Mar 30

The Highest Annuity Bonus Accounts

We receive several requests from fixed and indexed annuity shoppers about which insurance companies offer the best premium bonuses on first year and subsequent yearly deposits.

Interest rates and bonus amounts are constantly changing, so it is best to give us a call in order to compare current yields and illustrations as one size does not fit all with most investments.

Considering An Annuity Rollover Or Exchange?

There are investors looking for a suitable annuity rollover and there are also those who need a high first year bonus in order to justify leaving an under-performing asset like a variable annuity or mutual fund.

It’s important to understand how annuity bonus accounts work and what can be expected over time before investing in one that offers the highest bonus amount in the first year. While there are plenty of accounts offering 10% premium bonuses or more, they don’t all operate in the same fashion. Some annuity accounts offer a 20% premium bonus for example, but they require a future annuitization.

First Year Only Premium Bonus Accounts

Most fixed and indexed annuities offer a one-time bonus on all premiums deposited in the first year.  The amount of the bonus is usually tied to the term of the annuity. That is to say, the longer the term (in years), then the larger the first year bonus.

First year only bonus accounts are usually appropriate for consumers who are looking to exit an under-performing investment.  Maybe they have lost money in a poorly recommended mutual fund or wish to exchange a variable annuity for a safer investment like a fixed or indexed account.

Upfront bonuses can help account for investment losses elsewhere so the potential financial angst of rolling over a variable annuity with a larger death benefit does not seem as difficult.  This way the accumulated value of the new account (including bonus) can easily catch up to the death benefit value or initial investment value of the undesirable variable instrument.

Multi-Year Fixed Premium Bonuses

Not quite as common as a first year bonus, accounts offering multi-year bonuses are popular for those who are saving for the long haul – one year at a time.  A select few annuity providers will offer premium bonuses (some as high as 10%) on all deposits made in the first seven years of the account.

This can be very valuable for those who are slowly divesting from another investment.  One example would be someone who was systematically converting his or her traditional IRA to a Roth IRA.  The advantage is that the income tax liability created by the Roth IRA conversion would be spread out over more than one year.

Multi-year annuity accounts are also appropriate for those who are saving toward retirement.  If larger deposits will be made over a 2-7 year time period, then the account owner can take advantage of the bonus opportunity providing a much larger principal amount to draw from during their retirement years.

Annuity Income Riders Offering Bonuses

Highest Annuity Bonus
Income riders are gaining in popularity with many investors who desire a guaranteed income stream during retirement.

When the rider is attached to certain fixed and indexed annuities, then the income account value will also be credited with the bonus amount.

Those who want to divest a portion of their portfolio from the ups and downs of the overall markets are using guaranteed annuity income riders (with or without a bonus) as a simple, but very efficient means to create a future lifetime stream of income.  When a 10% bonus is added to the account value, future income streams are even more appealing.

What Are The Disadvantages To Annuity Bonuses?

The first and most obvious one is time.  In order to secure a large first or multi-year bonus, investors must be willing to commit their dollars for a longer period of time.  Any account offering a 10% or greater bonus will usually require at least a ten year surrender term.

It is important to understand that account owners will always have penalty-free access to a potion of their invested funds.  However, if they choose to withdraw all of their money before the annuity term is up, then they can be assessed an early surrender penalty.

Early surrender penalties are not assessed on regular interest income withdraws, yearly principal (usually 10%-20%) withdraws, withdraws for health reasons, during annuitization, or at death.  Annuity investors with longer surrender periods have several ways to access their funds for any number or reasons without facing penalties.

It is also important to know if the bonus associated with the chosen annuity account vests over time; some do some do not.  That is to say that if you withdraw all of your funds early, then the bonus might not be fully vested.  Vesting rules can also come into play when the owner passes away.  Should the account owner pass away prematurely, the bonus value may not be fully vested with some insurance companies.

Buyers of annuities may also want to ask if the first or subsequent year bonuses will mitigate future interest gains.  In some cases, a fixed account with no bonus, but offering a guaranteed multi-year rate may offer larger gains in the long run than one offering a larger first year bonus and unpredictable future returns.

Consumers should always ask about the guaranteed interest rates offered by the insurance company over the life of the contract depending on the type of annuity purchased.

Summary And Quote Request

In summary, annuities offering the best bonus opportunities may not be the same for every person and in every situation.  And some may simply not be appropriate at all for certain investors.  It is always wise to speak with an expert to make sure that all variables are thoroughly understood before investing.

Hyers and Associates, Inc. is a full service, independent insurance agency specializing in fixed, indexed, and immediate annuity accounts.  We help consumers all over the country with rollovers, 1035 exchanges, and retirement planning.

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