Upstream Secure Legacy Multi-Year Guaranteed Annuity (MYGA) Review

The features of the Upstream Secure Legacy Multi-Year Guaranteed Annuity (MYGA) remain consistent across all term durations, with the only variations being the interest rates and the withdrawal charge schedule associated with each term.

Product Policy

How does the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) policy work?

The Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) is structured to provide fixed, predictable growth over a chosen period, making it a suitable option for investors looking for security and stability. This annuity offers term options ranging from 2 to 15 years, with a unique interest rate assigned to each term. These rates ensure that the policyholder knows exactly how much their investment will grow over the selected period.

Let’s have a look at the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) Annuity rate sheet (as of May 2024) to understand how the earnings are determined.

2-Year Term: 5.25%
3-Year Term: 6.00%
4-Year Term: 5.70%
5-Year Term: 5.95%
6-Year Term: 5.55%
7-Year Term: 5.40%
10-Year Term: 5.40%
15-Year Term: 4.90%

Unlike many other annuity providers that offer different rates based on premium bands, the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) provides the same interest rate regardless of the premium amount. This feature is particularly beneficial for investors who prefer to make lower premium contributions while still receiving competitive rates. The annuity is available in 2 to 15-year terms, offering flexibility to suit various financial goals.

Important: Rates are subject to change. To ensure you have the most accurate and current information, please consult your trusted financial advisor before making any investment decisions.

The MYGA’s interest rate is locked in at the start of the contract and remains fixed for the entire term, ensuring a steady accumulation of funds. At the end of the selected period, the policyholder has several options: they may withdraw the accumulated funds, renew for another term (with rates based on prevailing conditions), or roll the funds into another financial vehicle.

Key Mechanics of the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) Policy

Interest Rate Lock: Once the policyholder selects a term, the corresponding interest rate is guaranteed for the duration of that term, providing clear expectations for growth.
Principal Protection: As a fixed annuity, the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) guarantees the protection of the principal, meaning that the initial investment is secure and unaffected by market volatility.
Withdrawal Charge Schedule: The policy includes a withdrawal charge schedule, which varies according to the selected term. If the policyholder needs to access their funds before the term ends, they may incur a penalty. However, many MYGAs, including Upstream Life MYGAs, often allow a penalty-free withdrawal of a certain percentage of the account value each year, typically up to 10%.

To understand how the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) works, let’s look at a hypothetical example:

Suppose an investor, Elsa, is 60 years old and is planning to retire soon. She wants a low-risk investment to grow her funds predictably over time. After researching her options, Elsa decides to invest $100,000 in the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) with a 7-year term, which offers a fixed interest rate of 5.40% for that period.

1. Interest Accumulation

With her $100,000 initial investment, Elsa can calculate her future value at the end of the 7-year term using the 5.40% annual interest rate:

Year 1: $100,000 * (1 + 5.40%) = $105,400
Year 2: $105,400 * (1 + 5.40%) ≈ $111,092
Year 3: $111,092 * (1 + 5.40%) ≈ $117,091
Year 4: $117,091 * (1 + 5.40%) ≈ $123,413
Year 5: $123,413 * (1 + 5.40%) ≈ $130,078
Year 6: $130,078 * (1 + 5.40%) ≈ $137,102
Year 7: $137,102 * (1 + 5.40%) ≈ $144,506

After seven years, her investment would grow to approximately $144,506, thanks to the fixed annual interest rate of 5.40%.

2. Principal Protection

Because the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) is a fixed annuity, Elsa’s initial $100,000 is fully protected from market losses. Regardless of what happens in the stock or bond markets, her principal remains secure, and she continues to earn the 5.40% fixed rate annually.

3. Withdrawal Options at the End of the Term

At the end of the 7-year term, Elsa has several choices:

Withdraw the Full Amount: Elsa can withdraw the full $144,506 without any surrender charges, giving her access to her accumulated funds.
Renew for Another Term: Elsa can choose to renew her MYGA for another term with Upstream Life, though the new interest rate will depend on the prevailing rates at that time.
Roll Over to Another Financial Product: Elsa can transfer her funds into another investment or retirement product, if she desires.

