Brighthouse Financial - Annuity Reviews

Review: Brighthouse Shield® Annuities for Retirement Security

byPeter Choi

Fri Mar 01 2024

Staff @ AdvisorWorld.com Inc
Review: Brighthouse Shield® Annuities for Retirement Security

Exploring retirement investment options? Our comprehensive review of the Brighthouse Shield® Level Annuities—comprising the 6-Year, 3-Year, and Advisory plans—delves into their unique blend of market participation and downside protection. Are these the safeguards your retirement savings need? Delve into our analysis for insights that could influence your investment strategy.

Key Takeaways

  • Brighthouse Shield® Level Annuities offer a balanced approach, allowing for growth participation linked to market indices while ensuring some level of protection against market downturns, without annual fees.
  • The Shield annuities come with a level of flexibility in terms of commitment, offering 3-year and 6-year plans to suit different investment horizons.
  • These products are designed for investors looking for a blend of equity market exposure and capital protection, featuring options like Cap Rate, Step Rate, and Step Rate Edge for tailored growth potential.

Product Overview

AttributeDetails for Brighthouse Shield® Level Select Annuities
Product NameBrighthouse Shield® Level Select Annuities
Issuing CompanyBrighthouse Life Insurance Company
AM Best RatingA (Excellent) - 3rd of 13 ratings
Moody’s RatingA3 (Good) - 7th of 21 ratings
Fitch RatingA (Strong) - 6th of 21 ratings
S&P RatingA+ (Strong) - 5th of 21 ratings
Withdrawal Charge Period(s)6 years (7%, 7%, 6%, 5%, 4%, 3%, 0%)
Maximum Issue Age85 years old
Minimum Initial Purchase Amount$25,000 (for both qualified and non-qualified plans)
Maximum Purchase AmountUp to $1 million without prior Brighthouse Financial approval
Surrender Charge ScheduleRefer to product brochure or fact card for detailed information
Crediting Period and Strategies1-Year, 3-Year, and 6-Year Terms (For Shield 6-year annuity) and 1-Year, 2-Year, and 3-Year Terms (For Shield 3-year annuity) with Cap Rate, Step Rate, and Step Rate Edge
Plan TypesPersonal, Non-Qualified, Qualified Plans (specific types not detailed in the brochure)
IndexesS&P 500® Index, Russell 2000® Index, MSCI EAFE Index, Nasdaq-100® Index (For Shield 3-Year Annuity only)
Shield RateOptions for 10%, 15%, or 25% level of protection
Rate Crediting TypeCap Rate, Step Rate, Step Rate Edge, and Fixed Account
Free WithdrawalsUp to 10% of account value after the first contract year without withdrawal charge
RMD FriendlyYes, Automated RMDs are available in any contract year
Death BenefitFor ages ≤75 at issue: Greater of account value or reduced purchase payment; For ages >75: Account value
Surrender ValueAccount value, subject to withdrawal charges and market conditions
Special Waivers of ChargesNursing Home Waiver and Terminal Illness Waiver post 1st year for purchasers ≤80 years old
Index Accounts Available at IssueCap Rate, Step Rate, and Step Rate Edge based on selected Shield option
Fixed Account OptionAvailable for both 3-year and 6-year annuity
RenewalsOptions to renew or adjust investment allocations at the end of each term
Additional FeaturesPerformance Lock available for certain Shield Options
Annual Contract FeeNone
Additional Purchase PaymentsNot permitted
New Service Office Contact InformationUpdated contact details for various contract transactions effective October 16, 2023
Enhancements (Post-May 1, 2023)Introduction of Step Rate Edge, 2-Year Terms, Nasdaq-100 Index® for certain Shield Options, and additional 1-Year Terms

Balancing Growth with Security

Brighthouse Financial introduces its Shield® Level Annuities as tools for securing retirement savings against market volatility, while still allowing for potential growth by tracking well-known market indices. These products stand out for their no annual fee structure, setting them apart from many financial products in the market.

The Shield® Level Annuities offer:

  • Protection to limit losses during market downturns.
  • Opportunities to participate in the growth of equity markets, subject to certain limits.
  • A straightforward approach, with no annual fees, making them an attractive option for cost-conscious investors.

Stepping into Market Participation with Protection

Investing in any of the Shield® Level Annuities means embracing a strategy that balances growth potential with a safety net. These products are designed not just for market participation but also for providing a buffer against significant downturns, making them a solid choice for those cautious about market volatility.

