Introduction
Fixed Index Annuities are contracts between the annuitant and an insurance company in which the insurance company promises to credit 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.
Annuities are complex products, and many advisors try to missell them without properly understanding the buyer’s needs. Thus, you must educate yourself on these products and not solely depend upon the annuity agent’s high-pressure sales pitch.
This article provides a comprehensive review of the Nassau Growth Annuity Fixed Indexed Annuity. The Nassau Growth Annuity is a deferred, fixed-indexed annuity designed for individuals seeking accumulation, tax-deferred growth, and downside protection. This product offers several indexing options that have the potential to deliver reasonable returns aligned with market performance. It is particularly suitable for annuitants focused on preserving their principal while growing their retirement savings. Additionally, it includes optional guaranteed lifetime withdrawal benefits for those who want income payments they cannot outlive. After thorough research and due diligence, I present an unbiased and detailed analysis of this product to help you make an informed decision.
The review of the Nassau Growth Annuity Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Product Policy
- Rates and Costs
- Riders
- What Makes This Product Stand Out?
- What I Don't Like
- Company Details
- Conclusion
Product Description
The Nassau Growth Annuity is a Fixed Indexed Annuity (FIA) that provides annuity investors the opportunity to earn returns linked to a market index without the risk of market downturns. This plan is well-suited for individuals seeking a fixed indexed annuity that focus on accumulation, tax-deferred growth, and principal protection. Additionally, it offers optional guaranteed lifetime withdrawal benefits for individuals seeking income payments they can’t outlive.
Let’s have a look at the high-level fine print of the Nassau Growth Annuity Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Growth Annuity |
|---|---|
Issuing Company | Nassau Life and Annuity Company |
AM Best Rating | B++ (5th of 13 ratings) |
Withdrawal Charge Period(s) | 7 and 10 years |
Maximum Issue Age | 85 Years |
Minimum Initial Purchase Amount | $15,000 |
Crediting Period and Strategies |
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Plan Types |
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Indexes |
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Free Withdrawals | 10% of the annuity’s Accumulated Value per year |
Death Benefit | Upon the annuitant’s death, the beneficiary will get greater of (i) Account Value or (ii) Surrender Value |
Free Benefits |
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Riders | Optional paid guaranteed lifetime income riders |
Surrender Value | Account Value less any withdrawal charges/MVA |
Minimum Guaranteed Surrender Value | 87.5% of premium paid grown at Total Guaranteed Value (TGV) interest rate minus withdrawals and enhanced benefit fees |
RMD Friendly | Yes |
The features of the Nassau Growth Annuity Fixed Indexed Annuity remain consistent across both terms, with differences primarily in crediting rates and surrender charges. Unless specified otherwise, this review will focus on the Nassau Growth Annuity Fixed Indexed Annuity 10.
Product Policy
How does the Nassau Growth Annuity Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the Nassau Growth Annuity fixed indexed annuity with a minimum initial purchase amount of $15,000, and in return, they will earn market index returns (calculated through a formula that we will discuss shortly), credited as per the chosen crediting period. Apart from the regular crediting period, there are various events that may trigger earnings credit: On free withdrawals, for a long-term care event or terminal illness or injury event, or when a death benefit is payable. All these interest credits are credited to a bucket called “Account Value.” This bucket is your annuity account balance, and all your withdrawals take place from it.
The Nassau Growth Annuity Fixed Indexed Annuity offers the annuitant to choose from one or more of the three indexes (S&P 500 Index, Nasdaq-100 Index, and Smart Passage SG Index) to determine their earnings crediting formula. The Smart Passage SG Index has 4 crediting strategies, the S&P 500 index has 5 crediting strategies, and the Nasdaq-100 has 4 strategies. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 14 strategy options. We will discuss each available index briefly:
1. S&P 500 Index
The S&P 500 index is one of the most popular and oldest indexes in the world. It tracks 500 large-cap publicly traded stocks listed in the United States. It is a reliable index and has often succeeded in the test of time. It is very important to note that, similar to most other annuities, the Nassau Growth Annuity Fixed Indexed Annuity offers the S&P 500 index with cap rates and participation rates in place, meaning that your interest-earning capacity is capped. These rates change frequently; I will discuss the rates in detail shortly.
