Our Professional Opinion on the North American Charter Plus 10 Annuity
We generally do not recommend the North American Charter Plus 10 as a first choice for safe accumulation. It is a bonus-heavy fixed indexed annuity with a 10-year surrender period, premium-bonus recapture, optional fees for a larger bonus, and strategy charges for higher participation rates.
North American is an excellent annuity company. North American Company for Life and Health Insurance is rated A+ by AM Best and comfortably exceeds our minimum financial-strength standard.
The upfront bonus is not free money. Bonus annuities commonly provide lower caps, lower participation rates, wider margins, or some combination of those tradeoffs. Charter Plus 10 also recaptures part of the bonus if you surrender the contract or take excess withdrawals during the surrender period.
The optional enhanced bonus rider adds another annual charge. We would only consider paying for that rider when a detailed comparison shows that the additional bonus is likely to create more net value after accounting for the rider cost, renewal terms, surrender schedule, and bonus recapture.
We also do not like paying a strategy charge for a higher participation rate when the future crediting terms are not locked for the full contract. The strategy charge is deducted even when the selected index strategy does not earn enough interest to cover it. Although the contract includes a limited accumulation-value true-up at the end of the surrender period, that protection has restrictions and does not make the fee-based strategy risk-free.
Charter Plus 10 does offer true S&P 500 strategies. However, the stronger-looking upside is concentrated in engineered indexes and fee-based enhanced participation methods. The traditional S&P 500 caps and participation rates are not locked for the full 10-year surrender period and can be reset when a new crediting term begins.
We generally prefer an accumulation FIA that locks its cap or participation rate and offers transparent traditional indexes such as the S&P 500, Nasdaq-100, or Russell 2000. See how cap-lock annuities and MYGAs reduce renewal-rate risk.
The product can have a narrow use when someone is replacing an existing annuity and needs a bonus to offset a surrender charge or market-value loss. Even then, the correct comparison is the projected net accumulation value after fees, bonus recapture, and reasonable renewal assumptions—not the size of the bonus on the first day.
We do like the annual penalty-free withdrawal provision beginning in the second year, the nursing-home waiver, the accumulation-value death benefit, and the fact that additional premiums do not start a new rolling surrender schedule. The nursing-home waiver provides access to the existing account value and is not a substitute for long-term care insurance.
Bottom line: Charter Plus 10 is a complicated bonus annuity with too many moving parts for us to recommend as the default accumulation choice. A large bonus can look attractive, but the long surrender period, recapture schedule, engineered indexes, changing renewal terms, and optional charges can offset that advantage.
What We Like
- A+ AM Best Rating: North American is one of the stronger annuity insurers in the market.
- True S&P 500 Strategies: The contract includes traditional annual and monthly S&P 500 crediting choices.
- Bonus Can Solve a Specific Replacement Problem: It may help offset an existing surrender charge when the full comparison still favors the new contract.
- Flexible Premium Design: Additional premiums can be added during the permitted period without creating a new rolling surrender schedule.
- Accumulation-Value True-Up: The contract includes limited protection when total strategy charges exceed total credited interest at the end of the surrender period.
- Annual Liquidity After Year One: The owner can generally withdraw a portion of the accumulation value without normal surrender charges.
- Nursing-Home Waiver: Qualifying confinement can provide access to the accumulation value.
- Accumulation-Value Death Benefit: Beneficiaries receive the greater applicable accumulation value or minimum surrender value.
What We Don’t Like
- Ten-Year Surrender Period: This is a long commitment for an accumulation annuity with changing crediting terms.
- Premium-Bonus Recapture: An early surrender or excess withdrawal can forfeit part of the bonus in addition to other contract charges.
- The Enhanced Bonus Costs Extra: The rider charge reduces the accumulation value and can offset part of the additional bonus.
- Enhanced Participation Rates Require a Strategy Charge: The charge is deducted even when the strategy earns little or no interest.
- Traditional-Index Terms Are Not Locked: The S&P 500 cap and participation rate can change when a new crediting term begins.
- Heavy Reliance on Engineered Indexes: Most of the stronger-looking upside is attached to indexes with less transparent live performance histories.
- Two-Year Crediting Terms: Several strategies require waiting two years before interest is measured and credited.
- No Normal First-Year Percentage Withdrawal: Standard annual liquidity does not begin until the second contract year.
- Some RMD Treatment Is Only Current Company Practice: A noncontractual feature can be changed or removed in the future.
How It Works, Who Should Buy It, and What You’re Giving Up If You Do
The North American Flexible Premium Deferred Annuity is a deferred annuity that allows you to make multiple contributions over time instead of a single lump sum. North American typically structures this as a Fixed Indexed Annuity (FIA)—not a traditional fixed annuity or variable annuity. The value grows tax-deferred, and you can begin income later using either withdrawals or a guaranteed income rider. However, before you buy this annuity, it’s critical to understand what it does well, what it lacks, and whether there’s a better option available.
