This shouldn't be a surprise. As interest rates fall, you can expect returns to be smaller and smaller on index annuities. The annuity business has grown in popularity as investors, especially those nearing retirement, look for options to protect themselves from stock market volatility and give them a decent income stream in retirement. Today I will dig deep into the Allianz Annuity which was launched in January of and was one of the best selling indexed annuities in the industry for the 4th quarter of This is the biggest percentage increase of any form of annuity.

You will often hear that annuities are sold, not bought. This is exactly why I will go in depth into some of the most popular annuities because there is shockingly little information available about them. Most of the information comes from the companies that sell the annuities and they gloss over the fees, risks and downsides. More importantly, annuities have grown into extremely complex instruments which even the most season professional may have trouble deciphering.

Indexed annuities, often the black sheep of retirement products, have a history of being so complex that they were a focal point of litigation and regulatory action in the s. While the negative attention led to a change for the better among the carriers, indexed annuities are still complex and difficult to truly understand.

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It is of the utmost importance to make an informed decision. I am writing this blog from the perspective as a curious analyst. I am totally impartial as I am a fee only registered investment advisor. I don't get paid to sell annuities nor do I personally sell them. I hope to bring a unique perspective to this topic drawing on my years of experience analyzing companies as a research analyst.

While many investment professionals hate annuities, I do not believe that they are all bad and some of them can make sense as a small part of your investment portfolio. Annuities should never, I repeat never, be the large majority of your portfolio because of their lack of liquidity which is one of their biggest drawbacks. It is important to look at the issuer of the annuity first because annuities are NOT a guaranteed investment of any sort. This is important to note so I will say it one more time.

Annuities are NOT guaranteed. Therefore if the issuer goes bankrupt, you are at risk of losing everything! It is the 2nd largest money manager in the world. Allianz in North America includes PIMCO and Allianz Global Investors. Here is a chart of Allianz SE:. Allianz Life receives solid ratings from all the leading rating agencies. This rating is the third highest out of 21 possible ratings. Moody's rates the company Aa3 with a stable outlook. Allianz is the 1 seller of fixed annuities in the US.

Sheryl Moore, CEO of annuity research firm Wink said she thinks Allianz's relative new "Allianz Preferred" program has boosted sales. She says, "The secret sauce is in that commission structure. Product launched January Surrender charges and period for this annuity are the typical of most indexed annuities. However if you are under age I believe surrender fees are one of the worst features of annuities. These are huge lockup fees and if you need the money, they sock it to you. This is why annuities should NEVER be a significant part of your investment portfolio because they are essentially illiquid for many years.

Unless you are positive you will not need access to these funds, then annuities are NOT for you. This indexed annuity also called an equity-indexed annuity, fixed-index annuity or hybrid annuity will likely be packaged around two main components:. I'm certain that this annuity is being pitched too aggressively in terms of expected return as Allianz saw a surge in sales at the end of last year.

The Annuity was launched in early with attractive cap rates to make returns look very appealing to prospects.

I admit that this is a brilliant marketing move by Allianz. Cap rates have already been coming down for both the Allianz and the Allianz in Anything more is a pipe dream. Many agents will give an example of: Great sales pitch but not the reality. In addition, to receive the PIV, including any premium bonuses and interest bonuses, clients must hold their annuity in deferral for at least 10 contract years and begin receiving lifetime income withdrawals after age Also understand that your account value isn't receiving any bonuses at all, only the PIV.

Just note that spreads have been rising dramatically from 2. Let me say that this is an incredible sales pitch. There is only one other person that promised those returns and you can reach him in his jail cell: It is too good to be true. Trust your instincts and run if any agent is selling you that dream. Matlab automated trading system is a quote from a National Sales Director of annuities that I'm connected with on LinkedIn.

Many do not realize that bringing in into play the then Lehman Bond Aggregate [now Barclay's] was Since publishing this in and updating inI thought it would be free indikator trading forex good idea to add an update for As I hear from readers comments and questions, it is clear that this is now being sold with the primary interest crediting option now being the Barclays US Dynamic Balance Index II prior to and in the original blog post, it was the Barclays US Dynamic Balance Index.

So why the change? I guess the returns weren't attractive enough to sell so they created the Index II which morgan stanley stock broker jobs stellar returns and no down years at all at launch.

Keep in mind that this new index was created April 14, so virtually all the data is purely hypothetical back-tested levels.

It's unsurprising that the historic data is compelling so it makes a great sales pitch. It hasn't been a year of real data for the index but the results aren't living up to the back tested results.

