AIG Polaris Platinum III Annuity Review
Today’s review is on the AIG Polaris Platinum III Annuity. The AIG Polaris is described as the “total retirement package by AIG. We’ll review this AIG Polaris Platinum III Annuity so you can see and understand all the details. This is a variable annuity so it’s important to understand the fee and benefit information to make sure it’s the best retirement strategy for you and not your advisor.
- Product Type
- Investment options that are available and their realistic long term investment return expectations
- Understanding the income rider
- How it can best help you as part of your financial plan
- How it’s most poorly used as part of your financial plan
AIG Polaris Platinum III Annuity Quick Facts
|Product Name||Polaris Platinum III Variable Annuity|
|Issuer||American International Group|
|Type of Product||Variable Annuity|
|Standard & Poor’s Rating||“A+” (Excellent)|
There are a few ways that Agents might pitch this product
- Guaranteed lifetime income
- To get 6% growth and pursue market upside
- Be able to withdraw 7% for the rest of your life no matter what the market does
- To be able to be in the stock market while at the same time have guaranteed lifetime income.
How Much of This is True?
The are some parts that are true but other it’s important to know the details.
The AIG Polaris Platinum III Annuity will guarantee your life time income however there’s a withdrawal rates and guaranteed lifetime rate that I see people getting confused with. The withdrawal rates are not the same as the lifetime income. You can utilize the withdrawal rate but if the you deplete the account then they’ll guarantee you the lifetime amount.
You can learn more by downloading the prospectus by clicking here Prospectus download
Many retirees have been forced into risky investments due to low interest rates. Variable Annuities with guaranteed income riders such as the AIG Polaris Platinum III Annuity have been very popular in recent years. These Annuity guarantees however come at a cost. Often these costs are worth it but in others they’re not. It can depend on your risk tolerance, financial objectives, and time frame.
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Before we go into detail, here is an important disclosure
This review of Polaris Platinum III Variable Annuity is meant to be an independent review at the request of readers, in addition, so they could see my perspective as a Certified Financial Planner CFP®, Designee 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. AIG 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, as they relate to your individual circumstances. This is not meant to be specific advice. Your advisor may know more about your circumstance to make an appropriate recommendation. All names, marks, and materials used for this review are property of their respective owners.
Information on AIG
Founded in 1919, American International Group, Inc. (AIG) is a leading global insurance organization serving commercial, institutional, and individual customers in more than 100 countries and jurisdictions.
They work to pinpoint risks and prevent them from becoming losses so clients are free to create the future; they help clients identify unseen risks—and stop accidents before they happen.
For nearly one hundred years, the organization has faced and managed complex risks; and provided the risk expertise and financial strength that empowers 90 million clients in more than 100 countries. Today, they’re evolving to better meet client needs. According to AIG “They’re simplifying their structure so that they work more closely with clients, provide greater transparency, and deliver value faster and more efficiently.
As with most Variable Annuities the AIG Polaris fees are an important area to analyze.
The fees on this annuity are its primary drawback and you should analyze the fees to see if the benefits that the fee’s provide are worth it.
The AIG Polaris base control fee is 1.30% for joint life benefit. Then you pay 1.30% for the fee’s inside the funds. This is with no riders. Often times advisors will recommend this annuity for tax deferral with no rider but then it’s important to see if the fee’s you pay might be more than the taxes. With the Polaris income-less daily rider that will run you an additional 1.10% for single and 1.35% bring the total annual fee’s to 3.9%. This over a 10-year period is 39%. This can really add up over your retirement period and will be a drag on performance. It can be a lot especially if you have too much of your nest egg tied up it’ll be like running with huge weight tied to you.
Let’s see if it the benefits that it might provide are worth the higher fees.
Are you considering a conservative or Moderate allocation within the Annuity?
An Important aspect about this AIG Polaris Platinum III Annuity for fixed Income Allocation’s.
Conservative or moderate allocations have a high percentage in bonds. With rates so low the fixed income portion of the portfolio will be losing money. For example, the aggregate bond index is currently yielding 2%. If the fees are 3.6% then you’ll be using the interest to pay the annuities fees. In other words, AIG and your advisor will be making more money on the bonds then you will! Yes high yield bonds can earn more than 3.9% but odds are high yield bonds won’t make up that large of a percentage of your portfolio. For this reason, it makes more sense to have a higher equity allocation.
If you’re extremely conservative and even with the annuities guarantees you want to be in bonds, then the rider fee’s will eat away on your interest and you may want to consider taking a long term view and accepting more volatility in order to get your money’s worth! This annuity does have a good option to maintain the equity exposure while having the living benefits which is a big plus.
What are some of the benefits of the AIG Polaris Annuity?
The benefits of the base annuity mortality and expense charge also known as M&E of 1.30% allow you to switch around with multiple money managers at no cost. The base also gives you the tax deferral of an annuity. The annuity has b shares which add another 1.3% in fees. The AIG Polaris annuity already has 2.6% in annual fee’s without the rider. The lifetime income rider adds an additional 1.10% for the single life option and 1.35% for the joint income life option. These can change up to a maximum 2.20% for single life and 2.70% for joint life. The base annuity is expensive and if you’re looking for growth the fees will weigh you down. Let’s look at the annuity’s income rider which is where things get more confusing and it’s important to understand the numbers so you can make this decision.
