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American Equity Annuity Review

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American Equity Investment Life Insurance Company has been in business since 1995, when it was founded by the late David J. Noble. As of Q2 2020, the company has $53 billion in policyholder assets under management (AUM) and more than 630 employees. Customers of American Equity can pick from products like fixed annuities, fixed indexed annuities and immediate annuities.

If you’re unsure which annuity best fits your retirement plan, it’s a good idea to consult with a financial advisor.

Annuity Fees Annuity Type Minimum Initial Premium More Information
Guarantee Series Find an Advisor

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  • No annual contract fees
Fixed annuity $10,000

Annuity Type

Fixed annuity

Minimum Initial Premium

$10,000
AssetShield 10 Find an Advisor

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  • No annual contract fees
Fixed indexed annuity $5,000

Annuity Type

Fixed indexed annuity

Minimum Initial Premium

$5,000
IncomeShield 7 Find an Advisor

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  • No annual contract fees
  • 1.10% - 1.20% lifetime income benefit rider fee
Fixed indexed annuity $5,000

Annuity Type

Fixed indexed annuity

Minimum Initial Premium

$5,000
Retirement Gold Find an Advisor

Read Review

  • No annual contract fees
  • 0.90% - 1.00% lifetime income benefit rider fee
Fixed indexed annuity $5,000

Annuity Type

Fixed indexed annuity

Minimum Initial Premium

$5,000

American Equity Investment Life Insurance Company appears to be in good financial health, as it has received strong ratings from some of the top rating agencies. More specifically, both A.M. Best and Standard & Poor’s (S&P) rated it at an A-, which translates as “excellent” and “strong” on these companies’ respective ratings scales.

Guarantee Series

There are three versions of the Guarantee Series of fixed annuities: the Guarantee 5, Guarantee 6 and Guarantee 7 contracts. They each call for a minimum investment of $10,000 and have an 85-year-old maximum issue age.

The numbers in each of the three Guarantee Series annuities' names refers to the length of the initial interest rate period. During this time, your money will grow at a certain rate that American Equity gives you at contract issue. The longer the period you select, the higher your interest rate will be.

This contract also comes with two riders for those who open their annuity at age 75 or younger: the Nursing Care Rider and the Terminal Illness Rider. The former allows you to withdraw 100% of your contract value, penalty-free, if you're confined to a qualified nursing home for at least 90 days after your third contract anniversary. The latter rider allows annuitants who receive a terminal illness diagnosis after their first contract year to withdraw their full contract value without penalty.

Fees

While you are not required to pay annual fees with any of the Guarantee Series of fixed annuities, they do have withdrawal charges. American Equity allows annuitants to take out as much as their interest credited for the current contract year. Any withdrawals beyond that adhere to the fee schedule below:

Withdrawal Fee Schedule
Term Length Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8+
5-Year 9% 8% 7% 6% 5% 0%    
6-Year 9% 8% 7% 6% 5% 4% 0%  
7-Year 9% 8% 7% 6% 5% 4% 3% 0%

There are no withdrawal charges upon the annuitant’s death. The death benefit is equal to the greater of your contract value or the minimum guaranteed surrender value, which is worth no less than 90% of your premium, minus any withdrawals.

If you withdraw from your annuity contract before you reach age 59.5, the IRS may levy a 10% income surtax. You’ll also have to pay standard income taxes.

Realistic Return Expectations

The Guarantee Series contracts are all fixed annuities, so interest rates are the lifeblood of their returns. As of February 2021, the current interest rates for each annuity are as follows:

  • Guarantee 5: 1.80%
  • Guarantee 6: 1.85%
  • Guarantee 7: 1.90%

AssetShield 10

The AssetShield 10 fixed indexed annuity is one of American Equity’s most basic contracts. It comes with two accounts that you can split your inital payment between. Using the fixed strategy, your funds will grow at a rate that American Equity gives you. You have more control over the money in your indexed account, though, as you can choose one of four S&P indexes to which your account’s performance will be tied.

To clarify, any payments made after your initial premium will go directly towards the fixed strategy. However, on each contract anniversary, you'll have the ability to reallocate your funds between strategies. The requirements for doing this include that each strategy allocation be at least $1,000 and the minimum transfer for a new strategy be at least 10% of your contract value.

You cannot be older than 85 years old if you want to open this contract. A minimum initial premium of $5,000 is also required. Like the Guarantee Series annuities above, annuitants younger than 75 at contract issue will receive a Nursing Care Rider and a Terminal Illness Rider, each of which allow for a full, penalty-free contract withdrawal under certain circumstances.

Fees

If you open an AssetShield 10 fixed indexed annuity, you won’t have to pay any annual fees. When it comes to withdrawals, feel free to take out up to 10% of your contract value every year. Should you surpass that allotted amount, withdrawal charges will begin to take effect.

Withdrawal Fee Schedule
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11+
9.2% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

As always, withdrawals made before you turn 59.5 will incur a 10% income tax penalty on top of your standard income tax rate.

Realistic Return Expectations

As of February 2021, American Equity offers a 2.00% rate for its fixed strategy, which is far above its 0.50% minimum. Index rates vary depending on which one you choose and how the market performs, so there is no way to project growth for these strategies.