Here is a chart of the index since launch. This is a brand new index that you shouldn't count on reproducing the back tested results because the live results are pretty ugly so far.

For those that chose this option in its first year of existance will probably be disappointed to see a big fat zero return that it will likely produce on the contract anniversary. The back tested results should be considered the absolute best case scenario. Don't expect those results going forward. Remember with all index choices, Allianz can change the caps and spreads on the annual reset so that makes it even more challenging to forecast returns.

It is important to understand that you are not investing in the underlying securities of any index. With index annuities, you are not making investment choices like a variable annuity.

Your interest crediting options are mathematical formulas that the insurance company is using to attract you into buying xyz annuity. The insurance company invests your money in whatever they choose likely diversified, conservative investments. They just have to earn a return higher than their mathematical formula or interest crediting option so they can pay you, their sales force, marketing, operations, etc.

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This is why index annuities will only generate low single digit returns. For the Allianz Annuity, you may select from 6 different interest crediting options: To make it a bit more complex, you have three different crediting methods: So let's dig a bit deeper into your choices. As of May 6,the Fixed interest allocation is currently paying 1.

This is slightly better than ls1 money maker intake 5-year Treasury Note at 1. You can likely beat the fixed account on your own. So onto the Indexed interest options. If someone is promising higher returns then you need to find a more honest agent. I will illustrate this for you. Let's first look at the monthly sum crediting method which looks at ose single stock options index return with a cap as of May certified stock brokers nigeria list, This cap can be changed at any time and allianz listed stock market already declined since last month.

It will never be less than 0. There is no cap on negative months. At the end of the year, the totals are added up and that is your return for the year. If it is negative, you don't lose anything.

Here is a hypothetical example for remember the product earn money by uploading ppt in In the Allianz Annuity, if you selected monthly sum crediting, you would be credited forecast day trading forex strategies worksheet a gain of allianz listed stock market.

If you selected the annual point-to-point crediting option, you would receive 2. It is important that note that Allianz can change your caps at any time.

Let's take a look at how the Allianz annuity would fare at current cap rates over the last 10 years. Note that these are hypothetical returns because the Allianz annuity only launched in January As you can see, the monthly sum method produced a couple of big years and but were offset by many big fat zeros. If you would like to see the numbers in more detail, just shoot me an email via our secure form and I'd be glad to share the numbers with you. The Barclays US Dynamic Balance Index UPDATE: It theoretically has been very good over the past 5 years.

Of course that period was a great time to be in equities and not this index. Here are the numbers using the current spread of 2. Your return for any given year will never be lower than zero.

What a great marketing pitch for the product's first year in existence. However you shouldn't expect this type of return over an extended period as was an exception, not the norm. If you are satisfied with these types of returns then it is fine.

I just don't want you to expect more because you will surely be disappointed. If you have additional questions about these options, please submit a question using our secure form.

We will answer your questions within 24 hours via email. No strings attached, just a little free help to point you in the right direction. The annuity can make sense for an extremely conservative investor who is looking for guaranteed income with no market risk. If you are happy with low investment returns and a guaranteed income stream, then this product may be acceptable for you.

Be sure to evaluate how it fits into your entire investment strategy and how it will help you reach your financial goals. If this gets too far out of line, Allianz will adjust the caps to as low as 0. Allianz has already been lowering caps and raising spreads in and even more in ! It would be no surprise to see this continue throughout and If you're considering this annuity and have additional questions, feel free to reach out.

You can contact us via our secure contact form. If you have questions about this annuity, please share them in the comments section below or visit our secure page to submit a question. By Chris Wang May 19, Categories: Please remember that past performance may not be indicative of future results. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede Capital Management, Inc.

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Perspective That You Can Trust I am writing this blog from the perspective as a curious analyst. Allianz SE and Allianz Life It is important to look at the issuer of the annuity first because annuities are NOT a guaranteed investment of any sort.

Allianz SE is a global financial services group headquartered in Munich, Germany. Here is a chart of Allianz SE: Allianz Annuity Maximum age for initial purchase: Provides level payments for the rest of your life Provides lifetime income plus an opportunity for payment increases Allianz Income Multiplier AIM benefit, allows you to double annual maximum income withdrawal if confined to a nursing home, hospital or assisted living facility Potential indexed interest limited by caps, spreads and participation rates Protected Income Value PIV bonuses if clients hold their annuity in deferral for at least 10 years and receive lifetime withdrawals after age 60 Get a guaranteed minimum value of Share This Story, Choose Your Platform!

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