The Best Bonus Annuities
| Annuity | Length | Rating | Bonus (Up To) |
|---|---|---|---|
| American Select Bonus Plus | 10 years | B++ | 18% |
| Athene Performance Elite PLUS 15 | 15 years | A | 20% |
| Athene BCA 12 2.0 | 12 Years | A | 13% |
| American Select 7 Series Bonus Plus | 7 years | B++ | 12% |
| Athene Performance Elite 10 Plus | 10 years | A | 18% |
| North American Secure Horizon Plus | 10 years | A+ | 15% |
| Equitrust MarketPower Bonus | 14 years | B++ | 12% |
| Midland IndexBuilder 14 | 14 years | A+ | 20% |
| F&G Performance Pro | 10 years | A- | 15% |
| Athene Performance Elite 15 | 15 years | A | 15% |
| Athene Performance Elite 10 | 10 years | A | 12% |
| North American Charter Plus 14 | 14 years | A+ | 12% |
| Athene BCA 10 2.0 | 10 years | A | 12% |
| Midland IndexBuilder 10 | 10 years | A+ | 19% |
| Americo LibertyMark 10 Plus | 10 years | A | 7% |
| North American Charter Plus 10 | 10 years | A+ | 10% |
| Athene Performance Elite 7 Plus | 7 years | A | 6% |
| Athene BCA 8 2.0 | 8 years | A | 6% |
| Fidelity & Guaranty Accelerator Plus 10 | 10 years | A- | 9% |
| Fidelity & Guaranty Prosperity Elite 7 | 7 years | A- | 4% |
| Americo ClassicMark 10 Plus | 10 years | A | 4% |
| AIG Power Select Builder 8 | 8 years | A | 10% |
| American Select 10 Series Bonus | 10 years | B++ | 12% |
| American Select 7 Series Bonus | 7 Years | B++ | 8% |
What is a Bonus Annuity?
A bonus annuity is a type of annuity product that offers an initial bonus or additional credit to the annuity’s value. This bonus is typically provided when you first purchase the annuity. The aim is to attract customers by giving them a head start on their investment. For example, if you invest $100,000 in a bonus annuity with a 5% bonus, your annuity’s starting value would be $105,000.
Key Features of Bonus Annuities
- Initial Bonus: This is a percentage added to your initial investment.
- Vesting Schedule: Some or all of the bonus may be subject to a vesting schedule, meaning you might have to wait a certain period to fully own the bonus.
- Surrender Charges: Withdrawing funds early may incur high surrender charges, especially in the initial years.
- Tax Deferral: Like other annuities, the investment grows tax-deferred.
- Multiple Investment Options: They often come with a range of investment options, like fixed, variable, and indexed annuities.
Examples of Bonus Annuities
- Fixed Bonus Annuity: Offers a guaranteed rate of return with a bonus on your initial investment.
- Variable Bonus Annuity: Provides a bonus and allows investment in various sub-accounts, similar to mutual funds.
- Indexed Bonus Annuity: Ties your returns to a market index, like the S&P 500, along with an initial bonus.
Comparison of Bonus Annuity Types
| Annuity Type | Bonus Feature | Risk Level | Potential Return |
|---|---|---|---|
| Fixed Bonus | Guaranteed | Low | Steady, lower |
| Variable Bonus | Non-Guaranteed | High | High, variable |
| Indexed Bonus | Guaranteed | Moderate | Moderate, capped |
Annuity Bonus Vesting Schedule
In the context of bonus annuities, “vesting” refers to the process by which the policyholder gradually earns the right to the initial premium bonus provided by the insurance company. The vesting schedule itself is a timeline that outlines the percentage of the bonus that becomes the policyholder’s own money over a series of years.
For example, consider a bonus annuity with a 10% premium bonus on an initial investment of $100,000, equating to a $10,000 bonus. The contract might stipulate a 5-year vesting schedule, with the bonus vesting at 20% annually. Here’s how that would look:
- End of Year 1: 20% of $10,000 = $2,000 vested
- End of Year 2: Additional 20% = $2,000, making a total of $4,000 vested
- End of Year 3: Additional 20% = $2,000, making a total of $6,000 vested
- End of Year 4: Additional 20% = $2,000, making a total of $8,000 vested
- End of Year 5: Final 20% = $2,000, making a total of $10,000 fully vested
Once fully vested, the entire bonus amount is officially yours, and the insurance company cannot take it back, even if you decide to surrender the policy (though surrender charges may still apply).
Why Does Vesting Matter?
- Commitment to the Contract: The vesting schedule encourages annuity owners to stick with their contract until the bonus fully vests. It’s a way for insurance companies to ensure policyholders remain invested for a certain period, allowing the company to manage its risks and returns effectively.
- Impact on Surrender Values: If you surrender your annuity before the bonus fully vests, you’ll likely forfeit a portion of the bonus. Understanding your vesting schedule helps you make informed decisions about if or when to withdraw funds.
- Strategic Planning: For retirees or those approaching retirement, knowing when bonuses vest is crucial for income planning. It allows for strategic decision-making about when to start taking income in alignment with the maximum financial benefit.
Who Should Consider a Bonus Annuity?
Bonus annuities are not a one-size-fits-all solution. They are best suited for:
- Long-term Investors: Given the longer surrender periods, those who can commit their funds for an extended period stand to benefit the most.
- Those Seeking an Initial Boost: If you’re looking for an immediate uplift in your account value or recouping losses in the stock market, the premium bonus can be quite attractive.
- Individuals Transitioning Large Sums: If you’re moving a significant amount from another investment or a lump sum from a retirement package, the bonus can add substantial value.
Conclusion
Bonus annuities can be an attractive option for long-term investment with their initial bonus feature. However, it’s crucial to understand their fees, surrender charges, and vesting schedules. They are suitable for those looking for tax deferral and potential growth. Always consult with a financial advisor to see if a bonus annuity aligns with your financial goals. Contact us today for a free quote.
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Frequently Asked Questions
Which annuity has the highest bonus?
Athene Performance Elite 15 Plus offers a 20% premium bonus.
What type of annuity adds a bonus?
Certain annuities, such as fixed index or variable annuities, may offer bonus features. These bonuses are typically added to the initial premium or account value to enhance potential returns.
What is the most common bonus in a bonus annuity?
The most common type of bonus in a bonus annuity is a percentage bonus, where the insurance company adds a predetermined percentage of the initial premium to the account value.
Are bonus annuities good?
The suitability of bonus annuities depends on individual financial goals and circumstances. While bonus annuities can provide initial account value boosts, it’s essential to consider the entire annuity structure, fees, and long-term performance before deciding.
What is a first-year bonus “teaser” rate?
A first-year bonus rate is a variant of the traditional declared-rate interest-crediting approach that insurance companies use to boost their marketing efforts. This type of annuity is generally referred to as a bonus annuity.
What are the best bonus annuities?
Best bonus annuities are a type of retirement investment that offers a higher upfront bonus, typically a percentage of the premium paid. This bonus can provide an immediate boost to the account value, allowing investors to potentially earn more over time. It’s important to carefully consider the terms and conditions before investing in the best bonus annuities, as they may come with higher fees or longer surrender periods.
What is a premium bonus annuity?
A premium bonus annuity is an insurance product that offers an additional bonus to the policyholder upon purchasing the annuity. This bonus is typically a percentage of the premium amount and is designed to provide an extra incentive for individuals to invest in the annuity. It can be a valuable feature for those seeking to maximize their returns and secure their financial future.