Architecting Financial Resilience

The Shield® Level Annuities are more than just investment products; they are financial tools crafted to provide peace of mind in retirement planning. With features like Cap Rate and Step Rate options, these annuities offer a structured approach to growth, aligned with individual risk tolerances and market conditions.

Features in Focus

The Brighthouse Shield® Level Annuities encapsulate a comprehensive suite of features designed to align with a diverse range of retirement planning needs and investment strategies. Here's a snapshot of the key features that we'll delve into:

  • Market-Linked Growth: Experience growth potential by linking your investments to well-known market indices such as the S&P 500, Russell 2000, MSCI EAFE, and Nasdaq-100, offering a diversified approach to capital appreciation.
  • Downside Protection with Enhanced Cap Rates: Unlike other annuities, which offer 100% downside protection, this annuity provides three tiers of protection: 10%, 15%, and 25%. By accepting higher levels of risk, you are eligible for a higher cap rate; for instance, a 10% protection level entails greater risk compared to a 25% protection level.  
  • Performance Lock: Secure positive index performance with the Performance Lock feature, enhancing your growth potential in favorable market conditions.
  • Death Benefit Considerations: Benefit from a nuanced death benefit structure designed to provide estate planning flexibility and protection for your heirs.
  • Interim Value and Flexible Transfers: Enjoy liquidity and adaptability in your investment strategy with features like Interim Value calculation and flexible transfers between Shield Options.
  • Lifetime Income Streams: Secure your retirement income with various lifetime payout options, ensuring financial stability in your retirement years.
  • Comprehensive Withdrawal Features: Understand and leverage withdrawal conditions and special waivers to manage your investment effectively.

In the following sections, we'll explore these features in detail, providing insights into how they can contribute to a robust and flexible retirement investment strategy.

Growth Opportunities and Market Exposure

Brighthouse Shield® Level Annuities are structured to provide growth opportunities by tracking well-known market indices such as the S&P 500, Russell 2000, MSCI EAFE, and Nasdaq-100. These annuities offer participation in market upswings with predefined limits through Cap Rate, Step Rate, and Step Rate Edge crediting strategies. However, it's crucial to understand that while these annuities allow for market participation, they also present a unique risk profile. Unlike typical fixed-indexed annuities that guarantee zero downside risk, Shield® annuities can result in a loss of principal if the market decline exceeds the chosen Shield Rate level of protection. This aspect makes them a higher-risk option compared to annuities with full principal protection.

Rates and Returns Consideration

Investors should carefully consider the specific rates associated with their chosen Shield Option, including the Cap Rate, Step Rate, and Step Rate Edge. These rates determine the maximum potential growth of the annuity based on index performance and are critical for setting realistic expectations for returns. The selection of these rates, along with the chosen Shield Rate, directly impacts the potential growth and level of downside protection, underscoring the importance of understanding these features in alignment with investment goals and risk tolerance.

Built-In Protection and Performance Lock

The built-in protection feature of Brighthouse Shield® Level Annuities is designed to provide a buffer against market downturns up to a specified Shield Rate, such as 10%, 15%, or 25%. This means if the market declines, losses are absorbed up to this chosen level. However, any decline beyond this Shield Rate will reduce the account value, potentially leading to a loss of principal, which distinguishes the risk profile of these annuities from those with full downside protection.

The Performance Lock feature allows for the locking in of positive index performance during the term, securing gains amidst market volatility. While this can enhance growth potential, it's important to note that the protection offered by the Shield Rate and the opportunity to lock in gains do not eliminate the risk of loss beyond the protected amount.

Death Benefit Considerations

The Brighthouse Shield® Level Annuities offer a nuanced death benefit structure that varies based on the purchaser's age at issue. For those aged 80 and under, beneficiaries are entitled to the greater of the account value or purchase payment, adjusted for any withdrawals and related charges. This ensures a level of estate planning flexibility and protection for investors' heirs. For purchasers over the age of 80, the death benefit equals the account value, providing straightforward posthumous asset transfer.

Interim Value and Flexible Transfers

One of the standout features of Brighthouse Shield® Level Annuities is their emphasis on providing investors with liquidity and flexibility, crucial aspects for those who value adaptability in their retirement planning. This is where the concepts of "Interim Value" and "Flexible Transfers" play a pivotal role.

