Nationwide Annuity Review

The Soloist® variable annuity from Nationwide offers an extremely low minimum initial investment of $300. This makes the product attainable even for those with little to no money saved up. As a comparison, most similar variable annuities have a $5,000 to $10,000 minimum. The contract has a maximum issue age of 78.

Like any variable annuity, investing is central to the benefits of this product. Nationwide provides annuitants access to a wide range of mutual funds to flesh out their portfolios. Each of these funds adhere to a distinct investment strategy, with options focused on stocks, bonds, index funds or other combinations of securities. This allows you to pick the one that best aligns with your risk tolerance and desired asset allocation. The annuity also offers an asset allocation feature that automatically rebalances your investments as the market and your situation change.

Fees

Like the vast majority of variable annuities, the Soloist contract comes with a plethora of fees. First a foremost, a $30 fee is charged every year on your contract anniversary. Also on an annual basis is the contract’s 1.30% to 1.33% combined administrative and mortality and expense risk fee. Investments are the centerpiece of a variable annuity, but they don’t come free. Depending on the mutual funds you select, you'll be responsible for certain operating expenses ranging from 0.51% to 2.11%.

When it comes to early withdrawals, Nationwide lets you take out as much as 10% of your purchase payment once your second contract year arrives. Anything over this cap is subject to the fee schedule below.

In the eyes of the IRS, annuities work like any other retirement savings vehicle. So if you withdraw money from your account before age 59.5, you’ll incur a 10% income surtax on top of your standard rate.

Realistic Return Expectations

A variable annuity is an extremely customizable product, as you’re handed the freedom to choose any investments you want within Nationwide’s network of available funds and securities. Given the plethora of investing options, and the inherent unpredictability of the market, it’s difficult to predict what kind of return you’ll see on your variable annuity. Over the last five years, the funds available through this contract have garnered average annual returns from 0.72% to 31.95%.

If you want to open a Nationwide Peak® 5 annuity, you’ll need at least $25,000 ready to invest. For single-life annuitants, the maximum issue age is 90, while joint-life annuitants have a slightly lower 85-year-old maximum age.

As a fixed indexed product, annuitants will receive a fixed account and an indexed account. The former earns interest at a specific rate. On the other hand, the latter garners returns based on the performance of one of the following indexes available to annuitants: S&P 500, MSCI EAFE, Morgan Stanley 3D or J.P. Morgan Mozaic II. You can allocate as much or as little to either account as you want.

The death benefit for this annuity is equal to your contract value. But should you select the joint option, your spouse will be the co-annuitant, meaning they can either accept the death benefit payout or take over the contract.

Fees

This contract is free of annual fees, which is a common feature of fixed indexed annuities. However, while you’re able to take out up to 10% of your contract value annually, anything more than that will induce a withdrawal fee.

Remember that the IRS will levy a 10% income tax penalty if you withdraw anything from your contract before age 59.5. That's in addition to standard income taxes.

Realistic Return Expectations

As of Aug. 2022, Nationwide offers a varying interest rate for this contract’s fixed account. Annuitants with a premium below $100,000 will receive a 3.90% rate, while those at $100,000 or more will receive 4.05%. For the indexed account, each index adheres to an individual rate cap that also differs based on your premium’s size:

• Premiums worth $25,000 to $99,999
  • S&P 500 index - 7.50%
  • MSCI EAFE index - 8.50%
  • Morgan Stanley 3D index - 9.50%
  • J.P. Morgan Mozaic II index - 9.50%
• Premiums worth $100,000 or more
  • S&P 500 index - 8.00%
  • MSCI EAFE index - 9.25%
  • Morgan Stanley 3D index - 10%
  • J.P. Morgan Mozaic II index - 10%

The Nationwide Secure Growth is a fixed annuity that earns interest at a specifically set rate. When you open your account, you can choose between a one-, three-, five- or seven-year guaranteed interest rate period. The rate that comes with the option you select will be automatically renewed through your seventh year as contract owner. Also, the more money you invest, the better the rate you’ll receive.

This annuity automatically comes with a return of purchase payment benefit rider. This states that when you annuitize your contract, you’re guaranteed to receive your purchase payment back, minus any withdrawals or applicable taxes. You'll also receive a 1% bonus on any purchase payments you make during your first year.

To get your hands on the Secure Growth annuity, you must be 90 years old or younger. The minimum initial premium is $10,000.

Fees

Nationwide does not charge an annual fee to continue owning this annuity. In addition to this, there are surrender fees associated with any withdrawals you take beyond the interest your contract has accumulated thus far.

If you’re 59.5 years old or younger, the IRS will charge you a 10% income surtax on withdrawals from your annuity. This won’t preclude you from paying your standard income tax rate as well.

Realistic Return Expectations

The Nationwide Secure Growth annuity splits its interest rates up by the size of annuitants’ purchase payments. For reference, this contract has a 0.50% minimum interest rate. If you're not particularly satisfied with the interest rate you're given, a certificate of deposit (CD) could be a valid alternative.

The INCOME Promise Select® immediate annuity calls for a $10,000 minimum investment. This money will be protected by Nationwide’s liquidity feature that affords annuitants the chance to make lump sum withdrawals from their account if a financial emergency arises, for an extra cost. The only stipulation is that you must select one of the term-certain or cash-refund payment options below.

When you purchase this contract, you can pick from monthly, quarterly, semi-annual or annual payments. There are also 10 income options:

• Single Life
• Single Life With Cash Refund
• Single Life With 5- to 30-Year Term Certain
• 3- to 30-Year Term Certain
• Joint and Survivor
• Joint and Survivor With Cash Refund
• Joint and Survivor With 5- to 30-Year Term Certain
• Joint and Last Survivor
• Joint and Last Survivor With Cash Refund
• Joint and Last Survivor With 5- to 30-Year Term Certain

Nationwide has also made available free annual cost-of-living adjustments of 1% to 5%. These must be selected at contract issue. The contract also comes with a liquidity feature that allows annuitants to make a lump-sum withdrawal under qualifying conditions if they have an emergency and need extra cash.

Fees

The INCOME Promise Select annuity from Nationwide is a virtually fee-free contract, as annuitants are not subject to annual fees or withdrawal charges. It’s worth noting, though, that this is a common setup for immediate annuity variations, as they are solely built to provide a steady income stream.

The tax rules surrounding retirement accounts like annuities are simple. If you withdraw from your account before you reach age 59.5, you’ll pay a 10% income surtax in addition to standard income taxes.

Realistic Return Expectations

Immediate annuities are not meant to provide returns. Instead they focus on guaranteeing income for life a specific period of time. However, should you choose life payments and outlive your premium, you'll technically receive back more than you put in.