USAA, which stands for United Services Automobile Association, has been providing financial services to its members for nearly a century. The company has its hands in nearly every area of finance, including annuities, bank accounts, insurance policies, mortgages, investment accounts, retirement accounts and more. USAA membership is largely restricted to people affiliated with the US military, and the easiest way to become a member of USAA is to be a member of the armed forces. However, in many cases, these members’ spouses and children will also be eligible for membership.
Annuities can be particularly confusing, as they often include many features, fees, investments and more. Enlisting the expertise of a financial advisor can be extremely helpful when considering an annuity as part of your retirement gameplan.
| Annuity | Fees | Annuity Type | Minimum Initial Premium | More Information |
|---|---|---|---|---|
| Fixed Guaranteed Growth Annuity Find an Advisor |
| Fixed annuity | $20,000 | Annuity TypeFixed annuityMinimum Initial Premium$20,000 |
| USAA Single Premium Immediate Annuity Find an Advisor |
| Immediate annuity | $0 | Annuity TypeImmediate annuityMinimum Initial Premium$0 |
USAA has secured superb financial strength ratings from some of the top ratings companies. A.M. Best has it at an A++ (Superior, highest), Moody’s has it at an Aa1 (Excellent, 2nd-highest) and Standard & Poor’s (S&P) has it at an AA+ (Very Strong, second-highest).
Fixed Guaranteed Growth Annuity
The Fixed Guaranteed Growth Annuity is a deferred, fixed annuity. As a base, you can choose either a 3-, 5- or 10-year guaranteed rate period, during which your money will grow at a set interest rate for the length of that period. Once it ends, you’ll still earn interest, but the rate is subject to change, though USAA does utilize a rate floor. The annuity is light on fees, but the contract calls for an initial investment of at least $20,000 for the 5- and 10-year variations, while the 3-year version requires a minimum investment of $50,000.
Once you begin receiving payments from your annuity, you are guaranteed to receive them for the rest of your life. It also comes with a death benefit. So when you pass away, your chosen beneficiaries will receive what remains in your annuity account.
Fees
After the first year, you can withdraw up to 10% of your annuity without paying a surrender charge. If you withdraw more than that, you’ll face a fee on the excess, which will adhere to the following schedule:
| Withdrawal Fee Schedule | ||||||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | Year 11+ |
| 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0.5% | 0% |
One exception to this is the Critical Care Withdrawal rule, which allows you to withdraw at no charge to pay for expenses related to nursing home, assisted living or home-health care. Since the annuity is tax-deferred, you’ll face a 10% penalty on any amount you withdraw before you turn 59.5.
Realistic Return Expectations
As of Aug. 2022, guaranteed interest rates for the Fixed Guaranteed Growth Annuity are as follows:
| Fixed Guaranteed Growth Annuity Rates | |||
| Contribution Amount | 3-Year Contract | 5-Year Contract | 10-Year Contract |
| Less than $50K | 2.50% | 3.20% | 3.25% |
| $50K - $100K | 2.55% | 3.20% | 3.25% |
| $100K - $250K | 3.15% | 3.60% | 3.65% |
| $250K - $500K | 3.15% | 3.60% | 3.65% |
| $500K - $1MM | 3.15% | 3.60% | 3.65% |
| $1MM and higher | 3.15% | 3.60% | 3.65% |
USAA Single Premium Immediate Annuity
The USAA Single Premium Immediate Annuity (SPIA) allows you to start receiving payments immediately or within a year after you invest money. There are three payout options with this annuity.
First, you can elect to receive regular payments for a set period of either 10, 15 or 20 years. With this option, you can choose a beneficiary that would receive the remainder of your payments if you die before the term’s end. You can also choose to receive guaranteed payments for the rest of your life. With this option, payments cease once you pass away, and no beneficiary payments are available. In addition, your payments can be fixed or you can have them increase by 1%, 2% or 3% each year.
There’s also a combination of these two options called “Lifetime and a Guaranteed Period of Time.” With this, you choose a guaranteed period and a beneficiary, but you’re also guaranteed payments for your life. Therefore, your beneficiary will only receive payments if you die before the end of your guaranteed period. But if you outlive that preset period, payments will remain for life.
Fees
Most immediate annuities come without any contract or maintenance fees, and this one is no exception. The sole charge you might have to worry about is the 10% IRS penalty, which only comes into play if you make a withdrawal before age 59.5.
Realistic Return Expectations
The primary feature of immediate annuities is that you start receiving payments soon after you make your investment. Consequently, returns are often minimal. However, if you choose the lifetime payout option and you live long enough, there’s a possibility that you’ll get more in payments than you initially invested.
Retirement Planning Tips
- Annuities are complex products, so finding a financial advisor to help you pick one out could be a worthwhile venture. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Just because you have an annuity doesn’t mean that your retirement income plans are set. Be sure to take advantage of every option available to you, such as contributing to a 401(k) via your employer.
All information is accurate as of the writing of this article.