Interim Value: Understanding the liquidity of your investment is essential, and the Shield® annuities address this through the Interim Value feature. This is a calculated value that reflects the performance of your chosen market index up to the accrued Shield Rate, adjusted daily. It offers a clear picture of what you can expect in terms of withdrawal amounts before the completion of your term, providing transparency and control over your investment.

This feature is particularly beneficial for investors who may need to access their funds prior to term completion due to unforeseen circumstances or changing financial goals. It ensures that you are not left in the dark regarding the current value of your investment and can make informed decisions about withdrawals or adjustments to your strategy.

Flexible Transfers: The Shield® annuities also shine in their flexibility, allowing for transfers between Shield Options or to the Fixed Account within five days post-term. This feature is designed for investors who wish to adjust their investment strategies in response to evolving financial goals or market conditions.

Whether you're looking to reallocate your investment in line with a more conservative or aggressive approach based on your changing risk tolerance, or you're aiming to take advantage of new opportunities in different market indices, the ability to transfer your investment with ease is a significant advantage. This flexibility ensures that your annuity can adapt to your needs over time, rather than locking you into a static investment strategy.

In essence, the "Interim Value and Flexible Transfers" features of Brighthouse Shield® Level Annuities underscore the commitment to providing investors with control, transparency, and adaptability. These features ensure that your investment in Shield® annuities can be as dynamic and responsive as your life and the markets themselves, offering peace of mind and strategic advantage in your retirement planning.

Lifetime Income Streams

Shield Annuities also cater to the critical need for reliable retirement income through various lifetime payout options. Fixed Life Annuities and Fixed Joint and Last Survivor Annuities, with or without guarantee periods, provide avenues for converting accumulated assets into steady income streams, ensuring financial stability in retirement years.

Comprehensive Withdrawal Features

Understanding withdrawal conditions is essential for effective liquidity management. After the first contract year, a 10% free withdrawal amount is accessible, with additional withdrawals subject to specified charges. Notably, special waivers for nursing home confinement or terminal illness offer compassionate exceptions, waiving charges under certain conditions and providing financial relief during challenging times. Moreover, the potential impacts of withdrawals on taxable income and the death benefit underscore the importance of strategic withdrawal planning.

Shield Annuity in Action

Let's understand the Shield Annuity with the company's rate card at the time of writing this article

Shield Annuity with the company's rate card at the time of writing this article
Shield Annuity with the company's rate card at the time of writing this article

Cap Rates: It means the rate at which your interest-earning capacity is capped. For example, if an index returned 12% but the contract’s cap rate is 6%. In this situation, the annuitant will be eligible for an interest credit of 6% only. It doesn’t matter how much the index goes above the cap rate; the maximum interest that can be earned is the cap rate. Each year, the higher the index rate and the cap rate get credited to your account value. Suppose your account value is $100,000 at the beginning of the contract and the cap rate is 6%, and after a year, if the index grows 8%, your contact value will increase by 6% of $100,000, i.e., by $6000. So, at the end of the first contract year, your contract value will become $106,000.

Step Rate: A flat or positive index return triggers the Step rate to be credited to the contract value. If the index return is negative, no interest is credited, but there will be no loss till the level of protection chosen. Suppose the change in the value of the index during that one year is zero or positive. In that case, the step rate is multiplied by the option’s account value to determine the index interest credits. The declared interest rate is set at contract issue and applies for the entire withdrawal charge period. In this case, the step rate for the S&P 500 Index is 9.55%. It means that if S&P Index doesn’t go negative for a given 1-year period (even if the growth is 0% and not negative), the interest credited will be 9.50% irrespective of the S&P 500 actual return. It is noteworthy that the company offers a good performance-triggered rate for the S&P 500 Index when compared to other similar policies.

Fixed Account Rate: If you opt for a fixed account rate, you simply earn the fixed rates for a particular period specified by the company before your policy begins. These rates usually tend to be low/at par as compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario. The 1-year fixed rate on this policy at the time of writing this article was 3.50%.

Let's understand this with two different scenarios 

Term 1: Activating the Shield Rate Emily and Alex, nearing retirement in a decade, seek to diversify their investment portfolio. After consulting with a financial advisor, they allocate $120,000—a segment of their retirement funds—into a Shield Option with a 1-year term, opting for an index of their choice and a Shield 10 level of protection. By the term's end:

  • The selected index sees a downturn of 12%
  • Thanks to the Shield Rate, Brighthouse Financial offsets 10% of this downturn
  • Emily and Alex sidestep $12,000 in potential losses
  • However, their account value will still lose 2%, i.e., $2,400. 

