American Equity IncomeShield 7 Annuity with an optional lifetime income benefit rider is a fixed index annuity that offers a powerful combination of benefits that help protect against many of today’s common retirement concerns.
Retirement is more than life after work.
It’s about enjoying the lifestyle you worked for, knowing that the money you earned is safe and the income you plan to live on is guaranteed.
For many Americans, fixed index annuities help provide financial security.
Through a combination of protection and stability, these products help fund millions of retirements.
The IncomeShield design offers the guaranteed benefits of principal protection, tax-deferred growth, diverse crediting options, and income that cannot be outlived.
About American Equity Annuities
American Equity Financial Strength
IncomeShield 7
American Equity IncomeShield 7 is a fixed index annuity designed to help protect hard-earned dollars from index fluctuations while offering interest growth opportunities based on increases in an index.
Premium Bonus
The IncomeShield 7 annuity includes a Premium Bonus on all premium received in the first contract year.
The bonus is applied to the Contract Value on the date received, allocated into the same values as the premium, and vests over time.
This provides a jump start for the Contract Value because the premiums paid during the first year receive a bonus and can help increase interest growth from the start.
Premium Allocations
The initial premium payment can be allocated, in any combination, to either the fixed interest or any of the index strategies.
Payments received after the initial premium automatically go into the fixed interest strategy.
The contract values may be reallocated on the contract anniversary between strategies subject to these minimums:
- The minimum allocation for each value is $1,000.
- The minimum transfer to select a new value is 10% of the contract value.
Premium Bonus Vesting
The Premium Bonus vests over a 10-year period.
Each year, after the first contract year, a percentage is vested until 100% vested — at the end of the 10th contract year.
The vested amount of the Premium Bonus is guaranteed and cannot be forfeited as a result of a Free Withdrawal.
In the event of a Partial Withdrawal or Surrender, Premium Bonus payouts will be based on the vesting schedule.
Money Access Options and Features
With the IncomeShield 7, there is always access to money in the annuity.
American Equity provides withdrawal flexibility and a variety of liquidity options.
Free Withdrawals
This is an opportunity each year (after the first contract year) to take Free Withdrawals up to 10% of the Contract Value.
Market Value Adjustment (MVA)
This product contains a Market Value Adjustment (MVA) Rider.
An MVA may increase or decrease the amount of a withdrawal in excess of the Free Withdrawal amount or the Surrender Value.
The MVA does not apply to Free Withdrawals, any death benefit, the MGSV, or any distributions occurring after the Surrender Charge Period has ended.
In general, as the MVA Index increases, Cash Surrender Values decrease.
As the MVA Index decreases, Cash Surrender Values increase.
Waiver of Surrender Charge Riders
Nursing Care Rider
Included automatically for owners under age 75 at issue.
After the first contract year, a one-time withdrawal of up to 100% of the contract value is allowed if the owner is confined to a qualified nursing care facility for a minimum of 90 days.
Confinement must begin after the contract issue date, and written proof is required from both the qualified nursing care facility and recommending physician.
Any payment made under this rider will not be subject to withdrawal charges, surrender charges, or MVAs.
Terminal Illness Rider
Included automatically for owners under age 75 at issue.
After the first contract year, a one-time withdrawal of up to 100% of the contract value is allowed if the owner is diagnosed with a terminal illness.
The diagnosis must occur after the contract issue date, and written proof with supporting documentation is required from a qualified physician.
Any payment made under this rider will not be subject to withdrawal charges, surrender charges, or MVAs.
Death Benefit
Death Benefit proceeds are paid to the surviving joint owner.
If there is no surviving joint owner, the death benefit is paid to the named beneficiary(ies) with no Surrender Charges, plus 100% Bonus Vesting. Generally paid in the lump-sum, other payment options are also available.
Life Insurance is also an inexpensive way to leave a death benefit for beneficiaries tax-free.
What is the Lifetime Income Benefit Rider (LIBR)?
The LIBR helps secure a lifelong income source for contract owners 50-80 at issue.
The amount of income to be received is measured by the Income Account Value (IAV).