2. Smart Passage SG Index
The Smart Passage SG Index, developed by Société Générale, is a rules-based equity index designed to outperform the S&P 500 by focusing on low-volatility stocks. Each month, the index selects the 200 least volatile stocks from the S&P 500, assigning greater weight to those with lower volatility. To manage risk, it employs a volatility control mechanism targeting a 16.5% volatility level, adjusting exposure to the core portfolio accordingly. This systematic approach aims to leverage the "Low Volatility Anomaly," where lower volatility stocks have historically outperformed higher volatility ones on a risk-adjusted basis. However, while this mechanism helps in reducing volatility, it also reduces the potential for significant upside gains.
3. Nasdaq-100 Index
The Nasdaq-100 Index is a market capitalization-weighted index comprising 100 of the largest non-financial companies listed on the Nasdaq Stock Market. It includes a diverse range of sectors, such as technology, healthcare, consumer discretionary, and industrials, with a significant tilt toward tech-heavyweights like Apple, Microsoft, and Amazon. The index serves as a benchmark for growth-focused investments and is renowned for its emphasis on innovation-driven companies.
It is very important to note that the Nassau Growth Annuity Fixed Indexed Annuity comes with cap rates and participation rates for these indexes, meaning that you will be credited only a part of the index return to your annuity. These rates change frequently; I will discuss more on these rates more shortly.
Note: In addition to allocating the funds in the following indexes, the annuitant also has the option to allocate funds at a fixed interest. These Fixed Rates change from time to time. The 1st year Fixed Value Rate for the 10-year withdrawal charge period at the time of writing this article was 4.30%.
Rates and Costs
The earnings crediting formula
The earnings crediting formula is the most important part of this annuity discussion. It is important to know that we don’t simply get the index return credited to our annuity. There are a few rates, caps, and other rates that the company has in place that affect your earnings. These rates tend to change over time, and the updated rates can always be checked on the company’s website.
Let’s have a look at the Nassau Growth Annuity Fixed Index Annuity rate sheet (as of November 2024) to understand how the earnings are determined.
From the above rate chart, you will notice that there are 14 interest crediting options (1 fixed and 13 indexed). Let’s have a look at different terms that are used by the company in the Nassau Growth Annuity FIA chart rate:
- Point-to-point with Participation Rate (PR): The participation rate describes the annuitant’s participation percentage in a return of an index. For example, suppose the participation rate is 150%, and the index returned 4% over the agreed time. In that case, the annuitant will be eligible for 150% of the return, i.e., 6%.
- Point-to-point with Cap Rates: This refers to the rate at which your interest-earning capacity is capped. For example, if an index returns 12% but the contract’s cap rate is 6%, 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.
- Sunrise with Participation Rate: The Sunrise with participation rate strategy utilizes a unique approach to calculate index credits based on the Smart Passage SG Index. For the 1-year and 2-year indexed accounts, the percentage change in the index is measured after applying the “Sunrise Adjustment,” which excludes the best monthly return for each year in the segment. This adjusted growth rate is then multiplied by the participation rate declared at the start of the segment to determine the account credit. These accounts may offer higher participation rates compared to other indexed accounts, making them attractive for potential growth. However, the Sunrise Adjustment, by excluding the top-performing months, limits the overall index credit. Consequently, these accounts are likely to underperform if significant annual growth is concentrated in a single month for 1-year segments or one month per year for 2-year segments. This feature makes them better suited for scenarios where index growth is steady and evenly distributed.
- 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 are usually 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 4.30%.
- Enhanced Index Options: Enhanced Index Options offer annuitants the opportunity to benefit from higher crediting rates, such as increased cap or participation rates, in exchange for an additional annual fee. This fee is calculated by applying an enhancement fee rate to the index account value at the start of the term and is deducted at the end of the term. The initial enhancement fee rate is fixed at the contract issue and guaranteed for the first index term, with a new rate declared at the beginning of each subsequent term. For example, by opting for an Enhanced Index Option with an annual fee of 1.00%, an annuitant can access an enhanced participation rate of 83% on the 2-year S&P 500 point-to-point strategy, compared to the standard participation rate of 67%. This allows for potentially higher returns, depending on the performance of the selected market index.
