Transamerica Annuities Review

The Transamerica Inspire annuity is a variable annuity that enables annuitants to take advantage of investment options for retirement that are not available to the general public. Transamerica has partnered with many different financial advisor firms to bring these opportunities to their customer base. Some of the typical options include insurance funds and bonds funds, as well as portfolios built around varying levels of risk tolerance or desired returns. There is a max issue age of 80 years old.

Paired with this annuity are multiple death and living benefits that make it customizable. For living riders, you can choose from the following: the Guaranteed Principal Solution benefit, the Retirement Income Max® benefit, the Transamerica Income Edge benefit and the Retirement Income Choice® 1.6 benefit. This quartet of riders provides differing protections of your minimum lifetime withdrawals and accumulation benefits, and only one can be active at a time.

If you’re interested in giving your beneficiaries more than what your base death benefit will, you can purchase the Additional Death Distribution or Additional Death Distribution+ upgrades. The former qualifies your contract for a larger death payout based on what you earn from other riders, while the latter offers the most upside with a bonus centered around your benefit base.

Fees

Most importantly, there is a $50 annual service charge associated with this annuity, although you can lower this rate under the right circumstances. In fact, you can get it as low as $15 if your premiums or overall policy value exceeds $50,000, or a full waiver is available for any with a contract worth more than $250,000. Be aware that there’s also up to a 0.30% annual fund facilitation fee for the various investment options that this variable annuity offers.

Annuitants that choose to add on benefit riders open themselves up to extra charges, the most expensive of which is attributed to the death benefit. For this, you’ll need to pay a 1.15% mortality and expense risk (M&E) fee and a 0.15% administrative charge. There are other similar fees for living benefits and the liquidity rider as well.

To deter annuitants from withdrawing substantial money from their account ahead of time, Transamerica institutes a seven-year early withdrawal fee schedule. These rates get lower every year, and go as follows: 8%, 8%, 7%, 6%, 5%, 4% and 3%. You can make some withdrawals, as up to 10% of your premiums can be withdrawn annually at a minimum amount of $500.

For most annuitants, income taxes are expected to be taken from your distributions. The IRS does reserve the right to impose a 10% tax hike for anyone who starts receiving money before they are 59.5 years old.

Realistic Return Expectations

Like all variable annuities, the Transamerica Inspire Variable Annuity features fairly high fees, but strong opportunities for returns. However, because these returns are earned via market performance, they are impossible to predict.

Like all of the annuities at Transamerica, the Variable Annuity Series B-Share provides an opportunity for tax-deferred growth. This is one of the biggest factors that determine how viable a retirement account can be, as it allows your money to snowball without the effects of Uncle Sam. 89 years old is the maximum issue age for this annuity.

Riders are again the centerpiece of this policy. It includes four living riders (Guaranteed Principal Solution, Retirement Income Max®, Transamerica Income Edge and Retirement Income Choice® 1.6) and two death riders (Additional Death Distribution and Additional Death Distribution+), although there is a base death benefit for annuitants who pass away during the accumulation phase. You have complete free rein to decide which, if any, you want to add to your contract, but remember that they don’t come free.

Variable annuities are based around informed investments with your retirement assets in the general market or indexes. But selecting a rider could limit the advantage of these investments, as Transamerica will designate which options you can invest in and which you cannot.

Fees

The Variable Annuity Series B-Share has a fairly standard fee schedule, as it most notably features an up to $50 annual service charge, a 1% M&E fee and a 0.15% administrative charge. The firm realizes that $50 annually can eat away at some of your returns, so it does offer a waiver system. If a customer has a policy worth $50,000 or has spent at least that amount on premiums, you’ll get up to $35 off. Anyone who can bump that number up to $250,000 will skip the fee entirely.

Like most annuities at Transamerica, an annual fund facilitation fee is determined by which investment options you select. This can be as high as 0.30%, and there are no waivers available. There are also portfolio operating expenses that vary from 0.44% to 1.48%.