Riders

The Upstream Life Secure Legacy MYGA offers two optional riders that provide additional flexibility and benefits. However, both riders come at a cost, as detailed below:

10% Free Withdrawal Rider:
Availability: Starts from the second contract year.
Benefit: Allows you to withdraw up to 10% of the contract value at the most recent anniversary date without incurring surrender charges.
Cost: This rider comes at a 15-basis point (0.15%) reduction in the crediting interest rate.
Death Benefit Rider:
Benefit: Provides a death benefit equal to the contract value for the beneficiary.
Cost: This rider incurs a 25-basis point (0.25%) reduction in the crediting interest rate.
Requirement: This rider is mandatory for policyholders aged 81 and older.

While these riders provide valuable features, it is important to note that many annuity providers include similar features at no additional cost. For example, a 10% free withdrawal option is commonly included as a standard feature in most MYGAs, rather than being offered as a paid rider. Similarly, some MYGAs provide death benefits as part of the base policy without reducing the interest rate.

Additionally, the Upstream Life Secure Legacy MYGA does not offer nursing home confinement or terminal illness waivers, which many other annuities provide free of charge. These waivers typically allow policyholders to access their funds without penalties during difficult times, adding an extra layer of flexibility.

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 Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA).

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.

Contract/Administrative Charge

The Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) levies no annual contract or administrative fees.

Benefits vs. Disadvantages of MYGA Compared to a Traditional Fixed Annuity

MYGAs and traditional fixed annuities both cater to conservative investors but with slightly different structures. MYGAs are ideal for those who want a predictable rate over a fixed term and are comfortable with the limited liquidity during that period. In contrast, traditional fixed annuities may offer a bit more flexibility in terms of rate adjustments or income options but typically lack the defined multi-year guarantee MYGAs provide. Here’s a breakdown:

Benefits of MYGA

Guaranteed Interest Rates for Specific Terms
MYGA: MYGAs provide a guaranteed interest rate over a fixed term, such as 3, 5, or 7 years, allowing investors to lock in predictable returns for a specified period.
Traditional Fixed Annuity: Traditional fixed annuities also offer guaranteed interest, but these rates are often set for a shorter duration (e.g., one year) and may reset annually based on prevailing rates.
Benefit: MYGAs offer more stability over a multi-year horizon, protecting against interest rate fluctuations, which is particularly beneficial in a low or falling interest rate environment.
Flexibility with Term Lengths
MYGA: MYGAs provide the flexibility to choose from different terms (e.g., 3, 5, 7, 10 years), depending on the investor's needs and market outlook.
Traditional Fixed Annuity: Traditional fixed annuities do not typically offer fixed terms with guaranteed rates over multi-year periods.
Benefit: MYGAs allow investors to align their investments with specific time horizons, such as short-term goals or bridge periods before retirement.

Disadvantages of MYGA

Interest Rate Risk Over the Long Term
MYGA: While MYGAs lock in rates for a specific term, they may be less advantageous if interest rates rise significantly during the term, as policyholders are bound to the initial rate until maturity.
Traditional Fixed Annuity: Traditional fixed annuities may offer rate adjustments periodically, which could benefit policyholders in a rising interest rate environment.
Disadvantage: MYGAs might not benefit from increasing rates mid-term, whereas traditional fixed annuities may adjust rates periodically, providing some adaptability to market changes.
Lower Growth Potential Compared to Market-Linked Annuities
MYGA: MYGAs have a fixed interest rate and are not linked to market performance, limiting the growth potential.
Traditional Fixed Annuity: Similarly, traditional fixed annuities are also fixed, but they may sometimes offer interest rate adjustments that allow for slightly higher yields over time.
Disadvantage: Both MYGAs and traditional fixed annuities limit growth potential compared to market-linked annuities or other investment options, which may not be ideal for younger investors with higher risk tolerance.

