account value for the first 10 years. This rate multiplier allows the Benefit Base to accumulate at a faster pace, offering greater potential growth whether the annuitant ultimately chooses to use it for income or as a legacy benefit. For issue ages 71-80, the bonus percentage is 8%, and for ages 81-85, it is 6%. For example, if the account value earns a net interest rate of 3% in a given year, the Accumulation Benefit Base would grow by 5.25% (3% × 175%) that year, amplifying the benefit base growth.

0% Floor for Market Protection: Like the core annuity product, the Accumulation Benefit Rider incorporates a 0% floor, ensuring that the Benefit Base is not affected by negative market performance. This protection means that even in a downturn, the Benefit Base will not decrease, securing a minimum level of benefits for the annuitant and their beneficiaries.
Option to Choose Between Income or Legacy Benefits: The standout feature of the Accumulation Benefit Rider is its flexibility. When the annuitant is ready, they have the option to use the Accumulation Benefit Base for either lifetime income or a legacy benefit. This option allows policyholders to delay their decision, adapting to their financial needs as they evolve over time.
Lifetime Income Option: If the annuitant chooses to use the Accumulation Benefit for income, the GLWB (Guaranteed Lifetime Withdrawal Benefit) is calculated using payout factors specific to this rider, which are determined by the annuitant’s age at the time they begin income withdrawals.
Legacy Benefit Option: Alternatively, if the annuitant wishes to pass along the benefit as a legacy, the beneficiaries can receive a death benefit based on the Accumulation Benefit Base.
No Rider Fees: Unlike other riders in the Atlantic Coast Guaranteed Income Annuity, the Accumulation Benefit Rider is provided free of charge. This feature is a notable advantage for annuitants seeking additional growth and flexibility without incurring extra costs.
Flexible Payout Options for Beneficiaries: In the event that the annuitant passes away and the legacy benefit option is selected, the Accumulation Benefit Rider allows beneficiaries to choose between different payout options:
Lump Sum: Beneficiaries can receive the greater of the account value or 80% of the Accumulation Benefit Base as a lump sum.
Five-Year Payout: Beneficiaries can opt for a five-year payout, receiving 100% of the Accumulation Benefit Base over this period, which can help spread out income and potentially reduce tax impact.

Example Scenario

Let’s say Sam, at age 60, purchases the Atlantic Coast Guaranteed Income Annuity with a $100,000 premium and adds the Accumulation Benefit Rider.

Growth in the Accumulation Benefit Base: Sam’s Accumulation Benefit Base grows at 175% of the net interest credited to the account value. In one year, if the net interest rate is 3%, the Benefit Base grows by 5.25% (3% × 175%), increasing that year to approximately $105,250.
Option to Choose Between Income or Legacy Benefit: At age 70, Sam evaluates his financial needs. If he decides he requires additional income, he can begin withdrawals calculated on the Accumulation Benefit Base using the specific payout factor for his age. Alternatively, if he decides to leave this benefit as a legacy, his beneficiaries can receive a death benefit based on the Accumulation Benefit Base, choosing between a lump sum or a five-year payout.
No Additional Costs: Since the Accumulation Benefit Rider comes without fees, Sam has gained this growth and flexibility without additional charges, enhancing his retirement strategy at no extra cost.

In Summary, the Accumulation Benefit Rider in the Atlantic Coast Guaranteed Income Annuity is ideal for annuitants seeking both asset protection and flexibility for future decisions. Its growth structure, zero-cost feature, and an option to choose between income and legacy make it a versatile choice for those who want the freedom to adapt their annuity’s benefits based on changing financial priorities.

Interest Crediting Mechanism

The Atlantic Coast Guaranteed Income Annuity credits interest based on the Secured Overnight Financing Rate (SOFR), a benchmark rate reflecting overnight borrowing costs in the U.S. Treasury repurchase agreement market. This structure allows the annuity to adapt to changes in the interest rate environment, providing a growth opportunity that aligns with general interest rate trends. When SOFR rises, the interest credited to the annuity may also increase, offering the potential for higher returns during periods of rising interest rates. The credited interest rate is calculated by applying a participation rate to SOFR, which determines the portion of SOFR that impacts the annuity’s growth. Additionally, the annuity maintains a guaranteed minimum interest rate of 2.75%, ensuring that the account value grows even in a low or declining interest rate environment, thus balancing growth potential with principal protection.

Surrender/Early Withdrawal Charge

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 in excess of the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule for the Atlantic Coast Guaranteed Income Annuity.

Market Value Adjustments - In case you need to surrender your policy, a Market Value Adjustment (MVA) will be applied to the portion of the withdrawal or surrender that exceeds the free withdrawal amount during the withdrawal charge period. The surrender charge schedule is different for the different tenures of annuities and also changes for some states. The surrender charge of Atlantic Coast Guaranteed Income Annuity is in line with that of other annuity issuers.