There are 3 Income riders available
Polaris Income Plus®
Offers guaranteed lifetime income plus the opportunity to increase income by locking in the greater of either the contract’s Highest Anniversary Value, or an annual Income Credit. If you elect Polaris Income Plus, you may choose from Income Options 1, 2 or 3. The annual 6% Income Credit is an amount we may add to the Income Base each year for the first 12 Benefit Years. The 6% Income Credit is reduced but not eliminated in any benefit year in which cumulative withdrawals are less than 6% of the Income Base and not greater than the Maximum Annual Withdrawal Amount applicable to the income option you elected, thereby providing a guarantee that income can increase during the first 12 years even after starting withdrawals.
After the first 12 years, only the Highest Anniversary Value increase may be available. In addition, if you do not take any withdrawals during the first 12 years, you’ll be eligible for the Minimum Income Base on the 12th Benefit Year Anniversary. The Minimum Income Basis equal to 200% of the first Benefit Year’s Purchase Payments.
If you’re expecting to be able to walk away with the 6% then you’ll be disappointed.
The income base is for determining your income value and not you’re cash value. Their using life expectancy tables to know that their promise to pay you is getting less in terms of years so every year you don’t take income AIG is willing to give you more. This annuity will typically earn much less then 6%.
Polaris Income Builder®
Offers guaranteed lifetime income and the opportunity to increase income by locking in the greater of either the contract’s Highest Anniversary Value, or an annual Income Credit. The annual 5% Income Credit is an amount we may add to the Income Base each year for the first 12 Benefit Years. The 5% Income Credit is only available in years when no withdrawals are taken. After the first 12 years, only the Highest Anniversary Value increase may be available. In addition, if you do not take any withdrawals during the first 12 years, you will be eligible for the Minimum Income Base on the 12th Benefit Year Anniversary. The Minimum Income Base is equal to 200% of the first Benefit Year’s Purchase Payments.
Polaris Income Plus DailySM
Offers guaranteed lifetime income plus the opportunity to increase income by locking in Step-up Values. Prior to the first withdrawal, Income Base step-ups, if any, occur on a daily basis. After the first withdrawal, Income Base step-ups, if any, occur only on Benefit Year Anniversaries, looking back at the prior Benefit Year’s Step-up Values. If you elect Polaris Income Plus Daily, you may choose from Income Options 1, 2, or 3.
For Polaris Income Plus and Polaris Income Builder only, an amount that may be added to the Income Base during the Income Credit Period as shown in the following table:
Income Credit Availability
Optional Living Benefit
|Income Credit (as a percentage of the Income Credit Base)|
|Polaris Income Plus||6%||Available during the first 12 Benefit Years — the Income Credit is reduced in years withdrawals are taken|
|Polaris Income Builder||5%||Available during the first 12 Benefit Years — the Income Credit is eliminated in years any withdrawal is taken|
|Polaris Income Plus Daily||Not available||Not available|
Where it works Best:
- Producing a pension like lifetime guaranteed income stream.
- Those looking for moderate capital appreciation but in which guaranteed lifetime income is important.
- Conservative investors who need guarantees to dip into stock market based investments
Where it works Worst:
- Those looking to receive 7% return for life
- Those who need liquidity.
- Who want maximum capital appreciation
- For those who want minimal volatility and may choose conservative investment options
Annuity Edu’s Summary on the AIG Polaris Platinum III Annuity
Overall this annuity has some good features and others to just make sure your aware of going in. The Surrender charge period of 10 years is low relative to other in it’s class. I also like AIG allows up to 81% equity exposure on some of the options even with the guaranteed Riders. This is a big benefit and other companies don’t offer this. The part I don’t like is that insurance companies can increase the fees on the riders dramatically. Another part is to make sure you understand that the 6% guaranteed income isn’t money you can just walk away with. Their marketing material makes it seem you can withdraw up to 7% for life. It’s up to 7% annual withdrawals until it runs out of money and it drops dramatically.
If your financial plan says you need 6% annually in retirement, don’t think you can buy the AIG Polaris get 6% guaranteed and all the investing and Retirement planning you need is done. You’ll need a comprehensive retirement income analysis that factors inflation, taxes, and your investment positioning to see if the annuity adds value to your retirement.
Get a Retirement Income Analysis done.
We do this for free at Annuityedu.com. My concern is that agents use sales tactics to sell. They are likely overstating the internal rate of return this annuity will provide. Just because the income base increases by 6% in years you don’t take income doesn’t mean this annuity is earning 6%. If your advisor is saying it’s earning 6% Guaranteed, contact us and we’ll show you the numbers so you can go back to your advisor with an intelligent response.
Click here to Test my Annuity.
If your agent was honest with you, the numbers will match up – if not, well at least you know before you buy.
Make sure this annuity fits into your financial plan. Often an annuity may be right for you. Make sure you understand the rate of return the income rider delivers and whether the high costs are worth it.
Have Questions on AIG Polaris Platinum III Annuity? 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. Surrender fees cause assets to not be utilized at their fullest potential.
We hope you found it helpful as you’re conducting your own research on AIG Polaris Platinum III Annuity. We hope you enjoy a plentiful retirement.
For any questions or if you need clarity about the AIG Polaris Platinum III Annuity, reach out to us by email or by phone.
All the best,