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.

Upstream Life Insurance Company

Upstream Life Insurance Company is a life insurance provider headquartered in Oxford, Mississippi. Founded in 1912 as Financial Assurance Life Insurance Company, it was rebranded as Upstream Life following its acquisition by Upstream Holdings, a Louisiana-based insurance holding company established in 2016. The company is particularly known for its fixed annuity products, including the Secure Legacy Multi-Year Guaranteed Annuity (MYGA). As of 2023, Upstream Life is licensed in 25 states and focuses on providing retirement solutions to retirees in the United States.

In 2021, Upstream Life was recognized as the third fastest-growing private company in America, achieving a three-year revenue growth of 36,955% and generating $194 million in revenue for the year. However, the company has faced challenges concerning its financial strength and regulatory compliance. In August 2024, the Texas Department of Insurance fined Upstream Life $25,000, citing misrepresentation and filing of false financial statements, as well as operating in a hazardous financial condition.

Subsequently, in November 2024, AM Best downgraded Upstream Life's Financial Strength Rating to C++ (Marginal) from B- (Fair) and the Long-Term Issuer Credit Rating to "b" (Marginal) from "bb-" (Fair), with the outlook revised to negative. Following this downgrade, Upstream Life requested the withdrawal of these ratings, and AM Best complied.

These developments highlight concerns regarding Upstream Life's financial stability and governance practices. Prospective clients and partners should exercise caution and conduct thorough due diligence when considering engagement with the company.

Suitability of Upstream Life Secure Legacy MYGA

While the Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) offers slightly higher interest rates compared to well-established insurance companies, it’s important to consider whether the potential rewards outweigh the associated risks. Annuities, unlike certificates of deposit (CDs), are not backed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. Instead, an annuity’s "guarantee" is only as reliable as the financial strength of the issuing company.

In the case of Upstream Life, recent regulatory fines, financial rating downgrades, and concerns about operational stability raise significant red flags. While the higher interest rates may seem appealing, locking your funds into a long-term annuity with a company facing financial challenges could expose you to considerable risk. If the company experiences further financial difficulties, it could affect your ability to access your funds or receive your payouts in full.

Limited Liquidity and Costly Riders

In addition to financial concerns, the Secure Legacy MYGA offers limited liquidity options:

There are no free withdrawals during critical life events, such as nursing home confinement or terminal illness, which many other annuity providers offer at no additional cost.
The available riders, such as the 10% Free Withdrawal Rider and Death Benefit Rider, come at an additional cost in the form of a reduction in the credited interest rate. This means you are essentially paying for features that are often included in other MYGAs as standard benefits.

Given the combination of financial instability, limited liquidity options, and the cost of additional features, the Upstream Life Secure Legacy MYGA may not be suitable for individuals seeking security, flexibility, and comprehensive coverage. When considering a long-term commitment like an annuity, it is crucial to prioritize stability over slightly higher interest rates. Consulting a trusted financial advisor can help you evaluate the risks and identify a product that aligns with your financial goals and comfort level.

Conclusion

The Upstream Life Secure Legacy Multi-Year Guaranteed Annuity (MYGA) may initially attract investors with its slightly higher interest rates compared to those offered by more well-established insurers. However, a closer examination reveals significant concerns that should not be overlooked. The company’s recent regulatory challenges, financial strength downgrades, and lack of federal guarantees make this annuity a potentially risky choice for long-term savings.

Additionally, the annuity’s limited liquidity options, absence of nursing home and terminal illness waivers, and paid riders for features that many competitors offer for free further reduce its appeal. While the interest rates may seem competitive, the cost of added flexibility through paid riders and the potential financial instability of the issuing company can outweigh the benefits.

For investors seeking principal protection, stable returns, and peace of mind, this product may not be the most suitable option. Instead, considering annuities from insurers with a strong financial reputation and consumer-friendly policies could provide a safer alternative.

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.