Free Nursing Home and Terminal Illness Waiver

As with most annuities, the Atlantic Coast Guaranteed Income Annuity includes built-in nursing home and terminal illness waivers at no additional cost.

Nursing Home Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is confined to a Qualified nursing home for at least 90 consecutive days. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.

Terminal Illness Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is diagnosed with a terminal illness with a prognosis of 12 months or less. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.

What Makes This Product Stand Out

The Atlantic Coast Guaranteed Income Annuity offers several unique features that distinguish it in the annuity market. Here are some key aspects that make this product stand out:

Multiple Customizable Rider Options: With choices between the Guaranteed Lifetime Withdrawal Benefit, Legacy Benefit, and Accumulation Benefit Riders, this annuity provides tailored solutions for income, legacy, or growth objectives. Each rider offers unique benefits, allowing annuitants to align their policy with specific retirement goals.
Interest Crediting Based on SOFR: Unlike many annuities that rely on traditional market indices, this product’s interest crediting is tied to the Secured Overnight Financing Rate (SOFR), aligning growth potential with general interest rate movements. This unique approach may offer higher returns during rising rate periods, with a minimum guaranteed interest rate for added security.
High Initial Bonuses: The annuity provides initial bonuses on each rider’s Benefit Base, helping to boost starting values. For instance, the GLWB Rider offers an 11% bonus, while the Legacy and Accumulation Benefit Riders each provide a 10% bonus, maximizing the annuitant’s growth potential from the beginning.
0% Floor Protection Against Loss: The annuity is designed with a 0% floor, ensuring that account values do not decrease in the event of negative market conditions. This protection offers peace of mind for those concerned about preserving their principal in volatile markets.
Home Healthcare Increase Benefit: The GLWB Rider includes a unique feature that doubles income payments for up to five years if the annuitant becomes unable to perform at least two out of six daily living activities, providing valuable support for healthcare needs.
Flexibility to Decide Between Income and Legacy: With the Accumulation Benefit Rider, annuitants can defer the decision to use the Benefit Base for income or as a legacy benefit, giving them the flexibility to adapt as their financial priorities evolve over time.

Cons

While the Atlantic Coast Guaranteed Income Annuity offers many appealing features, there are some considerations and potential drawbacks:

Higher Rider Fees: The fees for some riders, such as the GLWB and Legacy Benefit Riders, start at 1.25% and can rise to 1.60% over time. These charges, deducted from the account value, may impact the annuity’s overall growth potential.
Limited Accumulation Potential: This annuity is primarily designed for income and legacy planning, so it may not be the best choice for those focused solely on accumulation, particularly if growth is a primary goal.
Cap on Legacy Benefit Growth: The Legacy Benefit Rider has a maximum cap of 250% (up to 300% in some states) of the initial premium, which may limit the growth potential for those aiming to maximize the death benefit.

Company Details

You must always keep in mind that, unlike CDs, annuities are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. An annuity's "guarantee" is only as strong as the insurance company that issues the annuity, so it is always important to assess the issuing company before buying an annuity.

Atlantic Coast Life Insurance Company

Atlantic Coast Life Insurance Company has been in the business since 1925. It is one of the oldest providers of fixed and fixed-indexed annuities in the US.

It is rated as follows by the rating agencies:

Although the rating is not the best, it is not even that bad. The company is privately managed by Advantage Capital post its sale in 2015. It is considered to be strong and stable financially. As of year-end 2022, some of the other financial highlights for Atlantic Coast Life Insurance Company include its:

$903 million in total sales / direct written premium
$91.6 million of capital and surplus
$16.14 million in net operating income
$693 million in total assets

Conclusion

With advancements in healthcare and technology, the average American now lives longer than ever. Therefore, it’s essential to have a steady income stream that grows safely and can provide guaranteed income during retirement years. This approach not only helps mitigate the risk of outliving your income but also ensures you can maintain a comfortable lifestyle throughout retirement.

The Atlantic Coast Guaranteed Income Annuity is a well-rounded option for retirees seeking dependable lifetime income, protection from market risk, and the ability to leave a financial legacy. With flexible rider options, including the Guaranteed Lifetime Withdrawal Benefit, Legacy Benefit, and Accumulation Benefit Riders, this annuity provides tailored solutions for varied retirement goals. The interest crediting based on SOFR offers a unique approach that aligns growth potential with prevailing interest rates, and the product’s 0% floor ensures principal protection in volatile markets.

While the annuity’s primary strengths lie in its income and legacy benefits, those seeking high growth may find its accumulation potential limited. Additionally, the rider fees and caps on legacy growth should be carefully weighed. Overall, the Atlantic Coast Guaranteed Income Annuity is best suited for individuals who value stable, guaranteed income, flexibility in retirement planning, and a reliable way to support their beneficiaries. This annuity delivers peace of mind for retirees who prioritize income security and legacy planning over aggressive growth.

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. Dive deeper into our extensive reviews.