Saving for retirement is one of the most important financial goals of your life and annuities can provide you with a passive source of income making it an interesting investment option for retirees. Here, we review SILAC’s fixed indexed annuity products to see if its the right investment vehicle for you.
SILAC Insurance Company
Annuities provide investors with a hedge against several financial risks that include losses tied to other markets as well the possibility of investors outliving their money.
Given the benefits of annuities, let’s look at this product offered by SILAC Insurance Company which claims to be Utah’s oldest active life insurer. The company is licensed in 46 states as well as the District of Columbia.
According to SILAC, 80% of Americans are nervous about retirement and 73% are worried they might not have a lifetime income. Around 71% are concerned about the risk of a financial surprise.
The insurance firm aims to develop products for current and future policyholders to help them reach financial and retirement goals. It introduced fixed annuities in 2018 and fixed index annuities in 2019 that we will now explore.
The SILAC Denali Series offers certain guarantees while providing accumulation and lifetime income. Investors can choose a fixed interest rate that is declared on an annual basis. The annuity has a minimum guaranteed value as well as a choice of interest based on external market indexes. SILAC confirms that investor savings are insulated from market fluctuations and the principal is wholly protected.
Denali Bonus Series
The Denali Bonus Series is a flexible option for investors. You can fund the annuity via multiple crediting strategies that are tied to various market indexes. The investor can choose a certain fixed interest rate declared annually, subject to a minimum guarantee value. You also have the option to choose an interest based on the performance of an external index. This plan comes with a bonus that is added to the money used to purchase the annuity.
The Denali Bonus Series offers your annuity with the required diversification and the withdrawal charge period varies between 7, 10, and 14 years.
You are allowed to withdraw up to 5% of your account value after the first policy year. Required minimum distributions or RMDs are considered a free withdrawal, even if over 5% of the account value.
The investor can also withdraw 100% of the annuity account value if diagnosed with a terminal illness or is confined to a qualified care facility. In the case of home health care services, you are eligible to withdraw 20% of the annuity account value for five years.
The income withdrawals can be received monthly, quarterly, semi-annually, or annually.
In the SILAC Teton Series, annuities are also single premium and fixed indexed. So, your savings depend on a fixed interest rate while crediting strategies are linked to the S&P 500 index. As interest rates are fixed, your earnings have a certain limit and your losses are capped.
Here you are not only allowed to withdraw 100% of your account value in the case of a terminal illness or if you need to visit a qualified care facility, but you can do so even if you need home health care services.
Teton Bonus Series
The Teton Bonus Series is similar to the Teton Series. Here, they pay an immediate bonus. For example, the bonus for a 14-year contract is 10% while 10-year and 7-year contracts are 10% and 7% respectively.
Each of the plans mentioned above has a 7, 10, or 14-year contract, and the maximum issue ages are 90, 85, and 80, respectively. In all three annuity plans, your beneficiary is eligible to receive the entire account value in the case of your death, before contract maturity. Topurchase an annuity contract, you need at least $10,000 in start-up capital and additional payments through the first year.
Benefits of investing with SILAC
The savings of investors are protected from market fluctuations as the principal amount is completely insured. The annuity programs allow you to save your retirement savings by deferring taxes until you choose to make withdrawals. The investor is permitted to access additional funds if certain health conditions are met.
There are multiple liquidity options available and you can leave a legacy for your spouse and other loved ones while avoiding probate.
The final takeaway
Silac has $1.6 billion in assets and $121 million in surplus and liquidity with an assets to liability ratio of 108.1%. Credit rating firm A.M.Best has given it a rating of B+, which indicates “Good” on the rating scale.
Several other companies, including New York Life Insurance, Mass Mutual, and Allianz Life Insurance Company, have a higher credit rating than SILAC.
Investors need to ensure they are comfortable with committing the savings for long periods of time. Further, the investor can lose money in the following ways:
- If you withdraw an excess amount before the end of your term, SILAC will charge you surrender fees.
- There might also be a market value adjustment for early withdrawals.
Further, SILAC and all other insurance companies can be flexible with the terms of their index annuity. The annuity products compete with fixed income instruments and not with the broader equity market. So, you need to understand that returns should be compared with bonds and interest rates over time. Any annuity provider that attracts customers with exaggerated claims should be viewed with skepticism.