Introduction
Annuities are contracts between the annuitant and an insurance company in which the insurance company promises to credit interest based on a fixed interest rate specified at the time of purchasing the annuity.
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 Sentinel Life Personal Choice Fixed Annuity. The Sentinel Life Personal Choice is a fixed annuity that may be suitable for those seeking accumulation, tax-deferred growth, and principal protection. It is designed for annuitants who are focused on optional riders that enhance specific aspects of the contract. After conducting extensive research and due diligence, I present an unbiased and thorough analysis of this product.
The review of the Sentinel Life Personal Choice Fixed Annuity will be broken into multiple subcategories:
- Product Description
- Product Policy
- Riders
- What Makes This Product Stand Out?
- What I Don’t Like
- Company Details
- Conclusion
Product Description
The Sentinel Life Personal Choice is a Fixed Annuity plan that offers the annuitant (annuity investor) an opportunity to earn a fixed return at a rate specified during the purchase of the annuity. This might be a suitable plan for people who are looking for a fixed annuity that offers optional riders to improve specific aspects of the annuity and aims to grow and protect their retirement savings.
Let’s have a look at the high-level fine print of the Sentinel Life Personal Choice Fixed Annuity, and then we will discuss each point in detail.
| Product Name | Personal Choice |
|---|---|
Issuing Company | |
AM Best Rating | B++ (6th of 13 ratings) |
Withdrawal Charge Period(s) | 3, 5, 7, 10 years |
Maximum Issue Age | 90 Years |
Minimum Initial Purchase Amount | $2,500 |
Crediting Period and Strategies | Fixed account with interest guaranteed |
Plan Types | IRA, Roth IRA, Nonqualified Account, SEP IRA, SIMPLE IRA, 401(a), etc. |
Free Withdrawals | 10% of the annuity’s Accumulated Value per year with a paid rider |
Death Benefit | Upon the annuitant’s death, the beneficiary will get the annuity’s Cash Surrender Value. Optional paid rider available for enhanced death benefit |
Riders | Annuitant can chose from following optional paid riders Required Minimum Distribution Preferred 10% Free Withdrawal Terminal Illness/Nursing Home Care 72(t) Free Withdrawal Death Benefit Feature Accumulated Interest Withdrawal |
Surrender Value | Account Value less any withdrawal charges/ MVA |
RMD Friendly | RMD charges waived off only if you opt for RMD rider |
Product Policy
How does the Sentinel Life Personal Choice Fixed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 90) can purchase the Personal Choice Fixed Annuity with a minimum initial purchase amount of $2,500, and in return, they will earn a fixed return at a rate specified during the purchase of the annuity, credited as per the chosen crediting period. Apart from the regular crediting period, there are various events that may trigger earnings credit: On withdrawals, for a long-term care event or terminal illness or injury event, or when a death benefit is payable.
The Sentinel Life Personal Choice Fixed Annuity offers the annuitant the ability to choose from four fixed rate account periods to determine their earnings crediting formula. Apart from this, the annuitant can also choose from six optional paid riders available with this annuity.
Let’s have a look at the Sentinel Life Personal Choice Fixed Annuity rate sheet (as of September 2024) to understand how the earnings are determined.
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From the rate chart above, you'll observe that there are four fixed interest-crediting options.
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, however, this annuity provides the optionality of selecting various riders, which differentiates it from traditional fixed-rate instruments.
Riders
Riders are a key feature of the Sentinel Life Personal Choice Fixed Annuity, providing policyholders with the flexibility to customize their contracts based on individual needs. This annuity offers six optional riders, each designed to enhance specific benefits and offer added protection, allowing annuitants to tailor their coverage to better suit their financial goals. In the following section, we’ll briefly explore each of the six available riders, highlighting their key benefits and how they can enhance the overall value of the Sentinel Life Personal Choice Fixed Annuity.
1. Required Minimum Distribution (RMD) Rider
Description: This rider waives the surrender charge and market value adjustment (MVA) for any Required Minimum Distribution withdrawals from tax-qualified plans.
Cost: 0.16% fee.
Example: Imagine John, age 72, has a tax-qualified annuity and is required to withdraw a certain amount annually as per IRS rules. With this rider, if John needs to take out his required minimum distribution, he won't face any surrender charges or MVAs on that withdrawal.