How the North American Flexible Premium Deferred Annuity Works
Flexible Premium Contributions
- You can make multiple contributions over time, making it ideal for people who want to fund an annuity gradually.
- It accepts qualified accounts like IRAs and 401(k) rollovers.
- It also accepts non-qualified money (after-tax savings).
Tax-Deferred Growth
Your money grows without current taxation. Taxes are deferred until you withdraw money, allowing the contract value to compound more efficiently over time.
Interest Crediting Options
You can allocate your premium among:
- A 1-Year Fixed Account with a declared interest rate (guaranteed for 1 year, then reset).
- Index crediting strategies that earn interest based on the performance of indexes like the S&P 500® or engineered indexes.
- Options may include annual point-to-point with participation rates, spreads, or caps.
Riders for Lifetime Income
You can add a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider for an annual fee. This rider guarantees income for life without requiring annuitization. You can withdraw a set amount each year for life, regardless of the contract’s performance.
Liquidity Features
Most versions offer up to 10% annual penalty-free withdrawals. Waivers for nursing home confinement or terminal illness may apply.
What Happens After the Surrender Period Ends
Once the surrender schedule ends (typically 7 to 10 years):
- You can withdraw without penalty.
- You can keep the annuity to continue tax-deferred growth.
- You can annuitize (not recommended due to loss of control).
- You can begin lifetime withdrawals if you added a GLWB.
- You can transfer to another annuity (via 1035 exchange) for better features or rates.
Pros and Cons
Pros
- Accepts multiple contributions over time.
- Tax-deferred growth.
- Index-based interest with no market losses.
- Lifetime income available through GLWB rider.
- Penalty-free withdrawals and hardship waivers.
Cons
- Surrender charges limit liquidity early on.
- Engineered indexes are often used instead of traditional indexes like the S&P 500®.
- Index crediting rates (caps, spreads, participation rates) may decrease over time.
- Income riders come with fees that reduce the accumulation value.
- After the surrender period ends, most contracts do not offer new-money rates as high as MYGAs.
Who Should Buy This Annuity
- People under 60 who want to build future retirement income gradually.
- Conservative savers looking for downside protection with upside potential.
- Those rolling over a qualified retirement account into a safe, income-generating vehicle.
- People who want guaranteed income later in life using a GLWB rider.
Who Should Not Buy This Annuity
- Those who want full liquidity or plan to withdraw large amounts early.
- People uncomfortable with long surrender periods.
- Anyone who doesn’t understand index crediting strategies or is looking for simple guaranteed returns.
- Investors who won’t need lifetime income and would be better served by a MYGA or low-cost FIA with no rider.
What You’re Giving Up
By choosing this annuity:
- You lose access to higher guaranteed fixed rates found in MYGAs if you don’t need the GLWB.
- You may give up traditional index exposure if the product only offers engineered indexes.
- You’re committing to rider fees and lower accumulation values if you add income guarantees.
- You risk having renewal rates lowered, limiting your future upside.
Insurance That Can Help
- If your goal is guaranteed lifetime income, a FIA with a GLWB may work better than a SPIA due to flexibility, growth, and beneficiary protection.
- If you want immediate income, consider a Single Premium Immediate Annuity (SPIA).
- If you’re concerned about leaving a legacy, consider cash value life insurance.
- If you want to protect assets from long-term care costs, consider a long-term care annuity or hybrid policy.
Compare Before You Buy
Not all flexible premium deferred annuities are the same. North American offers a stable, well-rated product, but many competitors offer better liquidity, higher income payouts, and more transparent crediting methods. Compare the following:
- Surrender period length.
- Death benefit structure.
- Index options (engineered vs. traditional).
- Rider fees vs. rider benefits.
- Company financial strength (North American is A+ rated with AM Best).
Funding Sources Accepted
You can fund the North American flexible premium deferred annuity using:
- Traditional IRA
- Roth IRA
- SEP IRA
- 401(k) rollover
- 403(b) rollover
- Non-qualified (after-tax savings)
- 457 plan rollover
- Inherited IRAs (with restrictions)
Death Benefit
If the annuitant dies during the contract, the death benefit is typically:
- The full account value, not the income benefit base.
- Paid as a lump sum or with spousal continuation, depending on the contract and beneficiary setup.
- Avoids probate if a named beneficiary is listed.
The Bottom Line
The North American Flexible Premium Deferred Annuity is a reasonable option for someone seeking long-term accumulation and future income flexibility. However, if you’re not adding a GLWB or don’t need to contribute over time, you’re likely better off with a MYGA or a no-fee FIA that focuses on accumulation. Always compare multiple products before committing. Contact The Annuity Expert for a free quote and personalized comparison to find the best annuity for your retirement plan at the lowest cost.
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