Today’s review is on the Midland National Vector II Variable Annuity. The purpose of this review is to show you how this annuity works and to dig deep into the fee structure to see if what agents tell you about it is true or not. The best way to understand an Annuity and make an informed decision, you must consider all available facts.
- 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
Midland National Vector II Variable Annuity Quick Facts
|Product Name||Vector II|
|Type of Product||Variable Annuity|
|Standard & Poor’s Rating||“A+” (Strong)|
Before we go into detail, here is an important legal disclosure.
This review of Midland National Vector II 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. Midland National 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 Midland National
Midland National’s proud history dates back to our founding, in 1906, under the name Dakota Mutual Life Insurance Company. The company grew steadily during the early years, even as it faced the economic challenges of World War I, the Great Depression, and World War II. In 1925, the company assumed its current name, Midland National® Life Insurance Company.
Today, Midland National has over 1 million life insurance and annuity policies in force, and has paid more over $593 million in life insurance claims and over $470 million in annuity benefits in 2019 alone.
There are a few ways that Agents might pitch Midland National Vector II Variable Annuity
- Lifetime withdrawals
- Low Fee Annuity
How This Variable Annuity Really Work?
The Midland National Vector II Variable Annuity, it’s a standard variable annuity with almost no outstanding characteristic like most of their peers. It has relatively high fees that offset the annuity returns, tax-deferred growth if any growth, and the possibility to choose a rider that allows you to deplete your money in order to benefit from the lifetime income.
You have to remember that Variable Annuities are a long-term commitment investment, if you decide to buy one you have to be aware of that, and typically this type of annuities are design to stick to them forever, so you can benefit from the lifetime income they offer. It is possible to withdraw your money after the accumulation period, and enjoy some gains, but most of the potential of these variable annuities are offset by their high fees, so any possible high returns are minimized and most probably you will only keep up with inflation at the end of your accumulation phase.
However, it is possible to get out of a high fee variable annuity and get the best of your money without depleting it all, nowadays there are many opportunities in the market so you can minimize risk and maximize gains, and start enjoying those years of calm that your retirement offers you, with no worries whatsoever.
For More Informatiohttps://www.annuityedu.com/all-weather-retirement-portfolion Click Here!
Fees for Midland National Vector II Variable Annuity:
Surrender Value Charges
Surrender Charge Fees: 7- year schedule, 10% free annual max withdrawal
|Surender Charge %||7%||7%||6%||5%||4%||3%||2%||0%|
|Fee Types||Current Fee – Max Fee|
|Policy Value Fee||$30-$60|
|Mortality & Expense Charge||1.45%-1.45%|
|Extra Credit Rider||3% Bonus Option: 0.50%-0.50% 4% Bonus Option: 0.65%-0.65% 5% Bonus Option: 0.80%-0.80%|
|Five for Life Plus Rider||0.75%-0.75%|
|GMIB PLUS Rider||0.55% –1.00%|
|GMDB Plus Rider||3% Roll-Up Option: 0.20%-0.45% 6% Roll-Up Option: 0.45%-0.80%|
|Annual Step Up Option||3% Roll-Up Option: 0.30%-0.55% 6% Roll-Up Option: 0.55%-0.85%|
|Shortened CDSC Rider||4-Year Option: 0.60%-0.80% 3-Year Option: 0.65%-0.90% 0-Year Option: 0.70%-1.00%|
|Estate Planning Rider||0.30%-0.75%|
|Total Annual Portfolio Expenses (fund fees)||0.68%-5.03%|
|Total Approx. Fees without Riders||Current: 4.7% ($30) Max: 5.00%+ ($30)|
|Total Approx. Fees with Riders||6.7%-7.00% ($30)|
Agents may try to sell you this product by telling you that is a low fee annuity with only a 2% fee, which is not entirely true. As we can see above if you add all the management and administrative fees, in fact, the fee is around 2%, however, when you add the fund fees which according to the prospectus are between 0.68%-5.03% the total fees increase by a lot, and that happens without mentioning the rider fees which increases exponentially when you add them all. It is important to mention that fees from the riders can only get to a max of 2% in combination according to the prospectus, see below the possible combinations of rider fees for this annuity:
|Five for Life Plus Rider||GMIB Plus Rider and Estate Planning Rider|
|Extra Credit Rider||Shortened CDSC Rider|
|GMIB Plus Rider||Five for Life Plus Rider|
|GMDB Plus Rider||N/A|
|Shortened CDSC Rider||Extra Credit Rider|
|Estate Planning Rider||Five for Life Plus Rider|
Investments for Midland National Vector II Variable Annuity
A good and positive aspect of this variable annuity is that it has 77 investment portfolios that you can choose from, that’s a good amount of funds in which you can diversified your principal and hope for a good return. However, some funds available for this Variable Annuity are really high fees as we saw in the fee section of this review, so you have to be aware what funds your money is allocated if you have this annuity.