IncomeShield 7

The IncomeShield 7 fixed indexed annuity from American Equity is part of the IncomeShield family of annuities. It has an 80-year-old maximum issue age and a $5,000 minimum initial premium. It comes with a fixed account that earns at a certain fixed rate that’s provided to you by American Equity. You’ll also get an indexed account which will follow the performance of a market index. Annuitants can pick from a handful of different S&P indexes.

This annuity offers a lifetime income benefit rider (LIBR). This rider helps to secure your long-term income by affording extra interest to your Income Account Value (IAV), which is how the company determines what your income payments will look like. These IAV rates range from 4% to 7.25% and are guaranteed for 7 to 15 years.

Fees

Annual contract fees are nonexistent with the IncomeShield 7 fixed indexed annuity from American Equity. However, if you choose to add on a higher version of the company’s free LIBR, be prepared to pay either a 1.10% or 1.20% fee every year.

American Equity allows annuitants to withdraw up to 10% of their contract value annually. Anything beyond this amount will be subject to the following withdrawal charges.

Withdrawal Fee Schedule
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8+
9.2% 9% 8% 7% 6% 4% 2% 0%

Annuitants that withdraw from their account prior to turning 59.5 years old will receive a 10% income surtax from the IRS, on top of standard income taxes.

Realistic Return Expectations

Your index-based returns will vary depending on which of the four available options you decide to go with. But when it comes to your fixed account, you’ll receive a 1.70% interest rate, as of data from February 2021. The minimum rate for this fixed account is just 0.50%.

Retirement Gold

A fixed account and an indexed account are the core features of the Retirement Gold annuity from American Equity. As you might expect, the fixed account earns interest at a fixed rate, whereas the indexed account follows a market index’s performance. You get to decide which index your money tracks, as there are multiple S&P indexes to choose from.

When you open a Retirement Gold contract, you’ll receive an 8% bonus on any premiums you pay during your first year as an account holder. This bonus vests over a 14-year time period.

The Retirement Gold annuity offers an optional lifetime income benefit rider (LIBR) that operates similarly to the IncomeShield 7 annuity. It attempts to boost your contract’s Income Account Value (IAV). The IAV is how American Equity figures out what your eventual payments will be, so raising it should be of your utmost concern.

The first two LIBR options come with a 6% IAV rate that’s guaranteed for a decade. The third option instead utilizes a 400% multiplier that only lasts for your first year with an account.

Most of the annuities available through American Equity have maximum issue ages of 80 years old and higher. But for the Retirement Gold annuity, you must be 78 or younger. You must be able to put down at least $5,000 to open this account.

Fees

You’ll only pay an annual fee with the Retirement Gold annuity if you accept the optional LIBR. For this, American Equity charges either a 0.90% or 1.00% fee, depending on what type of rider you go with.

The withdrawal fees associated with this annuity are rather high and persist through the first decade of ownership. While American Equity lets annuitants remove up to 10% of their contract value annually after their second year of ownership, withdrawing anything beyond that could be extremely detrimental, as seen in this fee schedule:

Withdrawal Fee Schedule
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11+
12.5% 12% 12% 11% 10% 9% 8% 7% 6% 4% 0%

If you are younger than 59.5 years old, it’s best to wait before you start to take withdrawals from your annuity contract, as the IRS will levy a 10% penalty in addition to your standard income tax rate.

Realistic Return Expectations

As of February 2021, American Equity offers a 1.15% interest rate for its fixed account. This is higher than the company's 1% minimum rate, and it does not include the 8% premium bonus you'll receive over your contract's life. The performance of the index you decide to let your money follow will dictate your index-based returns. Therefore, these returns are unpredictable.

Tips for Your Retirement Plans

  • If you’d like help putting together a retirement income plan, it might be worth joining forces with a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • Don’t forget to include Social Security payments in your long-term retirement income projections. SmartAsset’s Social Security calculator can help you figure out what you can expect to receive.

All information is accurate as of the writing of this article.

Best Places for Small Business Owners

SmartAsset analyzed data to find the best places for small business owners in the country. This interactive map shows the best counties for small business owners in the U.S. and in each state. Zoom between states and the national map to see the top spots in each region. Also, scroll over any county to learn about that region's small business statistics.

Least
Most
Rank County Small Business Returns Small Business Income Income Taxes

Methodology Which places are best for small businesses owners? To answer this question, we considered three factors: the proportion of people in a county with small business income, how much business income those people reported and the amount of tax a potential resident must pay on their income.

To determine how attractive a region is for small business owners, we compared the number of tax returns that report small business income compared to the total tax-filing population of the region. Next, we compared the total amount of small business income to the overall amount of income reported in each region.

Small businesses are typically incorporated as pass-through entities, meaning that the business owners pay income taxes on the company profits rather than the company itself paying income tax. Because of this, income taxes can play a major role in determining the financial success of a given small business. To determine income tax burdens across counties, we used the national median household income. We then applied relevant deductions and exemptions before calculating federal, state and local income taxes for each location.

These three factors were then indexed and equally weighted to yield our small business index. Places with the highest small business index are the places which ranked the highest in the study.

Sources: Internal Revenue Service (IRS), US Census Bureau 2018 American Community Survey, Government Sources, SmartAsset