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 an in-depth review of the Nassau Personal Income Fixed Indexed Annuity. The Nassau Personal Income Annuity is a deferred, fixed-indexed annuity that may be a good option if you are looking for a fixed-indexed annuity that offers tax-deferred growth and downside protection, with a core focus on creating a stream of lifetime income that you can’t outlive. While this annuity is not optimized for accumulation, it does fairly well in delivering secure lifetime income features. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the Nassau Personal Income 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 Personal Income is a Fixed Indexed Annuity (FIA) plan that offers the annuitant (annuity investor) an opportunity to earn a market index-linked return without having to incur the risk of market downside. This is a suitable plan for people who are looking for a fixed-indexed annuity that offers tax-deferred growth and downside protection with a core focus on generating a stream of lifetime income they can’t outlive.
Let’s have a look at the high-level fine print of the Nassau Personal Income Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Personal Income |
|---|---|
Issuing Company | |
AM Best Rating | B++ (5th of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Maximum Issue Age | 80 Years |
Minimum Initial Purchase Amount | $15,000 |
Crediting Period and Strategies |
|
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 |
|
Riders | The annuitant has to compulsorily choose one paid rider guaranteed lifetime income rider out of two:
|
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 |
Product Policy
How does the Nassau Personal Income Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 80) can purchase the Nassau Personal Income 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. However, the principal selling proposition of the product is not its potential for interest growth, but the guaranteed lifetime income payments it offers, a feature that will be explored in greater detail in a subsequent section of this review.
The Nassau Personal Income Fixed Indexed Annuity offers the annuitant to choose from one or more of the four indexes (S&P 500 Index, Nasdaq-100 Index, UBS Tactical Multi Asset 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 6 crediting strategies, the Nasdaq-100 has 4 strategies, and the UBS Tactical Multi-Asset Index has 2 strategies. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 17 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 Personal Income 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.
4. UBS Tactical Multi-Asset Index
The UBS Tactical Multi-Asset Index is a dynamic investment strategy that tracks the performance of a diversified portfolio of exchange-traded funds (ETFs) across four asset classes: equities, fixed income (including credit and U.S. Treasuries), commodities, and real estate. The index uses a sophisticated, rules-based approach to periodically adjust the allocation of ETFs. Its primary objective is to optimize the return-to-risk ratio, with risk assessed based on the volatility of returns over recent historical periods. By targeting an annualized volatility of 6%, the index aims to stabilize risk, though this approach may also limit potential upside gains.
It is very important to note that the Nassau Personal Income 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 1.50%.
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 Personal Income 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 17 interest crediting options (1 fixed and 16 indexed). Let’s have a look at different terms that are used by the company in the Nassau Personal Income 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.
- Spread Rate: The amount of interest credited by the company is based on a declared spread applied to the selected index on an annual point-to-point basis. Once the index gain (if any) is determined, the spread amount is subtracted, and the remaining value is credited to the contract for that term. A higher spread rate results in less interest being credited, making it generally unfavorable for policyholders. In this case, the company offers the UBS Tactical Multi Asset Index with a spread rate of 4.75%, which is relatively high and, therefore, not advantageous for the policyholder.
- 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 1.50%.
- 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 42% on the 2-year S&P 500 point-to-point strategy, compared to the standard participation rate of 25%. 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 2-year S&P 500 Index point-to-point participation rate strategy with an enhanced participation option, the 1-year S&P 500 with a cap rate, 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.
You will notice that the cap rates, participation rates, and fixed rates in the Nassau Personal Income annuity are quite low. It is because this annuity’s core strength doesn’t lie in growth or accumulation but in its Guaranteed Lifetime Withdrawals Benefit (GLWB) riders, which provides relatively higher guaranteed lifetime income payments that you cannot outlive (unless you make excess withdrawals). So, it doesn’t make sense to opt for this annuity if your purpose is growth or accumulation. We will discuss the GLWB rider offered by this annuity shortly.
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 Personal Income Fixed Indexed Annuity:
| Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
|---|---|---|---|---|---|---|---|---|---|---|---|
10-Year Plan | 10% | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 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 Personal Income Fixed Indexed Annuity is in line with all the other annuity issuers.
Contract/Administrative Charge
The Nassau Personal Income Fixed Indexed Annuity does not impose any annual contract or administrative fees. However, it includes a mandatory rider fee of 0.95% annually deducted from the income base, applicable to both Guaranteed Withdrawal Benefit rider options. We will discuss these riders in the next section.
