Today’s review is on the Genworth Commonwealth Extra Variable Annuity. So as with the purpose of showing you it’s strengths 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
Genworth Commonwealth Variable Annuity Quick Facts
|Product Name||Commonwealth Extra Variable Annuity|
|Type of Product||Variable Annuity|
|Standard & Poor’s Rating||“BB+” (Vulnerable)|
Before we go into detail, here is an important legal disclosure.
This review of Genworth Commonwealth Extra 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. Also consult a properly licensed professional, should you have specific questions related to your circumstances. This review is not intended to give specific advice also 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 Genworth Financial
Genworth Financial is an S&P 400 insurance company. The firm was founded as The Life Insurance Company of Virginia in 1871. In 1986, Life of Virginia was acquired by Combined Insurance, which became Aon plc in 1987.
Genworth Financial has three segments: Retirement & Protection, US Mortgage Insurance, and International. Products and services include life and long-term care insurance, mortgage insurance, and annuities.
There are a few ways that Agents might pitch Genworth Commonwealth Extra Variable Annuity
- 4% Bonus Credit
- Rider free lifetime income
Is any of this True?
The Genworth Commonwealth Extra Variable Annuity does offer tax-defer accumulation on your money over the years, most annuities do the same. They also give you a 4% to each premium payment to the contract value unless the annuitant age is 81+ at the time of issue, which in this case you will not receive the bonus.
Another good aspect of this annuity is the payment plans that it offers, as they do not charge you any extra fee for those plans like in many other variable annuities. However, we are going to guide you through every plan later on this review to see if it makes sense to you or not.
Next we are going to break down the fees for this annuity so you have a better understanding of how fees work for this annuity.
Genworth Commonwealth Extra Fee Breakdown:
Surrender Charge Fees: 8- year schedule
|Surender Charge %||8%||8%||7%||6%||5%||4%||3%||2%|
|Mortality & Expense Charge||1.30%|
|Fund Expense Fee||0.34% –1.24%|
|Guaranteed Minimum Death Benefit Rider (optional)||0.35%|
|Aprox. Current Fees without riders||2.55%|
|Aprox. Current Fees with riders||2.90%|
This product can be categorized as a low fee variable annuity comparing it to other similar products in the marketplace. With 2.90% approx. fee per year if you choose the GMDB rider then you might say that may be buying this variable annuity is a good choice. However, you would be locking-in your money for 8 years, and without any principal guarantee. Also, the Genworth Commonwealth Extra Variable Annuity will have to outperform at least a 3.00% every year just to offset the 2.90% fee, which at the end is not as valuable as you might think.
It is important to mentioned that this annuity gives you Optional Payment plans without any additional charge. For so many other variable annuities the only way to receive income is by purchasing an income rider.
In the next section of this review, we are going to explain the different payment options on this annuity so as to see they are worth it or not.
Investments for Genworth Commonwealth Extra Variable Annuity
The Genworth Commonwealth Variable Annuity offers you the choice to choose from a wide range of investments, however, when choosing mutual funds in variable annuity you have to be aware of the fees of these funds because they are going to add up to your current annuity fees, and sometimes the returns of this funds are not as good as agent may pitch you. So, it is really important that you contact a specialist that can analyze your portfolio and see how can it be improve in terms of fees and returns.
If you elect fixed income payments, the guaranteed amount payable will earn interest at a minimum rate of 3% compounded yearly. We may increase the interest rate which will increase the amount we pay to you or the payee.
How do the Optional Payment Plans work for this Annuity?
Under this annuity contact, the are 5 payment options that you can choose from without paying any rider fees. However, some of these plans will not provide you with lifetime income, it will just pay you a set income for a determined period of time. Payments will depend upon the funds’ performance unless you choose the fixed payments with a 3% minimum payment.
Optional Payment Plan 1 – Life Income with Period Certain:
This option guarantees lifetime income to the payee with the minimum period raging from 10 to 20 years. In case, the person dies during the minimum period, the remaining amount will be discounted and pay a lump sum to the payee’s state.
Optional Payment Plan 2 – Income for a Fixed Period:
This option provides for periodic payments to be made for a fixed period not longer than 30 years. This option payments also depends on the investment’s performance. Also, in case of a death, it will be paid a discounted amount in a lump sum to the beneficiary.
Optional Payment Plan 3 – Income of a Definite Amount:
This option provides periodic payments of a definite amount to be paid and the payments can be paid annually, semi-annually, quarterly, or monthly. The minimum amount paid per year must be at least $120 per $1,000 of proceeds. This means that if you bought this annuity for $100,000 the annual payment should be at least $12,000. The last payment will equal the remaining proceeds in the annuity. Unlike the other option, in case the person dies, the insurance company will pay the remaining proceeds plus interest earned to the payees’ state.
Optional Payment Plan 4 – Interest Income:
This option will give you fixed payments on interest earned from the proceeds left. This option will pay the amount remaining of the proceeds and any earned interest in a lump sum to the beneficiary if the annuitant dies. This plan is not available for contracts purchased with Qualified Money.
Optional Payment Plan 5 – Joint Life and Survivor Income:
This option provides monthly payments for two people a for a guaranteed minimum of 10 years. Beneficiaries must be at least 35 years old when the payments begin. Payments will continue as long as one of the beneficiaries is living, in case both die, the discount amount of the remaining payments will be paid to the survivor’s estate.
Genworth Commonwealth Extra Variable Annuity Rider
Guaranteed Minimum Death Benefit Rider (GLWB)
This is the only optional rider for this annuity, which is a good aspect of this annuity, and what it basically does is guarantee you a minimum death benefit of the premiums paid despite any risks associated with any market downturn. So, if the premiums paid were $100,000 when the annuitant died, and the current annuity value is $80,000 due to bad market conditions, the beneficiary will receive the initial $100,000 of premiums paid.
This Annuity works Best:
- Lifetime income without rider 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
The Genworth Commonwealth Extra Variable Annuity is a rare case annuity that does not charge any rider fee for lifetime income. However, it does not mean it is the way to go. As you see above this annuity still have relative high fees of almost 3% which your investments will have to overcome every year in order to keep your returns positive.
It is really a risky decision as this annuity does not give you any principal protection. Furthermore once you buy it you are just 3% negative per year no matter how the annuity performs.
And 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.