National Western Life Annuity Review

The Ultra Classic® Annuity from NWL is a flexible premium deferred annuity, meaning you can contribute to your contract over time and have taxes deferred until retirement. As a fixed indexed annuity, you have the opportunity to benefit from both investment-based and fixed returns.

Your initial premium payment must be at least $2,000, or $5,000 for a non-qualified account. You can make additional contributions at any time, but they must each be at least $100 in size. This money will grow in varying ways depending on how you choose to allocate it. One option is the contract’s fixed interest rate, which is presented by NWL in advance and won’t change for at least the first year of your contract.

For the indexed half of this contract, you have three strategies to pick from: Monthly Average with Participation Rate and Asset Fee Rate, Annual Point-to-Point with Cap and Charge and Annual Point-to-Point option with Participation Rate and Asset Fee Rate. Here’s a breakdown of each:

• Option A - Monthly Average with Participation Rate and Asset Fee Rate: Your annual return is calculated by finding the percent change between the average of the S&P 500 over the last 12 months and its value on the prior anniversary of your contract. This value is then multiplied by the participation rate and the Asset Fee Rate is subtracted. What’s left is your interest rate for that year. If the value is negative, then your account will remain unchanged.
• Option J - Annual Point-to-Point with Cap and Charge: The amount your account is credited is determined by calculating the percent change between the current value of the S&P 500 and its value on the previous contract anniversary. If this is below your percentage cap, then the charge rate will be subtracted and the remainder will be applied to your account.
• Option U - Annual Point-to-Point option with Participation Rate and Asset Fee Rate: This is essentially a hybrid between the two prior options. In turn, the percent change is calculated in the same way as Annual Point-to-Point with Cap and Charge. Next, this change is multiplied by the participation rate and the asset fee rate is then subtracted. What remains is credited to your account value.

Fees

If you choose to add the optional withdrawal benefit rider to your contract, you’ll pay a maximum annual fee of 1%. Additionally, the maximum asset fee rates for Option A and Option U are 6%. For Option J, there’s a 2% maximum annual charge rate.

After the first year of your contract’s life, you can make a single annual withdrawal of up to 10% of its balance. If you withdraw more, then you’ll face a withdrawal charge. If you go a whole year without making any withdrawals, then your 10% from that year can roll over to the next year, up to 50%. Withdrawal fees go as follows:

With any withdrawal you make before age 59.5, you may face a 10% income tax penalty from the IRS.

Reasonable Return Expectations

Forecasting the returns of any fixed indexed annuity is difficult, as it’s essentially impossible to tell where the market is actually headed. But while NWL does not release its fixed interest rates, it does offer some numbers in relation to its indexing methods:

• Option A - Monthly Average with a Participation Rate and Asset Fee Rate
  • Minimum participation rate: 50%
  • Maximum asset fee rate: 6%
• Option J - Annual Point-to-Point with Annual Cap and Charge
  • Minimum annual index cap rate: 1%
• Option U - Annual Point-to-Point option with Participation Rate and Asset Fee Rate
  • Minimum participation rate: 20%
  • Maximum asset fee rate: 6%

For reference, a participation rate equals the percentage of an index's performance you'd be credited with. For example, if an index gained 10% returns over a year, you'd receive half of that with a 50% participation rate.

The NWL Prevail Seven® is a fixed deferred annuity that’s available to anyone under the age of 90 with at least $5,000 to invest. The account comes with a 10-year fixed interest rate period that features a withdrawal fee schedule of the same length. However, once your contract reaches its 17th anniversary, you can annuitize and start receiving payouts for a fixed period of at least five years.

This contract comes with a standard death benefit. If you die before your annuitization date, your account’s full value will be paid to your beneficiary. But if you pass away after the annuitization date, your beneficiary will only receive any unpaid guarantee amounts.

Fees

The NWL Prevail Seven® is light on fees in general, but you will have to watch out for withdrawal charges. These charges will kick in if you attempt to withdraw more than 10% of your money within one year of your contract. The penalty is applied as a percentage of the withdrawal that exceeds 10%; those penalty percentages decrease as your contract matures, according to the following schedule:

An annuity is a retirement savings product, so if you withdraw from it before age 59.5, you’ll be hit with a 10% income surtax by the IRS. This is in addition to your standard income tax rate.

Reasonable Return Expectations

The NWL Prevail Seven® Annuity comes with a guaranteed minimum interest rate of 2%. During your first year as an account holder, though, you’ll receive an upgraded interest rate of 7%. This rate is subject to change each year, though.

The NWL Benefit Assurance Annuity is a fixed annuity that accrues interest at a specific rate throughout its term. Although you can annuitize this contract after just five years, its early withdrawal fee schedule lasts 14 years. To open this account, you’ll need to be 85 years old or younger and have $5,000 ready to invest.

NWL also offers a bonus on premiums you make to this contract. For your first year, the bonus is 5%, with a 4% bonus applying to premiums made from years two through five.

Regardless of when you die, the death benefit attached to this contract is equal to its accumulation amount. You have full authority to name whoever you want as your beneficiary.

Fees

Fixed annuities are known for being largely fee-free, and the NWL Benefit Assurance Annuity is no exception. In fact, the only fees to be mindful of are early withdrawal charges. While NWL allows annuitants to withdraw up to 10% of their contract value annually, anything above that amount will be accompanied by a withdrawal penalty.

The IRS charges any annuitants who withdraw from their contract before reaching age 59.5 a 10% income tax penalty. This is in addition to standard income tax rates.

Reasonable Return Expectations

The interest rate for this annuity is determined by averaging the “5-Year Constant Maturity Treasury Rate” for each month starting with seven months before the start of the current quarter and ending one month before, then subtracting 1.25%. The minimum rate is 1%, and the maximum is 3%.