North American Annuity Review

The Strategic Design Annuity X comes with two separate accounts: a fixed account and an indexed account. The former earns interest at a prespecified rate that’s handed to you by North American upon contract issue and every year thereafter. The latter adheres to the performance of one of six indexes that the company offers to annuitants.

North American is notorious for its high minimum initial premiums, and this fixed indexed annuity is no different with a $50,000 minimum requirement. You’ll need to be 79 years old or younger to get this annuity. When it comes time to receive payments, annuitants can choose between either level or increasing distributions.

Fees

The only fee you have to worry about with the Strategic Design Annuity X is the 0.95% annual charge for the embedded benefits rider. Otherwise, there are no annual fees.

Once you’ve owned your account for at least one year, North American allows you to withdraw as much as 7% of your contract value per year. However, the enhanced penalty-free withdrawals feature could push this up to 32%. Anything above your limit will be subject to the following withdrawal charges:

If you’re younger than 59.5, the IRS will levy a 10% income surcharge on any withdrawals you make, on top of your standard income tax rate.

Realistic Return Expectations

The Strategic Design Annuity X features a 1.70% fixed interest rate, as of February 2021. Although this won't always be the rate you receive, North American has a minimum 0.25% rate. Like any fixed indexed annuity, the indexed account's returns will vary based on:

• How you allocate your assets between the fixed and indexed accounts
• How the index you choose to follow performs
• What fixed rate you receive at the time of your account’s opening

You’ll need at least $20,000 in investable assets to get your hands on the NAC VersaChoice 10 annuity. The maximum issue age is 79, and annuitants younger than 17 must have a Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) custodial account.

One of the main benefits of a fixed indexed annuity like this is that you can divide your money between a fixed-rate account and an indexed account. Funds placed in the fixed-rate account grow according to a stable interest rate. But for the indexed account, your money will earn interest based on the market performance of an index. There are three distinct options you can pick from, all of which are S&P 500 indexes.

North American offers an optional enhanced liquidity benefit (ELB). This provides annuitants with four benefits:

• If during the previous year, you only made ELB withdrawals, you'll receive an enhanced 20% penalty-free withdrawal limit for the current year.
• You can terminate your contract after your second anniversary and receive, at the minimum, your contract's net premium paid back, minus withdrawals.
• If you're unable to perform two of the six prespecified activities of daily living (ADLs), you'll be able to withdraw up to 100% of your contract's accumulation value without withdrawal fees.
• If you cannot perform two of the six ADLs any time after your second contract anniversary, you can withdraw your contract's accumulation value with a bonus multiplier added on. For years three through six, these multipliers are 110%, 115%, 120% and 125%, respectively.

Fees

The NAC VersaChoice 10 annuity comes with no annual contract fees in its base form. But should you subscribe to the company's optional ELB, you'll pay a 0.50% annual fee.

As soon as your second contract year begins, you can withdraw up to 10% of your contract’s value every year on a penalty-free basis. Beyond this amount, withdrawal charges apply.

If you withdraw money before turning 59.5 years old, you'll face a 10% tax penalty on top of your standard income tax rate.

Realistic Return Expectations

North American doesn’t provide any sort of return expectations for the index side of the NAC VersaChoice 10 annuity. This doesn’t come as a surprise, as fixed indexed annuities earn returns that are largely based on what index you choose to have your money follow the performance of. For the fixed account, your rate will vary based on your premium size. The following rates are as of February 2021:

• $20,000 - $74,999: 1.15%
• $75,000 - $1,000,000: 1.50%

There are four different guaranteed interest rate periods available through the North American Guarantee Choice annuity. Depending on what’s best for you, the company offers three-, five-, seven- and ten-year time frames during which you’ll earn interest at a prespecified fixed rate. Like a certificate of deposit (CD), the longer you lock your money up, the better the rate you’ll generally get.

North American includes a nursing home confinement waiver with this annuity. This means that if the contract holder is confined to a nursing home for at least 90 consecutive days at any point after their first contract anniversary, they can elect to receive 10% fee-free withdrawal increases every year.

The maximum issue age for this contract is 90, while the minimum initial premium is $2,000. The death benefit related to this annuity is worth your contract's accumulated value, plus interest.

Fees

Although the North American Guarantee Choice MYGA has no annual fees, there are withdrawal charges that last for three, five, seven or ten years depending on what guaranteed interest rate period you select. You are, however, allotted penalty-free withdrawals equal to your interest earned for the current contract year. This doesn’t begin until your second year of ownership, though.

Withdrawals made before an annuitant turns 59.5 years old will be subject to the IRS’ 10% income tax penalty.

Realistic Return Expectations

Your returns depend on a number of factors, including how much you invest and when and what guaranteed interest rate period you select. According to data from February 2021, North American is currently offering the following fixed interest rates with this annuity:

• North American Guarantee Choice 3: 1.85%
• North American Guarantee Choice 5: 1.75%
• North American Guarantee Choice 7: 2.20%
• North American Guarantee Choice 10: 1.95%

The North American Income annuity is meant to provide just that: income. Its technical name is a single-premium immediate annuity (SPIA), and you can receive your payments in seven ways:

• Period certain only: Payments come for 5 to 20 years to the annuitant, or to the annuitant’s beneficiary if they pass away before payments end.
• Single life only: Payments go to the annuitant for the remainder of their life, at which point they cease.
• Single life and period certain: Payments last for a 5- to 20-year period or for the life of the annuitant, whichever is longer. So if they pass away before payments end, their beneficiary receives the balance.
• Single life with installment refund: Payments last for the annuitant’s life. Should they pass away, the beneficiary will keep earning until the original premium is paid back.
• Single life with cash refund: Payments go until the annuitant passes away, at which point a lump sum payment is made to the beneficiary to cover the balance between the payments made and the initial premium.
• Joint life with survivorship: Payments last for the annuitant’s life. Should they pass away, their spouse will continue receiving payments.
• Joint life with survivorship and period certain: Payments are guaranteed for 5 to 20 years, but last for the annuitant’s life. If they pass away, their spouse takes over payments. If both spouses pass away before the period certain is complete, the beneficiary receives the remainder of the payments.

This annuity calls for a minimum initial investment of $25,000 with a maximum issue age of 85 years old for life income options; and 93 years old for period-certain income options.

Fees

Most immediate annuities do not have any fees associated with them, and the North American Income annuity is no exception. This includes contract fees and withdrawal charges.

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

The role of an immediate annuity is to provide income protection for the annuitant. As such, there are no returns to speak of. However, depending on your income option and how long you live, you may wind up receiving more in income payments than you put in. This could be construed as a return on investment.