2. Accumulated Interest Withdrawal Rider
Description: This rider waives the surrender charge and MVA associated with accumulated interest withdrawals.
Cost: 0.08% fee.
Example: Sarah has an annuity that has accumulated interest over time. If she decides to withdraw just the interest without touching the principal, this rider ensures that she won’t face any surrender charges or MVAs on that withdrawal.
3. Preferred 10% Free Withdrawal Rider
Description: This rider waives the surrender charges and MVA for the first withdrawal per year, after the first contract year. The annuitant may withdraw up to 10% of the account value or the Required Minimum Distribution, whichever is greater. If multiple withdrawals are made during the contract year, additional fees may apply.
Cost: 0.08% fee.
Example: Mark's annuity account is valued at $100,000. With this rider, he can withdraw up to $10,000 (10% of the account value) without incurring any surrender charges or MVAs. If he takes out more or makes multiple withdrawals in the same year, surrender charges may apply for subsequent withdrawals.
4. Death Benefit Feature Rider
Description: This rider waives the surrender charge for a lump-sum payment in case of the annuitant's death. Cost: 0.35% fee.
Example: If Emma, the annuitant, passes away, her beneficiary would be entitled to a lump sum of the account value without any surrender charges. This provides financial relief to her family during a difficult time.
5. Terminal Illness/Nursing Home Care Feature
Description: This rider waives the surrender charge if the annuity owner is diagnosed with a terminal illness such as stroke, heart attack, or life-threatening cancer. It also waives surrender charges if the annuitant requires skilled nursing care for more than 90 consecutive days.
Example: Consider Jane, who has been diagnosed with a life-threatening illness. With this rider, if she needs to withdraw funds from her annuity to cover medical expenses, the surrender charges would be waived, providing much-needed financial flexibility. Similarly, if Jane needs long-term nursing care for over 90 days, she can access her funds without incurring penalties.
6. 72(t) Free Withdrawal
Description: This rider waives the surrender charge and market value adjustment (MVA) on withdrawals made under IRS Section 72(t). This section of the tax code allows for early withdrawals from retirement accounts (including annuities) before age 59 ½, as long as they are part of a series of substantially equal periodic payments (SEPPs).
Example: Imagine John, who is 55, wants to start withdrawing from his annuity to supplement his early retirement income. By utilizing this rider and adhering to IRS Section 72(t) rules, John can take regular withdrawals without facing surrender charges or MVAs, as long as the withdrawals meet the required SEPP criteria.
While the optional paid riders offered with the Sentinel Life Personal Choice Fixed Annuity provide some flexibility, it's important to note that many other annuity companies include features such as free withdrawals and RMD waivers at no additional cost. However, the a la carte structure of these riders allows Sentinel Life to offer more competitive interest rates on the base contract. By letting annuitants choose only the riders they need, the company can allocate more resources to delivering higher returns.
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 Sentinel Life Personal Choice Fixed Annuity.
| Issue Ages 0-59 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
3-yr | 9% | 8% | 7% | |||||||
5-yr | 9% | 8% | 7% | 6% | 5% | |||||
7-yr | 9% | 8% | 7% | 6% | 5% | 5% | 5% | |||
10-yr | 9% | 8% | 7% | 5% | 5% | 5% | 5% | 5% | 5% | 5% |
| Issue Ages 60+ | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
3-yr | 8% | 7% | 6% | |||||||
5-yr | 8% | 7% | 6% | 5% | 4% | |||||
7-yr | 8% | 7% | 6% | 5% | 4% | 3% | 2% | |||
10-yr | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0% | 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 (if any) 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 Sentinel Life Personal Choice Fixed Annuity is in line with all the other annuity issuers.
Contract/Administrative Charge
The Sentinel Life Personal Choice Fixed Annuity levies no annual contract or administrative fees. However, it comes with six optional paid riders, each designed to enhance specific aspects of the contract. These riders include the Required Minimum Distribution (RMD) Waiver, Accumulated Interest Withdrawal, Preferred 10% Free Withdrawal, Terminal Illness/Nursing Home Care, 72(t) Free Withdrawal, and the Death Benefit feature. While these riders offer some additional benefits, it's important to consider that each comes with its own cost, ranging from 0.05% to 0.35% of the contract value annually.
