Today I’m going to break down an annuity called the Security Benefit Secure Income Annuity. Issued by Security Benefit Life Insurance Corporation, this annuity is sold all over the country.
Annuities have evolved significantly in the past few years. They now have a major focus on income riders, home healthcare income enhancements, and so many ways to credit interest it will make your head spin.
There are even “hybrid annuities” which combine various features of other annuities. Sadly, there’s a lot of misinformation about how they really work. Researching these new annuities – index annuities, fixed index annuities or equity index annuities, and hybrid annuities in particular – is becoming increasingly difficult.
When using Google to do research, for example, you often get search results that point directly to the annuity’s sellers. Some of these sites are just very well-crafted sales sites without truly independent and helpful research.
This annuity review is just the opposite. It is 100% independent, breaks down the good and bad, and uses fully disclosed research. The purpose is to help those thinking of purchasing this (or similar) annuities make a well-informed decision.
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As a fee-only financial advisor, I don’t get paid to sell annuities. Unlike many other fee-only advisors, though, I do think annuities can be a smart part of a comprehensive financial plan if used correctly.
Since my compensation is not tied to their sale, I try to make my view of annuities as impartial and objective as possible and I want to make a few things clear:
- I have nothing against Security Benefit Life or the Secure Income Annuity.
- After reviewing quite a few annuities on the market, I think it can work quite well if used for the right circumstances.
- I think that some investors have no idea how the Secure Income Annuity – or most annuities for that matter – really work.
- By doing this review I should be able to help potential investors better understand the real pros and cons of this particular annuity.
What’s Covered in This Review of the Security Benefit Secure Income Annuity
I’ll be covering the following information in this review:
- Product type
- Current rates
- Realistic long-term investment expectations
- How it is best used
- How it is most poorly used
What you’ll find is that like all annuities, the Secure Income Annuity does some things really well. However, there are things some agents might say about its performance that is not entirely clear. It’s important you understand the differences, so you can determine if it really is a good fit as part of your financial plan.
Before I dig into today’s review let me clear the air with a little legal disclosure:
This is a review, not a recommendation to buy or sell an annuity. Security Benefit Life has not endorsed this review in any way nor do I receive any compensation for this review. This review is meant to be an independent review at the request of blog readers so they could see my perspective when breaking down the positives and negatives of this particular model annuity. Before purchasing any investment or insurance product be sure to do your own due diligence and consult a properly licensed professional should you have specific questions as they relate to your individual circumstances. All names, marks, and materials used for this review are the property of their respective owners.
The Security Benefit Secure Income Annuity With Guaranteed Living Withdraw Benefit (GLWB) Review
Product Name: Security Income Annuity
Type of Product: Fixed Index Annuity
Issuer: Security Benefit Life Insurance Company
Standard & Poor’s Rating: “A-” (Strong)
Phone Number: 800-888-2461
Where it works best:
- For producing a reliable, “pension-like” guaranteed income stream
- For producing an income for life that cannot be outlived by a surviving spouse
- For investors who have a family history of life longevity
- For producing additional income for home health care needs (subject to state approvals and annuity holder qualification)
Where it works worst:
- For those that do not plan on using the income for life benefit
- For those seeking maximum long-term growth
- For those expecting real returns of greater than 5% per year on average
According to the Security Benefit website, this annuity is described as “a sensible part of your income plan for retirement.” Its key features are described as:
- Optional Guaranteed Lifetime Income via its Guaranteed Lifetime Withdrawal Benefit (GLWB)
- Flexible Interest Options – it can earn interest based on gains in the S&P 500 (without dividends)
- Can never lose money, even if the S&P 500 index goes down in value
- 8% bonus – so if you invest $100,000 right out of the gates your annuity value is worth $108,000 (subject to surrender penalties and bonus recapture charges)
- Tax-deferred growth – if purchased in a taxable account (non-retirement account) the growth grows free of tax and is only taxed upon withdrawal (gains are taxable, not your original principal)
- Home Healthcare Double – if you use the GLWB (see bullet one above) and you cannot perform 2 of 6 basic activities of daily living your income can double for up to five years (cannot be exercised in the first 2 years)
This is from their brochure and not tax or legal advice. I’m just reporting here, so you need to review the full contract for all the details.
Legal disclosures aside, it obviously has a lot of nice points in the sales material.
The Secure Income Annuity does best what its name implies – generate a secure income for retirement. The longer you (or your co-covered person) live, the greater the benefit of this annuity.
However, it’s important that investors understand that the “roll-up rate” is not the actual return, nor is the “lifetime withdraw rate” the actual return. It is sometimes explained in a way that implies these rates are the actual returns, which is not the case.
For someone strictly looking for guaranteed income with no market risk and willing to have long term returns in the 3% to 5% range, this is actually one of the leading fixed index annuities on the market for that purpose. I’m still not sure all agents know what the real returns are, though. Some might significantly over-promise what’s realistic, so be especially wary of anyone who suggests this annuity will work better.
If the agents are being upfront and honest, you’ll notice their explanations match very closely (if not exactly) as described in this review. When that happens, you have an agent you can trust.
Nor will it likely return better than 5%. When financial advisors use those numbers, they are referring to percentages used to calculate the income guarantee. But since it will take quite a few years of this “income” to return your initial investment, most investors are likely to get return more in the 3% to 5% range. More or less return is possible, I just think this is a realistic expectation.
There are exceptions to the rules though, so be sure to analyze the annuity for your unique situation to determine what your realistic returns might be.
Have Questions on the Security Benefit Secure Income Annuity?
I know annuities can be confusing. That’s why it’s important to know the real facts to make sure if you go down a route you’ll regret taking it. After all, annuities are long-term commitments with contracts, surrender penalties, etc. For some people, they won’t make sense at all, but for some, they might be a really great fit.
Because there’s a long-term commitment, it’s a really good idea to get a comprehensive retirement plan before buying an annuity (or any other financial product). You can click here to learn more about our Results in Advance Planning method and request a complimentary, no-obligation conversation with one of our full-time advisors.