AIG Power Select Plus Income Annuity with Lifetime Income Plus Review
Today’s review is on the AIG Power Select Plus Income Annuity with Lifetime Income Plus. The Purpose of this review is to show you where Power Select Plus Income Annuity with Lifetime Income Plus Annuity is strong and where it has weaknesses. In order to make an informed decision, it is important to consider all available facts.
- Product type
- Investment options that are available and their realistic long-term investment return expectations
- Understanding the income rider
- How it can best help your financial plan
- How it’s most poorly used as part of your financial plan
Polaris Platinum III Annuity Quick Facts
|Product Name||Power Select Plus Income Annuity|
|Type of Product||Fixed Indexed Annuity|
|Standard & Poor’s Rating||“A+” (Excellent)|
Before we go into detail, here is an important legal disclosure.
This review of AIG Power Select Plus Income Annuity is an independent review at the request of readers. Intended to explain my perspective 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. Polaris Platinum 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 related to your circumstances. This review is not intended to give specific advice and your adviser 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.
Before we go into the review, some information on AIG
Founded in 1919, American International Group, Inc. (AIG) is a leading global insurance organization serving commercial, institutional, and customers in more than 100 countries and jurisdictions
AIG provides the safety that gives companies and people the freedom to grow. They work to pinpoint risks and prevent them from becoming losses so clients are free to create the future. As well as help clients identify unseen risks, and stop accidents before they happen.
For nearly one hundred years, the organization has faced and managed complex risks. They have also provided the risk ability and financial strength that empowers 90 million clients in more than 100 countries. Today, they’re evolving to better meet client needs.
They’re simplifying their structure so that they work more closely with clients, give greater transparency and deliver value faster and more efficiently.
There are a few ways that Agents might pitch AIG Power Select Plus Income Annuity.
- Achieve guaranteed Lifetime income
- Obtain uncapped market growth
- Create an inflation adjusted lifetime income
- Receive a 10% guaranteed growth
Is any of this true?
Certainly, some of it is. But we must understand the details of how it works. To clarify, things aren’t always what they seem.
In fact, AIG Power Select Plus Income Annuity joins the class of Fixed Indexed Annuities that offers both uncapped return strategies, as well as life time income that is able to increase. These are both aspects that are very popular, and with good reason. Guaranteed Lifetime Income that is able to increase has the potential to deliver much more income over your life time than income that doesn’t increase. It does typically come with lower guaranteed values. Let’s take a look at some of the important numbers. I’ll give you my opinion on how this annuity’s uncapped strategies compared with other uncapped annuities. Uncapped Strategies and increasing income are only available through a few carriers at the moment.
There are similar versions of this annuity product with annuity surrender schedules lower or higher than this exact model.
Understanding the Lifetime income Plus Multiplier Guaranteed Living Benefit Rider
The AIG annuities don’t have a guaranteed roll up for the income base. It does however have a 200% increase to your income base for any interest you earn. For example, if you earn 5% then it’ll credit 10% to your income base.
The strongest aspect of this annuity is the incomes ability to increase. I’ll walk through a hypothetical example from an illustration, to further explain how this works.
In this example, a male, age 61, invests $100,000 in the Power Select Plus Income Annuity and plans to defer it until age 66 when he retires. Upon retirement, 10% annual guaranteed roll up is credited to him. At age 66, his account has an income guarantee of $160,000 and his lifetime withdrawal rate of that value is 5.10%. This guarantees him 5.1% or 8,160 annually for the rest of his life. That is the way he can get access to the $160,000. He cannot take a lump sum of that $160,000.
After taking lifetime income for 15 years and owning the annuity for 20 years, he has received $122,400 total from his annuity 25 years. This is under 2% annually compounded to return. Still confused? I’m going to break this down further. To further illustrate this example and guide you to make the best decision for yourself, not your agent!
In comparison, when deferring it for 5 years income, increasing by the 10% you received $122,400 back. So the defer for longer scenario yielded about 17% total income spread over a 20-year period. This is lower than the 50% implied growth from the 5 years of a 10% annual increase!
However, if you were to live male life expectancy and do the first 15 years on the 5-year deferral scenario, then you’ll receive $81,000 in total income. Which totals about 6% more return against a 50% implied 5 years of return.
What are the uncapped investment options for AIG?
S&P Annual PTP Participation rate
MLSB: The Merrill Lynch Strategic balanced index 2-year PTP is likely the one that your agent is showing you. This is the Merrill lynch index with a 2-year PTP. Currently in most states this is the lowest spread and some of the strongest historical returns for this annuity. Typically, 2-year point to point have higher historical returns than 1-year point to point all else equal. This requires more patience but historically this has rewarded those who have been patient. This index has averaged around 6%.
As a result, I’ve seen many times an agent will recommend the 1 year. Given that they’ll likely get less return just because they know clients aren’t patient! So please ask yourself whether you can wait 2 years for a likely higher return and participation rates or whether you prefer less return.
This is the highest historical returning index. Often times agents might not recommend it because it has a higher spread (spread is like a fee but only assessed when interest is positive). However, even after the spread the returns have been higher than any other index for this annuity.
For that reason, it might be best is two combine a mix of the 1-year and the 2-year to give yourself more consistency.
The BNP annual return for the best 10 years was 4.83% Annually.
This is not bad, considering interests rates are low. But if you are expecting high stock market returns, you will be disappointed. This annuities performance is similar to a bonds performance than of a stock. It also has much less downside risks and volatility than stocks.
Where does it work best:
- Safety of principal
- The opportunity for more index-linked growth
- Guaranteed lifetime income in retirement
- Increasing income potential
- As a high-quality bond replacement as part of an asset allocation strategy
Where does it least work:
- Trying to get a high return
- Not looking for a guaranteed lifetime income
- No intention to keep this for the rest of their life
Annuity Edu’s Summary on the AIG Power Select Plus Income Annuity
Overall, I think this Fixed Indexed annuity has some good features. The annuity has a strong guaranteed lifetime income especially if starting income right away compared to others in the market. The ability to double income on interest is powerful as well.
Buying an Equity Indexed annuity is a long-term commitment. It is important to test this annuity versus various others to see which one fits your goals the best. Typically, these annuities earn nowhere near the return of the guaranteed 10% roll-up income rider amount. This is something we do for free here at Annuityedu.com. Test the annuity to know if it is a good fit for you. We’ll use our proprietary calculator to illustrate how this annuity will likely do in your specific situation.
To be sure, Click here to request a complimentary, no obligation Annuitycheck® Report to test an existing annuity or an annuity before you buy. If your agent was honest with you, the numbers will match up – if not, well at least you know before you buy.
Unfortunately, advisers tend to underestimate how low the returns are over time, especially if choosing one of the riders. The return of Annuities is comparable to the return of a bond more than a stock. It’s about having realistic expectations and risk/adjusted basis. That’s why we can help you test the guarantee in your financial plan for the internal rate of return AIG provides and see if your plan can handle the amount of return in retirement.
Furthermore, purchasing an annuity is often an irreversible decision. You’ll have high surrender fees if you change your mind after you buy it. Surrender fees cause assets to not be used at their fullest potential.
Have Questions on the AIG Power Select Plus Income Annuity? Have any comments?
Finally, if you need clarity about the Power Select Plus Income or you have any questions and 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.] You can also reach out to us by email or by phone.
We hope you found it helpful as you’re conducting your own research on the AIG Power Select Plus Income Annuity. We wish you all the best in your retirement journey!
All the best,