Today’s review is on the Delaware Life Masters Prime Variable Annuity, with the purpose of showing you it’s strengthts and weaknesses. Because in order to make an informed decision, it is important to consider all available facts such as the following:
- Product type
- Investment options that are available and their realistic long-term investment return expectations
- How it can best help your financial plan
- How it’s most poorly used as part of your financial plan
Delaware Life Masters Prime Variable Annuity Quick Facts
|Product Name||Masters Prime Variable Annuity|
|Issuer||Delaware Life Insurance Company|
|Type of Product||Variable Annuity|
|Standard & Poor’s Rating||“BBB+” (Stable)|
Before we go into detail, here is an important legal disclosure.
This review of Delaware Life Masters Prime Variable 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. Equitable 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 Delaware Life
Founded in 2013, Delaware Life Insurance Company is a member of a dynamic network of businesses making insurance more useful, logical, and accessible for everyone. As of June 30, 2020, the company had assets of $40.9 billion and liabilities of $39.4 billion (does not include Delaware Life Insurance Company of New York) with more than 300,000 active annuity and life insurance policies.
There are a few ways that Agents might pitch Delaware Life Masters Prime Variable Annuity
- 6.25% Guaranteed Returns
- Lifetime Income
Is any of this True?
Before getting into the details of this product, we should address how it is typically sold by agents. In order to do this, I want to point out the things said on the Annuity brochure:
They said they offer “pure value and transparency” with this annuity, however we after we break down the fees in this review you are going to judge for yourself if this is true or not.
They offer guaranteed 6.25% return on your investment, but is this true at all? Well, like as I’ve mentioned in many of our reviews, these guarantees are never really close to what they make it seem to be. After we add all the fees that come with it those returns are closer to 2-3% even sometimes less than that. Later in this review you are going to see how it works for this specific annuity.
When they talk about tax-deferral and legacy they are right, but all annuities offer the advantage to differ your money into retirement, so this characteristic is not something that would make this annuity special or different if compared to others.
Also in the brochure they succeed to tell you that the Delaware Life Masters Prime Variable Annuity will allow you to create lifetime income but what they fail to tell you is that in order to do this you have to purchase their income riders, and many times these are high fee income riders, that will simply drain your returns and decrease your benefit base until depleting all of your money.
Delaware Life Masters Prime Fee Breakdown:
Surrender Charge Fees: 7- year schedule
|Surender Charge %||8%||7%||6%||6%||5%||4%||3%||0%|
|Mortality & Expense Charge||0.85%|
|Admin Fee (waived over 100k)||0.15%|
|Fund Expense Fee||0.56% –1.50%|
|Guaranteed Lifetime Withdrawal Benefits Rider (optional)||1.20%|
|Return Of Premium Rider (optional)||0.20%|
|Highest Anniversary Value Death Benefit Rider||0.40%|
|Aprox. Current Fees without riders||3.40%|
|Aprox. Current Fees with riders||5.20%|
As you can see above, this annuity has high fees that agents try to hide most of the times, and you’ll end up wasting all your annuity returns paying for these fees. With an investment of $100,000 this annuity at the lowest will drain you principal at least $24,000 in 7 years. That’s not something you want for your future, because besides the fees you have to pay attention to inflation, and if your annuity nets 2-3% returns after fees, that means that’d you be barely keeping up with inflation or in many cases decreasing your wealth.
That’s why it’s always important to get the numbers right, and don’t be manipulated by the sales pitches that promise you a guaranteed rate of return. I do not want to be all against annuities but specially the variable annuities are most of the time a rip off. There are good annuities that can act as a defensive part of your portfolio but before you make any decision it is important that you contact a fiduciary advisor that puts your interest in front of his and disclose you all the things involving your retirement, because sometimes the best route to take is not to buy an annuity, it all depends on your situation.
Investments for Delaware Life Masters Prime Variable Annuity
The Delaware Life Masters Prime Variable Annuity as other variable annuities in the marketplace offer you a range of investment that you can choose from, however, it is important that you know that most of these investments come with a fee, sometimes it is worth it, but you still have to get the numbers right so you can decide if it is the best option for you or not.
There’s an option for a fixed account, Delaware will declare new interest rates monthly to reflect current conditions, but never less than a minimum guaranteed rate. However, you might not be able to take this option if you had purchased rider for this annuity.
Delaware Life Masters Prime Variable Annuity Riders
Guaranteed Lifetime Withdrawal Benefit Rider (GLWB)
This rider can only be purchased on the beginning of the contract and what it allows you to do is, to take partial withdrawals from a benefit base for the lifetime of the annuitant. As we have mentioned before this rider allows you to withdraw your own money until depleted and it will give your lifetime guaranteed withdrawals, but think about it? Do you want to deplete all your money? Remember that the guaranteed is a fixed amount and it would not keep up with inflation.
Nowadays with a good retirement income plan you will not have to withdraw all your money to receive lifetime income. You have to be aware of that before you buy any annuity with an GLWB or GLIB rider. Remember that annuities are a long-term commitment and if you don’t make a good, well informed decision your money might be trapped for many years on an annuity.
Return Of Premium Rider (ROP)
This Rider will enhance your death benefit rider and let you enjoy your living benefits, and in case you die before the contract is fully paid, then a return of the total premiums paid are going to be given to your beneficiaries.
I think this rider can really add value to you, because at the end of the day we don’t know what might happen in the future, and this is a way to secure some type of legacy for your family. However, it would be better to look for this rider in another low fee annuity, because as I have previously explained, this annuity has considerable high fees when you add them all.
Highest Anniversary Value (HAV) Death Benefit Rider
This Rider allows you to lock-in the investment gains each year on the contract anniversary date, up to your 81st birthday, and also give you death benefit guaranteed to the highest that your account value has been in the your years before 81st. For example, if you bought this rider 5 years ago, and your contract value is $200,000 right now, but in year 3 your contract value was $235,000, this benefit will be guaranteed that your death benefit would be $235,000 which is the highest anniversary value.
This Annuity works Best:
- For those who like paying high fees
- Death Benefit Enhancers.
- Tax-deferred growth.
- For those looking for lifetime income
This Annuity Works Worst:
- For those looking for Low Fees
- Those who need liquidity.
- Principal Protection
In conclusion, this Annuity as most of variable annuities has high fees with high fee income riders. It offers you good death benefit guarantees but they come with fees involved. The 6.25% guaranteed is very deceiving and not nearly as close as that percentage.
However, sometimes they might be a turn around if you already purchased this product, it is not for all cases but in many cases it is worth it to get out of an annuity that is not providing your portfolio with any value but instead taking value from you.
Finally, if you need more information about this annuity or any other annuity that you might want to know about feel free to contact a Certified Financial Planner that can evaluate your current situation and provide you with the best solutions for your retirement.