The IAV is credited over time and grows until the earlier of income payments beginning or the end of the Accumulation Period.
Depending on the option chosen, a Rider Fee may be deducted from the Contract Value each year the rider is attached to the contract.
- For Option 1, income payments may begin 30 days after the contract issues.
- For Options 2 through 5, income payments may begin any time after the first contract anniversary.
These payments are available without a Surrender Charge or having to Annuitize the contract.
LIBR Options
Option 1
- This option has a set IAV Rate, declared at issue, and guaranteed for 15 years.
- The IAV is calculated on a compound interest basis.
- There is no fee associated with this option.
Option 2
- This option has a set IAV Rate, declared at issue, and guaranteed for 7 years.
- The IAV is calculated on a simple interest basis.
Option 3
- This option has a set initial IAV Rate, declared at issue, and guaranteed for the initial IAV Rate Guarantee period of 10 years.
- The IAV Rate will never be lower than the Minimum Guaranteed IAV Rate for the remainder of the Accumulation Period.
- The IAV is calculated on a compound interest basis.
LIBR and Wellbeing Benefit Options
These allow for increases in the amount of income by an income payment factor for up to five years, should the contract owner (or their spouse) become unable to perform multiple activities of daily living outlined in the contract.
This option is not confinement driven, so it is available to those receiving home care.
There is a two year waiting period before the benefit can be activated.
Check out a Long Term Care Annuity to supplement your long term care insurance needs.
Option 4
- This option includes the LIBR guarantees with a set IAV Rate, declared at issue and guaranteed for 7 years, plus the Wellbeing Benefit.
- The IAV is calculated on a simple interest basis.
Option 5
- This option includes the LIBR guarantees with a set initial IAV Rate, declared at issue and guaranteed for the initial IAV Rate Guarantee period of 10 years.
- The IAV Rate will never be lower than the Minimum Guaranteed IAV Rate for the remainder of the Accumulation Period.
- This option also includes the Wellbeing Benefit.
- The IAV is calculated on a compound interest basis.
Income and Withdrawals
The Lifetime Income Benefit Rider offers guaranteed income through a secure revenue source.
Income Payment Election
Income payments may begin starting 30 days or one year after the contract is issued, depending on the rider option.
- Single Life – payout factors are determined by the owner’s sex and their age at the time of payout election.
- Joint Life – payout is based on the youngest age of the contract owner or spouse, who is at least age 50, and income payments are guaranteed until the death of the surviving spouse subject to the spousal continuation provision.
Excess Withdrawals
Any Partial Withdrawals taken from the Contract Value after income payments have started are considered excess withdrawals and will reduce future income payment amounts and your IAV on a pro-rata basis.
For example, an additional withdrawal of 5% of your Contract Value reduces your future income payments by 5%.
If an excess withdrawal plus income payment exceeds the Free Withdrawal amount allowed in any contract year, Surrender Charges will be applied to any amount in excess of the Free Withdrawal amount.
Should excess withdrawals reduce the Contract Value to zero, the IAV will also be reduced to zero, and the contract, as well as the rider, will be considered Surrendered.
Any remaining income payments would also terminate.
Death of Owner
American Equity’s annuities have a Death Benefit that allows the beneficiaries immediate access to Contract Value at the time of death.
This can help avoid a costly prolonged probate process.
If the owner’s spouse is the sole primary beneficiary of the contract, elects spousal continuation, and is at least age 50, then income benefits may continue.
Details and available options are in the contract.
The LIBR terminates, and income payments stop upon the earliest of either the owner’s written request, the date the contract terminates, the date the contract is Annuitized, or the date the owner of the contract changes.
Once the LIBR terminates, it may not be reinstated.
Tax Treatment
All income payments are considered a withdrawal from the Contract Value, and any part of the withdrawal that is deferred interest is taxable as income.
If the contract is in a qualified plan, the entire amount of the withdrawal may be taxable.
The taxation of income payments is calculated as outlined in the Internal Revenue Code.
In addition, the taxable portion of any withdrawal taken before age 59½ may be subject to an additional penalty of 10% by the Internal Revenue Service.
