Protective Life Annuity Review

Protective ProSaver Platinum Plus is a fixed deferred annuity. This means that you lock in your money for a chosen amount of time and Protective Life will pay a declared interest rate. The guaranteed periods can be three, four, five, six or seven years, and you can allocate your money to different periods. The minimum amount for each period is $2,000, while the contract's overall minimum is $10,000. The maximum issue age is 85 years.

At the end of each guaranteed period, you can withdraw your money, transfer it to another available period, renew it for a year (during which time there are no early withdrawals penalties) or renew it entirely. If you should die before you annuitize, your beneficiaries will receive the full amount of your contract value.

When it’s time to turn your savings into an income stream, you have five options: to receive income for life, to receive income for a set period of time, to receive income for life with a certain period guaranteed (if you die before then, your beneficiary will receive payments until the period ends), to receive income for life with a cash refund (if you die with a remaining balance, your beneficiary will receive a lump sum) and to receive income for life with an installment refund. These options are also available for joint policies.

Fees

This annuity has no front-end or annual administrative or maintenance fees. But there are surrender charges for early withdrawals. Any withdrawal before the first anniversary of the contract or that amounts to more than the earned interest during the prior year is considered early. The fee for the initial guaranteed period starts at 8.5% the first year and decreases 1% every year till the end of the guaranteed period.

Also, early withdrawals will be subject to a market value adjustment (MVA). This means that you may get less or more than the amount you withdraw, depending on if interest rates are higher or lower on the day of the withdrawal compared to the contract date.

Additionally, withdrawals before age 59.5 may incur a 10% IRS penalty, plus ordinary income tax.

Realistic Return Expectations

As of February 2021, Protective Life’s brochure describes the minimum interest rate as between 1% and 3%. At those minimum rates, the most you can hope for is to keep pace with inflation. If there’s any chance you may need to access the money before the contract matures, you may be better off with a certificate of deposit (CD). Top CD rates are lower, but the penalty for early withdrawals is also cheaper.

Another fixed deferred annuity, the Protective Secure Saver is a seven-year contract. This means your interest rate is locked in for seven years. At the end of the contract, you can withdraw your money, renew for a year (with no penalties for withdrawals) or annuitize. 

If you annuitize after renewing three times, you may receive a 2% bonus. Your payout options are the same as for the annuities above (lifetime income, income for a certain period, lifetime income with a certain period, lifetime income with a cash refund or lifetime income with an installment refund).

Should you die before you annuitize, your beneficiary will receive the full amount of your contract value. This annuity also has a healthcare waiver that allows you to withdraw money without a penalty in the event you or a spouse are diagnosed with a terminal illness or must go to a qualified medical care facility (such as a nursing home) for at least 30 consecutive days. There is also an unemployment should you or a spouse become unemployed. Both waivers may not be available in some states.

The minimum purchase amount is $10,000. The maximum issue age is 85.  

Fees

This annuity has no front-end or administrative charges. But there are fees for early withdrawals, called surrender charges. They will kick in if you withdraw more than the allowed 10% each year. Surrender charges start at 9% and decrease 1% every year until the end of the contract. Withdrawals will also face a market value adjustment (MVA). This means the actual amount you receive may be less (or more) than the amount you withdraw, depending on whether the interest rate is higher (or lower) than what is was on the contract date.

Additionally, withdrawals made before age 59.5 may be subject to a 10% IRS penalty, on top of income tax.

Realistic Return Expectations

According to Blueprint Income, Protective Life is offering 1.55% for seven-year contracts, as of February 2021. This rate is subject to change based on market conditions. Also, if you invest significantly more than the $10,000 minimum, you may receive a higher rate.

Protective Indexed Annuity II is a fixed indexed deferred annuity. This means you can earn either a fixed interest rate or an indexed rate, which is linked to the annual return of the S&P 500 Index. Of the two indexed rates available, you can choose to be credited on a capped point-to-point annual basis or on a tiered annual basis, which means you earn interest if the index has reached a certain level during the year. At the time of the contract, you allocate your money among these strategies and can reallocate every contract anniversary, when rates reset.

In the event that you die before during the guaranteed period, your beneficiary will receive the greater of the contract value or the minimum surrender value as of the date that Protective Life receives proof of death. The annuity also offers healthcare protection, where you can withdraw money with no surrender charges after the first anniversary if you or a spouse is diagnosed with a fatal condition or must enter a qualified medical care facility for 30 consecutive days. There’s also an unemployment waiver. 