Transamerica has instituted a seven-year withdrawal charge system for this annuity that decreases every year that you remain an account holder. During year one and two, this will be 8%, with rates subsequently falling to 7%, 6%, 5%, 4% and 3% every year following that time frame. However, you are allowed to make up 10% annual withdrawals during this time, so long as they are at least $500 in size.

For the majority of annuitants, the money that’s received as payments is subject to the federal income tax. Although this is essentially an unchangeable fact, you can avoid the 10% tax hike by waiting until age 59.5 to begin taking out money.

Realistic Return Expectations

There are over 60 investment options that Series B-Share customers can choose from when fleshing out their portfolios. So as you can likely imagine, the levels of potential return are equally as varied. Like any variable annuity, though, returns are entirely dependent on market performance, which makes them unpredictable.

Transamerica Variable Annuity Series C-Share is a tax-deferred variable annuity with a max issue age of 89. It offers customers the chance to invest in many different investment funds, portfolios and other strategies. Most of these are proprietary options, although some are from Fidelity® and JPMorgan. It would be best to speak to a financial advisor to decipher which investments are best for your plans, as they’re built around government funds, exchange-traded funds (ETFs), various risk levels and more.

What’s remarkable about this annuity is that account holders can make unlimited withdrawals, so long as each is larger than $500. Being that most of the other annuities at this firm typically run early withdrawal charges of between 3% and 8%, this is a particularly surprising revelation.

Once you’re ready to begin taking regular withdrawals, you can choose to have them paid monthly, quarterly, semi-annually or annually. There are some conditional withdrawals too, though. For example, if you find yourself terminated or laid off from your job, you can take extra withdrawals. The same policy applies if you or your spouse have been living in a hospital or nursing home for 30 or more days in a row.

Fees

Being that there are no withdrawal charges for Series C-Share annuitants, it should come as no surprise that the policy’s benefit fees are on the higher end of the spectrum. For example, your M&E and administrative fees start at 1.55%. This could be extremely restrictive for many customers, although the simultaneous lack of withdrawal fees could be infinitely beneficial for customers that think they’ll need to take out cash along the way.

The IRS employs stringent policies in regard to when individuals can begin taking distributions from their retirement accounts. In this case, anyone younger than 59 years old that does this could encounter an extra 10% in income tax.

Realistic Return Expectations

You should always consult a financial advisor when selecting a portfolio model or set of investments for your variable annuity. But what helps make the Series C-Share annuity so enticing for even a novice is that it features a ton of different options. However, because of the investment-centric nature of this annuity, returns are impossible to predict.

The nearly nonexistent fees of the Transamerica Variable Annuity I-Share is undoubtedly the strongest point of this annuity policy, but its set of investment options is also very favorable. There are some crossovers from other annuities, but its inclusion of Vanguard and even more proprietary portfolios gives it a leg up. This annuity holds a max issue age of 90.

Like the Series C-Share variable annuity above, this account is devoid of all withdrawal charges. That means you can make as many withdrawals over $500 as you want, although this time around it doesn’t include medical- or job-based reasons on top of that. There are a number of living and death benefit riders available with this annuity too.

Fees

If you solely look at the fee structure of the I-Share annuity, you might be surprised at how favorable some of its associated costs are. The combined M&E/administrative fee is 0.20%. However, the up to 0.60% annual fund facilitation fee for investments is nearly double that of the other annuities on this list. The annual service charge is still the traditional $50, and it adheres to the same waiver standards (up to $35 for policies higher than $50,000 or up to $50 for policies higher than $250,000).

The federal income tax is already a thorn in the side of retirees, so tacking on surcharges would likely be at the bottom of everyone’s list. As long as you wait until you reach 59.5 years old, you will avoid the 10% surtax from the IRS.

Realistic Return Expectations

As their name makes clear, variable annuities often have many conditions that make it hard to read what your returns could look like. This becomes equally difficult when you consider the number of investment opportunities available through Transamerica.