The Two-Tiered Annuities

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is a Two-Tiered Annuity?

Two-tiered annuities are unique financial products that offer you a structured approach to retirement savings and income. When you invest in a two-tiered annuity, you enter a contract with an insurance company. This contract is designed with two distinct phases: the accumulation phase and the payout phase.

In the accumulation phase, your investment grows over time. This period can last several years, during which your funds benefit from interest rates typically higher than those offered by traditional savings accounts. Often, these annuities come with an initial bonus, boosting your investment from the start. This can be particularly attractive if you’re looking to maximize growth during the early years.

When you transition to the payout phase, the annuity converts into a steady stream of income. This phase is crucial for ensuring a reliable source of funds during retirement. You can choose to receive payments over a specified period or for the rest of your life, depending on the terms of your contract.

Two-Tiered Annuity

Types of Two-Tiered Annuities

Two-tiered annuities come in various forms, including fixed indexed annuities, variable annuities, and fixed annuities. Each type offers different benefits and is suited to different investment strategies:

Fixed Annuity: Offers a guaranteed interest rate, providing stability and predictable growth.

Fixed Indexed Annuity: Provides interest earnings linked to a stock market index, offering growth potential while protecting against market downturns.

Variable Annuity: Allows you to invest in multiple sub-accounts, similar to mutual funds, with the potential for higher returns but greater risk.

Two-Tiered Annuities

Benefits of a Two-Tiered Annuity

The natural charm of a two-tiered annuity is in its practical design. Let’s get into it:

  • Bonus Annuity Features: Often, a two-tiered annuity comes with an initial ‘bonus’ credited to your account, hence earning the name ‘bonus annuity.‘ This can be anywhere from 5-10% of your initial investment, immediately boosting your nest egg.
  • Earnings Growth Potential: Another upside is the potential for growth in the accumulation phase. During this period, the money you invest earns interest, typically at a rate higher than what traditional savings accounts might offer.
  • Guaranteed Income Stream: Once you reach the payout phase, you’ll receive a guaranteed income for a specified period or life, depending on the terms of your annuity contract.
  • Higher Payouts: The two-tiered annuity contracts generally have higher annuity payout amounts for retirement income planning than an immediate or deferred annuity.
  • Better Interest Rate: Typically, these retirement annuities offered better growth or a higher guaranteed interest rate simply because you would be stuck in the contract for a long time.


The drawbacks of a two-tier annuity include the following:

  • Loss Of Liquidity: A reduction in liquidity compared to other deferred annuities. Contracts have limited liquidity (penalty-free withdrawals) during the accumulation phase if any at all. Therefore, there would be no liquidity in the income phase.
  • Locked In: The contract owner is locked into a two-tier annuity, and they are only able to get out of it by taking a reduction in cash value or electing the annuity settlement option. 
  • Hard To Predict Income: You usually don’t know your retirement income payment amounts because these retirement annuities were mostly performance-based (indexed products) that earned gains versus the guaranteed income riders of modern annuities.
  • Forced Annuitization: Annuity owners are forced to convert their accumulated value into periodic payments for a fixed period if they want to receive full access to all the benefits (including the bonus and the higher rate of return).
  • High Surrender Chargers: If you could surrender your contract, the surrender charges would be extremely high, and you’d lose a significant amount in your accumulation value.
  • No Death Benefit: Finally, beneficiaries could have had zero death benefits if they chose a contingent life payout (single life or joint and survivor).

How We Can Help

At The Annuity Expert, we understand the complexities and emotional toll of planning for a secure retirement. With 15 years of experience as an insurance agency, annuity broker, and retirement planner, we are dedicated to finding the best solutions at the lowest costs.

We believe in empowering you with the knowledge and tools needed to make informed decisions about your financial future. We stand against hidden fees and high costs, ensuring transparency and trust in our services.

Your goal is our priority, and we aim to solve the core problem of financial insecurity in retirement. We recognize the symptoms—worry, confusion, and uncertainty about the future—and we address these with clear, personalized guidance.

What Is A Two-Tiered Annuity

What We Recommend

1. Schedule a Free Consultation

The first step is to schedule a free consultation with our experts. During this session, we’ll assess your current financial situation and retirement goals. The main benefit of this step is gaining clarity on your needs and how we can help.

2. Personalized Annuity Plan

Next, we create a personalized annuity plan tailored to your unique needs. We’ll explore different types of two-tiered annuities and recommend the best options for you. The main benefit here is a customized strategy that aligns with your financial goals.

3. Implement and Monitor

Finally, we help you implement your annuity plan and provide ongoing monitoring and support. You’ll receive regular updates and adjustments to ensure your plan remains effective. The main benefit is peace of mind, knowing your retirement income is secure.

Features and Benefits:

  • Initial Bonus: Boosts your investment from the start.
  • Higher Interest Rates: Better growth potential during the accumulation phase.
  • Guaranteed Income: Ensures a reliable source of funds in retirement.
  • Personalized Support: Tailored advice and ongoing monitoring.

Common Objections:

  • Liquidity Concerns: We provide clear explanations and alternatives to manage liquidity needs.
  • Commitment Issues: We highlight the long-term benefits and potential for higher returns.
  • Complexity: Our experts break down complex concepts into easy-to-understand information.

By not working with us, you risk financial uncertainty and missed opportunities for maximizing your retirement income. Conversely, partnering with us ensures financial stability, tailored advice, and a secure retirement.

You will experience relief from worry, confidence in your financial future, and the satisfaction of knowing you have a solid plan in place.

Contact us today for free advice or a quote. Let us help you secure your financial future with a two-tiered annuity.

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Frequently Asked Questions

What are the advantages of a two-tiered annuity?

A two-tier deferred annuity typically offers higher interest rates than other annuities with a similar structure, making it their main benefit.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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