Once it’s time to turn your nest egg into an income stream, you have five payout options: income for life, income for a set period of time, income for life with a certain period guaranteed (if you die before then, your beneficiary will receive payments until the period ends), income for life with a cash refund (if you die before your investment has paid out, your beneficiary will receive the remaining balance as a lump sum) and income for life with an installment refund. These options are also available for joint policies. If you annuitize after the 10th anniversary of your contract date, you may receive a 2% bonus.

The minimum initial deposit is $10,000. You can make subsequent contributions of at least $1,000 as long as they begin before the first contract anniversary and until the oldest policy holderis 86. Contracts can be for five or seven years. The maximum issue age is 85.

Fees

The Protective Indexed Annuity II has no front-end or administrative charges. But there are surrender charges for early withdrawals. They will kick in if you take out more than the allowed 10% each year. Surrender charges are 9% the first two years and then decrease 1% every year after that, until the end of the contract. 

Additionally, withdrawals made before age 59.5 may be subject to a 10% IRS penalty, on top of income tax.

Realistic Return Expectations

For the indexed side of this annuity, returns are unpredictable, as they are reliant on market performance. But as of February 2021, Protective is offering fixed interest rates by contract type and premium amount. They go as follows:

• 5-Year Contracts
  • Without ROP Benefit
    • Less than $100,000 contract value: 1.20%
    • Above $100,000 contract value: 1.45%
  • With ROP Benefit
    • Less than $100,000 contract value: 1.20%
    • Above $100,000 contract value: 1.35%
• 7-Year Contracts
  • Without ROP Benefit
    • Less than $100,000 contract value: 1.30%
    • Above $100,000 contract value: 1.55%
  • With ROP Benefit
    • Less than $100,000 contract value: 1.20%
    • Above $100,000 contract value: 1.40%

The Protective Dimensions IV Annuity is a flexible premium deferred variable annuity. This means you can fund it with more than one deposit and allocate your money to an investment sub-account and a fixed interest account. Within the investment sub-account, there are a wide array of fund options.

This annuity comes with a free death benefit. Should you die before you’ve annuitized, Protective Life will return your deposits, adjusted for any premium taxes, to your beneficiary. For an additional cost, you can select a maximum quarterly value death benefit or maximum anniversary value death benefit if you are younger than 77.

Also for an additional fee, you can add an optional protected lifetime income benefit called SecurePay FXi. This guarantees the ability to make withdrawals based upon the value of your lifetime income benefit base even if your contract value falls due to a market downturn. With this rider, though, your benefit base may increase on the anniversary of your contract during a specified period even if your contract value has not increased.

The minimum initial purchase amount is $10,000, and you can make subsequent payments of at least $100 thereafter (or $50 if set up as an automatic payment). Additional deposits may be limited if you opt for certain riders. The maximum issue age is 85 (you have to be younger than 86).

Fees

Unlike the other annuities in this article, the Protective Dimensions IV Annuity has an annual maintenance fee of $50, though it is waived if your account balance surpasses $75,000. Additionally, there is an annual mortality and expense risk charge and administrative fee that combines for a total fee of 0.75%, as well as a maximum annual premium based charge of 0.70%. On top of that, the funds you invest in will have operating expenses.

If you add the monthly maximum anniversary value death rider, the fee is 0.20%, while the fee for the maximum quarterly value death benefit is 0.25%. Fees for the SecurePay FXi rider are 1.40% annually.

Additionally, if you make early withdrawals (which are any withdrawals that exceed the allowed amount), you will incur surrender charges. These depend on your investment level, and generally decline 1% every year. The maximum surrender charge is 7%. What’s more, any withdrawals before you reach age 59.5 will be subject to a 10% IRS penalty and income tax.

Realistic Return Expectations

This investment is meant for long-term investors. Over time, you will likely do better than inflation - and then some, assuming your asset allocation is geared for growth. That said, fees will cut into your earnings.

The Protective ProPayer Income Annuity is a single premium immediate annuity. This means that in exchange for a lump sum, you will receive periodic payments right away or you can defer up to 12 months. The size of your payments depends on your premium and age.

With this annuity, you have four payout options: to receive payments for a certain period, to receive payments for life and with a guaranteed period (if you die before the period is over, your beneficiary will receive payments until the period ends), to receive payments for life with an installment refund (should you die with a remaining balance, your beneficiary will receive payments until the balance has been paid out) or to receive payments for life with a cash refund. If you want to cover a spouse, you can get joint and survivor payments for life and for a certain period. 

Premiums can be as low as $50,000 and as high as $1,000,000. The maximum issue age is 99.

Fees

Like all immediate annuities, this contract has no front-end or administrative charges.

Realistic Return Expectations

Whether or not you and your beneficiary get your money back - and then some - depends on how long you live. The insurance company, of course, is banking that it won’t have to pay out more to you than it took in.