When allocating premiums in a fixed-indexed annuity, individuals can distribute their money across these different indexing strategies. This means you can decide how much of your premium goes into each strategy, allowing for a tailored approach to potential growth and risk based on your financial goals and comfort level.
Among these indexes, I prefer the 1-year S&P 500 with a cap rate, the 2-year S&P 500 Index point-to-point participation rate strategy with an enhanced participation option, or even the 2-year Sunrise Smart Passage SG with an enhanced participation option. I would avoid the Nasdaq-100 indexing option due to the low participation rates offered.
Free Withdrawal and Surrender/Early Withdrawal Charges
Each year, you are allowed a 10% free withdrawal of your contract value, excluding any non-vested premium bonuses, without incurring charges, fees, or penalties.
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 Nassau Growth Annuity Fixed Indexed Annuity:
| Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
|---|---|---|---|---|---|---|---|---|---|---|---|
10-Year Plan | 9.6% | 8.7% | 7.8% | 6.8% | 5.9% | 4.9% | 3.9% | 3% | 2% | 1% | 0% |
7-Year Plan | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 0% |
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 the Nassau Growth Annuity Fixed Indexed Annuity is in line with that of other similar annuities.
Contract/Administrative Charge
The Nassau Growth Annuity Fixed Indexed Annuity does not charge any annual contract or administrative fees. However, it offers optional lifetime income withdrawal riders for an additional cost between 0.25% and 0.95% annually. These rider options will be discussed in detail in the next section.
Riders
The Nassau Growth Annuity Fixed Indexed Annuity offers four optional paid lifetime income riders, each tailored to provide guaranteed income while addressing varying preferences for steady or rising income. These riders enhance the annuity's appeal by combining guaranteed growth with performance-based increases, ensuring flexibility and security for annuitants. Here’s a detailed look at the available riders:
1. Amplified Income Rider
This rider focuses on steady income payments and enhances the Income Benefit Base through a performance-based roll-up.
- Income Benefit Base: Set at the initial contract value and increases annually by 150% of the contract’s growth, net of strategy fees, for up to 15 years or until the rider is exercised.
- Rider Fee: 0.25% of the Income Benefit Base, deducted annually.
- Key Feature: Steady income payments once exercised, with no further roll-up after the rider is activated.
2. Amplified Income with Rising Income Opportunity Rider
For those seeking the potential for rising income payments, this rider provides continued growth opportunities after the rider is exercised.
- Income Benefit Base: Begins with the contract value and grows annually by 150% of the contract’s performance, net of strategy fees, for up to 15 years. The roll-up continues even after the rider is exercised.
- Rider Fee: 0.25% of the Income Benefit Base, deducted annually.
- Key Feature: Rising income payments, allowing for adjustments in income as the contract’s performance drives growth.
3. Amplified Income Plus Rider
This rider combines performance-based growth with guaranteed annual increases to provide stable and predictable income growth.
Income Benefit Base:
- 150% Performance-Based Roll-Up: Adds 150% of the contract’s growth, net of strategy fees, for up to 15 years or until the rider is exercised.
- 3% Simple Interest Roll-Up: Adds a fixed 3% annual roll-up to the Income Benefit Base for the same period.
- Rider Fee: 0.95% of the Income Benefit Base, deducted annually.
- Key Feature: Guarantees steady income growth regardless of market performance, making it ideal for those prioritizing stability.
4. Amplified Income Plus with Rising Income Opportunity Rider
This rider offers a unique blend of performance-based and guaranteed growth, along with the potential for rising income payments.
Income Benefit Base:
- 150% Performance-Based Roll-Up: Increases the Income Benefit Base annually by 150% of the contract’s growth, net of strategy fees, for up to 15 years.
- 3% Simple Interest Roll-Up: Adds a guaranteed 3% annual roll-up to the base for the same period.
- Growth continues after rider exercise, allowing the Income Benefit Base to increase based on performance.
- Rider Fee: 0.95% of the Income Benefit Base, deducted annually.
- Key Feature: Rising income payments supported by both guaranteed and performance-based growth mechanisms, offering maximum flexibility.
