Great American Life Simple Income Option Review
This review is meant to show you the strengths and weaknesses of the Great American Life Simple Income Option, American Custom 10. I’ll also go into the details you need to know in regards to the Income outlook plus 5 rider and how to find out if it’s worth it for you. As with all annuities, they work very well doing some aspects and poorly at other aspects. I’ll walk through the details of how this annuity works, so you can know what to expect. This Great American Life Simple Income Option annuity is often positioned with an income Secure rider, so I’ll go into detail on how the income rider works.
- Product type
- Current rates
- Investment options that are available and their Realistic long term investment return expectations
- Understanding the Guaranteed 9% Simple income Rider and its true value
- How it can best help you as part of your financial plan
- How it is most poorly used as part of your financial plan
Great American Life Simple Income Option Quick Facts
|Product Name||Life Simple Income|
|Issuer||Great American Life Insurance Company|
|Type of Product||Single premium deferred Fixed Indexed annuity|
|Standard & Poor’s Rating||“A+” (Excellent)|
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If it happens that you’re on this website for the first time. We’re dedicated to helping you with a second opinion viewpoint so to help you see through some of sales pitches that aren’t what they seem. We hope with the information we provide you’ll be better educated to make an informed decision before you buy.
Before we go into the details, read this important legal disclosure.
This review is meant to be an independent review at the request of readers, so they could see my perspective as a when breaking down the positives and negatives of this particular model annuity. This is an independent product review, not a recommendation to buy or sell an annuity. Great American Life has not endorsed this review in any way, nor do I receive any compensation for this review. Before purchasing any investment product be sure to do your own due diligence and consult a properly licensed professional, should you have specific questions as they relate to your individual circumstances. This is not meant to be specific advice and your advisor may know more about your circumstances to make an appropriate recommendation. All names, marks, and materials used for this review are property of their respective owners
Important facts you need to know, below is some Company Information from their website.
Information about Great American Life
Since its founding, Great American Insurance Group has been rooted in strength and integrity, and driven by a strong entrepreneurial spirit. Over the decades, one thing has remained constant—a determination to provide the highest quality products and service to customers. Great American Insurance Group has grown to over 30 specialty property and casualty insurance businesses and an annuity group serving the retail, financial institution and education business sectors.
In 2015, over 60% of gross written premium in the property and casualty operations was generated by business units with a “Top 10” market ranking. Great American’s annuity operations consistently rank among the Top 10 in sales of fixed annuities and is a leading provider of fixed-indexed annuities through financial institutions.
The Annuity Group provides consumers a broad range of financial resources, including traditional fixed and indexed annuities, sold in the education, financial institution, and retail markets.
See more at www.greatamericaninsurancegroup.com
How do agent’s typically Pitch this Product?
- As a way to get a high level of Guaranteed Lifetime Income
- To get 9% growth every year you don’t take income
- Uncapped upside market Growth with No downside risk
- To receive a 2% upfront Bonus!
- To get market upside with potential to lock in gains
- Principal protection over a 10 year period while going for growth
- To get tax deferred accumulation
Is any of this True?
In a sense, it is, however, the details are important because things aren’t always what they seem. While many of the statements above are true, they don’t tell the whole story. My goal is to help you understand more about the details and exactly what you can expect, so you can see deeper into an overly simplified sales pitch.
As a principal protected way to get upcapped market growth?
This annuity can help you get growth with principal protection. It’s important to note, however, that it’s not the same as being in the market as far the upside. I’ll walk you through the expected return by looking at the rates, and historical performance. There are other index options as well that we will discuss, but let’s start with the uncapped. The uncapped index is the S&P500 risk Controlled 10 index, which is a less volatile version of the S&P500. Current participation rates at 55%, these are subject to change, so please see current participation rates before deciding. This means you’ll receive 55% of whatever the S&P500 10% volatility index does for that year with zero downside. The S&P500 volatility index has a lot less upside then the S&P500. On top of that, you’re getting a participation rate, which gives you a percentage of the upside of the risk controlled index.
S&P500 Index Risk Control index 10% Index
Assuming the 55% participation rate, this index has averaged 3.46% since 2006. This index, however, can have large up years when the market performs well especially when compared to the safety of no downside risk. In 2013, when the S&P500 Volatility index increased 21.91%, this annuity would’ve credited 12.05 %, so it can have large up years, however, even with that large year, it still has averaged 3.32%, which is less than average bond portfolio during the same period, yet still much more then cash or CD’s.
S&P500 Index Annual Point-t0-point with cap
Assuming the current 4.5% cap. (Caps and participation rate for all crediting options are subject to change. So caps may be higher or lower when you purchase.) This has averaged anywhere from 3.03% compounded annual return for the best 10 year period. It has averaged 2.43% for worst 10 year period. The last 10 years it’s average 3.03% compounded annual return.
SPDR Gold shares annual point to point with Cap
Assuming the current 5.25 % cap. The best 10 year period has averaged 4.15% compounded rate of return. The worst 10 year period has been 3.61% and the last 10 year period it’s averaged 3.47% annual compounded return.