Riders
The riders are the central feature of the Nassau Personal Income Fixed Indexed Annuity, offering flexibility and guaranteed income tailored to individual needs. Each rider comes with its unique benefits and structures, ensuring clients can optimize their financial strategies effectively. The annuitant must compulsorily select one of the two paid riders:
- Income Strategy: Today
- Income Strategy: Tomorrow
Below, we provide a detailed overview of the available rider options. But first, let’s discuss the Income Benefit Base.
The Income Benefit Base is a calculated value that starts equal to the single premium at contract issue. It grows through bonuses and roll-ups, depending on the chosen rider, but is not available as a lump sum withdrawal or cash value. Instead, it is used to calculate the guaranteed lifetime income payments, which are based on a percentage of the Income Benefit Base.
The percentage used to determine withdrawals is influenced by factors such as:
- The age of the annuitant at the time the rider is exercised.
- Whether the single or spousal income option is selected.
Once withdrawals begin, they are locked in as a guaranteed percentage of the Income Benefit Base and will continue for life, even if the contract value is depleted.
1. Income Strategy: Today
This rider focuses on providing immediate growth to the Income Benefit Base with bonuses and annual roll-ups.
Initial Bonus: The rider offers a bonus to the income benefit base, ranging from 30% to 45%, depending on when withdrawals begin:
- 30% if withdrawals start in Year 1
- 37.5% if withdrawals start in Year 2
- 45% if withdrawals start in Year 3 or later.
- Simple Interest Roll-Up: After the initial bonus, the income benefit base grows by 3% simple interest annually from years 3–10 or until the rider is exercised, whichever comes first.
2. Income Strategy: Tomorrow
This rider provides consistent growth for those who plan to defer withdrawals for a longer period.
- Guaranteed Growth: The income benefit base increases by a fixed 14% simple interest annually for the first 10 years or until the rider is exercised, providing robust growth potential for long-term planning.
Additional Features of GMWB Riders
- Restart Option: If no withdrawals are taken for 10 years, annuitants can restart the benefit base roll-up for another 10 years at a rate guaranteed to be a minimum of 3%. However, the rider fee may increase upon restart.
- Rider Fee: Both riders include an annual fee of 0.95% of the income benefit base, deducted from the contract value.
Note that the income benefit base is a calculated value used exclusively for determining rider fees and benefits payable. It does not represent the contract’s cash value or an amount available for withdrawal.
Choosing the right rider depends on your financial goals, income needs, and retirement timeline. If you need guaranteed income sooner, the Income Strategy: Today rider may be the better option. It provides immediate growth in your Income Benefit Base through tiered bonuses (30%, 37.5%, or 45% depending on when withdrawals start) and steady roll-ups, making it ideal for those who anticipate beginning withdrawals within the first few years.
On the other hand, if you plan to defer withdrawals and prioritize long-term growth, the Income Strategy: Tomorrow rider might be more suitable. It offers a guaranteed 14% annual simple interest growth to the Income Benefit Base for up to 10 years or until the rider is exercised, allowing for significantly higher income payments later in retirement.
Since this decision has long-term implications, consulting a financial advisor is highly recommended to ensure the rider aligns with your retirement goals and financial strategy.
Also, as with most annuities, the Nassau Personal Income 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 Personal Income Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are:
- Customizable Guaranteed Income Options: The product offers two distinct rider options, Income Strategy: Today, and Income Strategy: Tomorrow, allowing annuitants to tailor their income strategies based on immediate or deferred needs.
- The plan offers the S&P Index with multiple crediting methodologies.
- Free Confinement and Terminal Illness Waiver 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
This product is decent for individuals seeking growth and safety; however, there are a few aspects that could add more value for the annuitant. The features I find less appealing include:
- Lower Indexing Rates: The annuity's participation rates and caps on index-linked growth are relatively lower compared to some competitors. This limitation could hinder the growth potential of the account value, especially in strong market conditions.
- Mandatory Rider Fee: The product charges a compulsory rider fee of 0.95% annually, regardless of the rider selected. While the riders provide valuable benefits, the mandatory fee reduces the overall return on investment, particularly for those who might not fully utilize the rider features.
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 Personal Income Fixed Indexed Annuity is specifically designed for individuals seeking guaranteed lifetime income payments rather than significant accumulation or growth. While its Income Strategy riders—Today and Tomorrow—offer flexibility and structured mechanisms to enhance the Income Benefit Base, the product's potential for market-linked growth is limited compared to other annuities focused on accumulation. Its primary strength lies in providing predictable and reliable lifetime income payments, making it a suitable option for those prioritizing income security over asset growth. Consulting with a financial advisor is recommended to determine if this annuity aligns with your long-term financial goals.
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.