Term 2: Capitalizing on Market Upswing The protective measures of their Shield annuity minimize Emily and Alex's initial losses. With the renewal of their Shield Rate for another year, they witness:

  • A robust 18% upswing in their chosen index
  • Given their 10% protection, they benefit from an enhanced Cap Rate of 16%
  • Their investment appreciates by 16%, enhancing their account value
  • They also had the option to choose greater protection of 25%, but then they would have been entitled to a cap rate of just 8.5%, which means they would be giving up on an additional 7.5% of Index gains.

This scenario serves as an illustrative example to demonstrate the operational dynamics of the Shield annuity amidst fluctuating market conditions, showing its capacity to shield investors from significant downturns while allowing them to enjoy market upswings.

The Verdict on Performance

Do Shield® Level Annuities live up to their promise of delivering a balanced mix of protection and growth? Our analysis suggests that these products present a distinctive proposition for individuals willing to undertake a modicum of risk for a potentially higher return than that offered by most other fixed indexed annuities. Their methodical approach to fostering growth, coupled with robust protection features, renders them an attractive choice for conservative investors seeking long-term financial stability.

Company Details

When considering an annuity, it's important to understand that these financial instruments are not covered by the Federal Deposit Insurance Corporation (FDIC) or any other federal agency. Instead, the security an annuity offers is fundamentally tied to the financial strength and credibility of the issuing insurance company. This makes the insurer's background and financial stability paramount considerations before proceeding with an annuity purchase.

Brighthouse Financial, established as an independent company following its separation from MetLife in 2017, is headquartered in Charlotte, North Carolina. It has quickly cemented its reputation in the insurance and financial services sector, focusing primarily on life insurance and annuities.

As a specialist in these areas, Brighthouse Financial offers a range of products designed to help clients achieve financial security, including various types of annuities and life insurance policies. The company serves customers across the United States through multiple distribution channels.

The financial robustness of Brighthouse Financial is highlighted by its ratings from major credit rating agencies:

Rating AgencyRating
AM BestA (Excellent)
Moody'sA3 (Good)
FitchA (Strong)
S&PA+ (Strong)

These ratings indicate Brighthouse Financial's solid ability to fulfill its ongoing insurance and annuity obligations, underpinned by a stable financial foundation. The company's commitment to financial health is evident in its substantial financial metrics:

  • Total assets amounting to $230 billion
  • Managing $198 billion in assets under management, comprising total investments and separate account assets
  • Holding a strong financial position with total liabilities at $224 billion

With its focused expertise in life insurance and annuities, strong financial ratings, and a commitment to providing financial security to its clients, Brighthouse Financial stands as a dependable choice for individuals looking to secure their financial future through annuities.

For further details on Brighthouse Financial's financial performance and product offerings, reviewing their official financial statements and annual reports is recommended.

Conclusion

Brighthouse Shield® Level Annuities stand out as a robust solution for those navigating the complexities of retirement planning. With their strategic blend of growth opportunities and downside protection, these annuities offer a balanced approach to investment that can be tailored to individual risk tolerances and financial goals. Key benefits such as market participation without annual fees, flexibility in investment terms, and diverse growth mechanisms like Cap Rate and Step Rate options, underscore their appeal to a broad spectrum of investors.

Moreover, the added peace of mind provided by features such as the Performance Lock and nuanced death benefits ensures that your financial legacy is secured, offering a level of reassurance that is invaluable during uncertain market conditions. The illustrative scenarios of Emily and Alex highlight the practical application of these features, demonstrating the annuities' capacity to shield investors from significant downturns while allowing them to capitalize on market upswings.

As you contemplate your retirement investment strategy, it's crucial to consider how products like Brighthouse Shield® Level Annuities align with your long-term financial objectives. Reflect on the balance you wish to strike between risk and reward, the importance of flexibility in your investment choices, and how the protection features align with your estate planning needs. We encourage you to consult with a financial advisor to discuss whether Brighthouse Shield® Level Annuities fit into your comprehensive retirement planning strategy, ensuring that your financial future is both secure and aligned with your aspirations.

In the journey towards financial security in retirement, understanding and selecting the right investment vehicles are paramount. Brighthouse Shield® Level Annuities offer a compelling option for those looking to navigate market volatility with confidence, providing a structured pathway to achieving your retirement goals with assurance and clarity.