Understanding the Simple Income Option and the 9% rollup rate 9% Guaranteed return, sign me up! Not so fast.
It’s important to understand the rate of return this provides to your financial plan when analyzing whether the Simple Income rider is appropriate in helping you reach your financial goals. In order to do this, test this annuity versus others for the internal rate of return that it provides to you.
The way Great American gives you 9% every year, you don’t take income is based on mortality tables. They know that every year you don’t take income is a year that their promise to pay your lifetime income is getting less, so they’re willing to give you 7% additional in years that you do take income because they know they’ll on average be required to give you income for less years. The insurance companies are smart, so it’s important to analyze all your options and test the annuity for the internal rate of return, so you can make the smartest decision for you and your retirement and not the insurance companies.
Let’s assume you’re age 62 and put $100,000 into this Great American annuity with the Simple Income 9% rider and you want to begin taking income in the 5th year. By then your $100,000 has growth by 7% simple to $128,000 in the income base. Your lifetime withdrawals at age 66 are $7,000 annually. The $7,072 is a 5.5% withdrawal rate of $136,000. By the time you turn 80 years old, after taking income for 15 years, you have received $106,080, so you’ve just received a little more than your investment back. Note that if you’re a male, the average life expectancy is 76 and if you’re a female, it’s 81; this means many of you reading this will have passed away before making a return.
This is what the insurance company is counting on and why they are able to give you 9% income increase every year you don’t take income. You don’t start making a return on your investment until year 15 in which you’ve received $106,080.00 in total income, which is a 6.6% total gain over 15 years, less than 0.3% annual interest. Yes that’s less than 1/3 of 1% annually. .
So, did you really make 9% guaranteed in those years?
Of course not. The longer you live, the higher the return you can make, but are you confident that you can afford to make no return in retirement for the first 15 years? While, this annuity may still have a role, but if you’re counting on the 9% income rider to help you hit the 7% return goal that you need, you may want to look elsewhere. Test this annuity, as part of your retirement income plan, to see if it can help you reach your goals. Often times an agent may not realize what I’ve just explained to you, so if he doesn’t make sure you get an analysis done so you can make the best decision.
Another aspect of this is that if you pass away, your beneficiaries don’t get the income base value that increases by 9% annually. If that’s important to you, you may want to look at the other income riders Incomesecure plus and Inheritance enhancer which do offer enhanced death benefit features. Great American does have some of the best death benefit features I’ve seen in the market, which can be valuable because that really helps increase the potential guaranteed internal rate of return to your heirs, especially if that’s one of your priorities with the money you are thinking about putting inside this annuity when compared to other safe alternatives.
This rider costs 1.35% annually. It’s important to analyze whether this rider makes sense for you. If you’re looking for growth and you average 3.5% in your index credit, this rider will cost you over 25% of your growth. Be sure to see if the income rider is best for your goals. Income credits cannot increase the income base more than the income rollup cap of 250%. Remember every year you don’t take income, their promise to pay is less.
Where it works best:
- For Producing a pension like lifetime Guaranteed Income Stream with the Simple Income Rider
- For those looking for a conservative growth
- Those who want to make sure they never lose their principal and will to accept safety over return
- For those looking for guaranteed growth to pass money to their heirs with Inheritance Enhancer or Income Sustainer Plus
- For those looking for tax deferral and conservative growth
Where it works worst:
- Those looking for maximum growth
- Those who need a return on their investment in the first decade of retirement if using Income rider
- Those who need a return of over 5% annually in retirement to maintain their lifestyle
AnnuityEdu’s Summary of the Great American American Custom 10
Overall, this annuity has some good features and some bad ones. .
Great American is a strong company with a good track record. This annuity is best for conservative growth and for guaranteeing lifetime income that you can’t outlive no matter how long you live. Great American Life Simple Income Option should outperform cash and perform similar to conservative bonds in the current low rate environment, in my view. Also, this annuity can help minimize volatility of your overall asset allocation. I feel many agents and retiree’s may think that they’re really earning a 7% return when they’re not.
Buying an Annuity is a long term commitment and the decisions you make will determine your success in retirement. It’s important to test this annuity versus various others to see which one fits your goals and objectives the most. This is something we do for free here at annuityedu.com. Unfortunately, I believe many agents think that the 9% roll up rate is the rate of return. They may not fully understand the real returns that they’ll deliver to you. The only way to know if this annuity is a good fit for you is to have it tested.
We’ll use our proprietary calculator to illustrate for you how this annuity will likely perform in your specific situation.
If your agent was honest with you, the numbers will match up – if not, at least you know all of the information before you buy.
Have Questions on the Great American Life Simple Income Option? Have any comments?
Do you have any questions that you can’t seem to find the answer here on our website? [You can send us your questions here via our Free Annuity Help contact form].
Finally, purchasing an annuity is often an irreversible decision. You’ll have high surrender fee’s if you change your mind after you buy it.
We hope you found it helpful as you’re conducting your own research Athene Ascent Annuity. We wish you all the best in your retirement journey!
For any questions or if you need clarity about Great American, reach out to us by email or phone.
All the best,