Prudential Annuities Review

The PruSecure® Fixed Indexed Annuity is a single premium annuity, which means you make one initial payment. The annuity offers two ways to grow your money: with a fixed interest rate and with a rate that tracks a stock index (up to a cap). You allocate as much as you wish to each crediting strategy.

Your fixed account will grow according to a set interest rate. For the indexed account, you have four optionsto follow: the S&P 500 Index, MSCI EAFE Index, Dow Jones U.S. Real Estate Index or Bloomberg Commodity Index. However, your money isn't actually in the stock market. Instead, Prudential says it will pay you a rate that tracks these indices.

Depending on what works best for you, Prudential will let you pick between a five- and seven-year withdrawal charge schedule. If you think you’ll need money sooner rather than later, choose the five-year period; if you can hold off on withdrawals in exchange for higher rates, then the seven-year period is the better choice.

Prospective annuitants must be 85 years old or younger and have $10,000 available to invest. The latest age at which you’re allowed to annuitize your contract is 95.

Fees

There are no annual fees associated with the PruSecure Annuity from Prudential. However, if you withdraw more than 10% of your account’s value, you’ll be subject to the following fees that are dependent on what term length you select.

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% penalty in addition to applicable income taxes.

Realistic Return Expectations

As of Feb. 2021, Prudential offers a 1.00% and 1.05% fixed interest rate on the five- and seven-year withdrawal terms, respectively. For the indexed account, rate caps range from 2% to 6% for the five-year term and 2.05% to 6.25% for the seven-year term. Participation rates range from 10% to 14% for the five-year term and 12% to 16% for the seven-year term.

Like any fixed annuity contract, the Prudential Fixed Annuity with Daily Advantage Income Benefit is built to earn you interest on a sum of money for a given number of years. It works a lot like a certificate of deposit (CD), only it grows tax-deferred like most retirement-centric accounts.

This contract comes with a little extra boost called the Daily Advantage Income Benefit, which comes at an extra cost. Through this, your future income will grow. In turn, the longer you wait to annuitize, the larger your income base will become. This feature comes with a 5.75% annualized growth rate that's divided up so it applies on a daily basis.

The minimum initial premium for this product is $25,000, and the maximum issue age is 85.

Fees

Like most fixed annuities, the Prudential Immediate Income Annuity has no recurring contract or investment-related fees. However, the Daily Advantage Income Benefit comes with a 0.95% annual fee.

You are allowed to withdraw up to 10% of your contract's value each year without incurring extra fees. If you surpass that limit, withdrawal charges will apply, and they last for seven years. Rates start at 7% and fall by 1% annually, until the contract is over.

If you use qualified money and you are younger than 59.5, payments will also be subject to a 10% IRS penalty, as well as ordinary income taxes.

Realistic Return Expectations

The Prudential Fixed Annuity with Daily Advantage Income Benefit comes with a 1.00% fixed interest rate. With the help of the Daily Advantage Income Benefit, though, your future income will continue to grow at an annualized rate of 5.75%.

If you’re looking to merge investing and retirement planning into a single product, the Prudential Premier® Investment Variable Annuity B Series is a solid option. There are plenty of funds to invest in through the company, with options spanning the entire risk tolerance spectrum.

Some funds focus on fixed-income securities, while others are centered around stocks and other asset allocations. Goldman Sachs Asset Management, JP Morgan, BlackRock and Massachusetts Financial Services Company are a few of the managers of these funds.

For those who want to pay up for an upgraded death benefit, Prudential can oblige. For an extra fee, its Return of Purchase Payments Death Benefit will pay your beneficiary the greater of the sum of your purchase payments minus any withdrawals or taxes or the unadjusted account value on the day the company receives proof of death. Otherwise, the standard death benefit pays your contract’s value adjusted for any withdrawals. Both benefits apply only should you die before you annuitize.

Fees

The annual contract fee for this annuity is variable, meaning you’ll be charged the lesser of $50 or 2% of your account value. The entire charge is waived, though, if your total purchase payments equal $100,000 or more. Furthermore, being that this is an investment-centric contract, you’ll pay anywhere from 0.31% to 2.34% in investment portfolio operating expenses. Prudential also charges a 0.48% annual account value based insurance charge, as well as a 0.18% death benefit fee if you subscribe to the optional rider.

You can withdraw up to 10% of each purchase payment you make every contract year. Anything beyond this limit will be subject to withdrawal fees.

To avoid a possible 10% early withdrawal penalty from the IRS, wait until you turn 59.5 to take out money from your contract.

Realistic Return Expectations

As their name indicates, variable annuities have unpredictable returns. In other words, the investments you select and the amount of money you allocate to each will determine what you’ll make over the long term.