Renewal Options for the Sentinel Life Personal Choice Fixed Annuity
When your Sentinel Life Personal Choice Fixed Annuity reaches the end of its guaranteed interest period, you have the flexibility to choose how you want to move forward. This annuity allows you to earn tax-deferred interest at a guaranteed rate over a period of 3, 5, 7, or 10 years, with daily compounding and monthly crediting of interest to your account. At the end of each guarantee period, you are given several options to ensure your contract continues to align with your financial goals.
Renewal Options:
Continue Your Contract for Another Guarantee Period: As you approach the end of your current guarantee period, you have the option to renew your contract for another period. The key advantage here is that you can select a different guarantee period than the one you initially chose. For instance, if you started with a 5-year guarantee period, you may opt for a shorter or longer period based on your updated needs or market conditions.
Apply the Contract Value to a Settlement Option: You may decide to transition your contract value into a settlement option. Settlement options typically include a range of payout structures, such as annuitization, which can provide a steady stream of income over a specified period or for life.
Partial Withdrawal with No Surrender Charges or MVA: During the last 30 days of your guarantee period, you can make a partial withdrawal without facing any surrender charges or Market Value Adjustments (MVA). The remaining balance can be applied to a new guarantee period, which could be different from the preceding one. This flexibility allows you to access funds without penalty while continuing to earn interest on the remaining amount.
Surrender the Contract Without Penalty: If you decide that continuing the annuity is not in line with your financial objectives, you can choose to fully surrender the contract. By doing so during the renewal window, you avoid any surrender charges or MVA, ensuring that you retain the full value of your contract.
Automatic Renewal:
If you do not actively select any of the options above during the last 30 days of your guarantee period, your contract will automatically renew for the same guarantee period as before. The interest rate for the new period will be determined by Sentinel Life based on the market conditions at the time of renewal. This ensures that your investment continues to earn a competitive rate without interruption, even if you forget to make a decision within the renewal window
What Makes This Product Stand Out
One of the standout features of the Sentinel Life Personal Choice Fixed Annuity is its ability to offer a customizable, a la carte selection of annuity riders. This unique structure allows policyholders to choose only the specific riders they need, rather than paying for a bundled set of features. As a result, Sentinel Life can focus on delivering better base rates compared to many other annuities that offer standard features at no cost. This flexibility not only tailors the annuity to individual needs but also helps the company offer more competitive interest rates. For example, optional riders like the Death Benefit can be added for those prioritizing long-term beneficiary protection and estate planning, without sacrificing the overall growth potential of the annuity.
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.
Sentinel Security Life Insurance Company
Sentinel Security Life is a financial services company that has been in business since 1948 and is based in Salt Lake City, Utah. This company offers a wide range of financial products, including:
Personal Choice Annuity
Retirement Plus Multiplier Annuity, with extensive review.
Guaranteed Income Annuity
Summit Bonus Index
New Vantage Life Insurance
Personal Choice+ Annuity, which I have reviewed previously.
The Accumulation Protector Plus Annuity, with review.
Sentinel Security Life got its start when a group of Utah funeral directors saw that there was a need for an insurance product that could help families pay for funeral costs. This initial product was designed to help families pay for the final expenses of a loved one. Over the past seventy years, Sentinel Security Life has expanded to offer a more comprehensive suite of financial products and has also experienced many name changes throughout the years.
According to its 2023 financial statements, Sentinel Group has sold over $1.7 billion in annuity contracts., and is rated B++ by AM Best.
Conclusion
With the advancements in healthcare and technology, the average American today lives longer than ever. So, it’s very important to have a stream of income that can grow safely and steadily and have the ability to provide a guaranteed 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 Sentinel Life Personal Choice Fixed Annuity offers a flexible, customizable structure with its a la carte rider options, allowing policyholders to pay only for the features they truly need. This unique approach enables the company to provide more competitive interest rates on the base annuity, making it a solid choice for those who prioritize higher returns and don't necessarily require every additional feature. While some standard features like free withdrawals or RMD waivers are typically included at no cost in other products, Sentinel Life's flexibility ensures that you're not paying for extras you don’t plan to use. 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.