How the Riders Work
At contract issue, the Income Benefit Base is set equal to the contract value and grows annually through the rider’s specified mechanisms. When the rider is exercised, the lifetime income payments are calculated as a percentage of the Income Benefit Base, which depends on factors such as the annuitant’s age at issue, age at exercise, and whether a single or spousal option is selected.
These riders provide robust tools for securing lifetime income while balancing growth potential and stability, making the Nassau Growth Annuity a versatile choice for retirement planning.
Also, as with most annuities, the Growth Annuity FIA has free in-built nursing home and terminal illness waivers.
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 6 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 Nassau Growth Annuity Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are:
- Decent Indexing Options: This annuity provides a range of indexing options, allowing for growth opportunities tied to market performance. It particularly stands out for its very good cap rate on the S&P 500 index, enabling policyholders to benefit from potential market gains while still enjoying principal protection.
- Guaranteed Lifetime Income Riders: The product offers four optional lifetime income riders, each tailored to meet varying income needs. These include features such as performance-based roll-ups and guaranteed simple interest roll-ups, providing flexibility for steady or rising income payments.
- The plan offers the S&P Index with multiple crediting methodologies
- Free Confinement and Terminal Illness Waiver Benefit: This no-fee rider is automatically included for owners and includes both a Qualified Nursing Care and Terminal Illness Benefit:
- Multiple Payout Options: Lump-sum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
What I Don’t Like
While the Nassau Growth Annuity Fixed Indexed Annuity offers several attractive features, there are aspects that potential buyers should carefully consider:
- Complexity of Riders: The optional lifetime income riders, though highly customizable, involve intricate structures and calculations. Features such as performance-based roll-ups, guaranteed growth, and varying payout options depend on multiple factors, including age, timing, and market performance. This complexity can make it challenging for policyholders to fully understand how the riders operate and how they impact long-term income potential.
- Need for Professional Guidance: Given the complexities involved in the riders and the broader product structure, it is highly recommended to consult with a financial advisor or professional. This ensures that the annuity is aligned with your financial goals and retirement plans, helping you make an informed decision.
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.
Nassau Life and Annuity Company
Nassau Life and Annuity Company is an insurance provider that specializes in offering retirement products, particularly annuities. The company is headquartered in Hartford, Connecticut, and has a long history dating back 170 years. Nassau Financial Group, which includes Nassau Life and Annuity Company, serves 374,000 policyholders and contract holders.
Nassau Life offers a variety of annuity products, including indexed annuities and multi-year guaranteed annuities (MYGAs). Their product lineup is designed to cater to different retirement needs, such as protecting savings, delivering guaranteed income, or covering health care costs. The company is known for providing low minimum premiums, highly customizable contracts, and strong customer service
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | B++ |
KBRA | BBB+ |
Although the rating is not the best, it is not even that bad. It is considered to be strong and stable financially. As of June 2024, some of the financial highlights for Nassau Life and Annuity Company include its:
- $24.3 billion Assets Under Management
- $1.5 billion of total adjusted capital
- 106% solvency ratio
Going by the operating history, financial numbers, and ratings, we can safely gauge that you can trust your savings with Nassau Life and Annuity Company.
Conclusion
With the advancements in healthcare and technology, the average American today lives longer than ever. So, it’s very important to have a retirement corpus that can grow safely and steadily and have the ability to provide a fixed stream of income during the retirement years. This not only helps you mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in your retirement.
The Nassau Growth Annuity Fixed Indexed Annuity combines growth potential, principal protection, and income flexibility, making it a well-rounded option for individuals focused on retirement planning. Its standout features, such as decent indexing options with a competitive cap rate on the S&P 500 index, optional lifetime income riders, and tax-deferred growth, cater to diverse financial needs. The annuity’s ability to safeguard principal while offering performance-based and guaranteed growth mechanisms makes it an attractive choice for those seeking stability and growth in a single product. However, the complexity of its optional riders and associated calculations can be a challenge for some buyers, underscoring the need for professional advice. Consulting a financial advisor is strongly recommended to ensure that this annuity aligns with your goals and retirement timeline.
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. Delve deeper into our extensive reviews.