There are limitations on what funds you can choose with certain riders, it is important that you ask the agent what those limitations are or read it in the prospectus.
If you want to know more about the investment option performances for this annuity click here!
Midland National Vector II Variable Annuity Riders
Five for Life Plus Rider
This rider guarantees you lifetime withdrawals equal to the GPA (Guaranteed Payment Amount) until your GPB (Guaranteed Payment Balance) is depleted, even if your accumulation value reduces to zero. In other words, this rider will help you deplete your capital in exchange and then give you lifetime withdrawal after you deplete your money. Any withdrawals taken may affect your guarantee withdrawal payments in the future.
Extra Credit Rider
This Rider allows you to choose between 3%,4% or 5% premium bonus at the time you apply for the contract. The credit will depend on the amount chosen, to each premium payment that you make in the first contract year. Check fees above for exact numbers.
Sounds good in paper but when you get the numbers right, it looks like a pretty smart move by the insurance company, for example, if you choose the 5% bonus percentage with the 0.80% fee, and you buy $100,000 of this annuity, they will give you the 5% bonus which represents $105,000, it sounds good right? Okay, lets see how much in fees represents that 0.80%, $105,000 x 8% = $840 per year, supposing that is the fee amount for the next 7 years your total fees would be $5,880 at the end of those 7 years, so that bonus is going to be recovered by the insurance company anyways. However, we have to mention that they credit you any excess if the fees surpass the bonus at the end of the 7 years.
GMIB Plus (Guaranteed Minimum Income and Accumulation Benefit) Rider
This Rider allows you to agree to a guaranteed Minimum Benefit if you decide to annuitize at the end of your contract, your accumulation value will be increased to equal the Guaranteed Minimum Accumulation Benefit, in the case is higher than your accumulation value. This rider will only apply after the rider has been enforced for at least 10 years. Also, remember that any withdrawal that exceeds 5% will reduce the GMAB benefit. This guarantee won’t be affected by any positive or negative returns on your investment portfolios, it is going to be a fixed guarantee that you can’t outlive.
GMDB Plus (Guaranteed Minimum Death Benefit) Rider
This Rider acts as a death benefit enhancer which allows the beneficiary to receive a minimum death benefit according to the option that was selected. There are 2 options for this rider:
GMDB Plus 3% Roll-Up Benefit:
This option will guarantee the minimum death benefit will be greater than the death benefit available under the based contract or the roll-up benefit with a 3% annual interest rate.
GMDB Plus 6% Roll-Up Benefit:
This option will guarantee the minimum death benefit will be greater than the death benefit available under the based contract or the roll-up benefit with a 6% annual interest rate.
GMDB Plus Annual Step-Up Benefit:
This rider will guarantee the minimum death benefit will be greater than the death benefit available under the based contract or the GMDB Plus Annual Step-up Benefit.
GMDB Plus Annual Step-Up With 3% Roll-Up Benefit:
This rider will guarantee the minimum death benefit will be greater than the death benefit available under the based contract; the GMDB Plus Annual Step-up Benefit or he roll-up benefit with a 3% annual interest rate.
GMDB Plus Annual Step-Up With 6% Roll-Up Benefit:
This rider will guarantee the minimum death benefit will be greater than the death benefit available under the based contract; the GMDB Plus Annual Step-up Benefit or he roll-up benefit with a 6% annual interest rate.
Shortened CDSC (Contingent Deferred Sales Charge) Rider
This Rider was created to help people that want to withdraw their money earlier than the surrender schedule indicates avoiding high surrender fees. Basically, it give you the option to reduce your surrender charge period from 7 years to 4,3, or none years. Below there is a reference table so you can understand the way this rider works better.
|Length of Time From Premium Payment Number of Years)||With Rider –Surrender Charge Percentage (as a percentage of premium payment withdrawn)||Without Rider –Surrender Charge Percentage (as a percentage of premium payment withdrawn)|
|Less than one||7%||7%|
|More than 7||0%||2%|
It is important to mentioned that this rider cannot be elected in combination with the Extra Credit Rider.
Estate Planning Rider
This rider allows the beneficiary to receive a death benefit equal to the contract value plus 40% of the contract gains that would help as a tax relief when the money is withdrawn.
However, it is important for you to understand that this benefit is going to be taxed as well, so it is not the case that it would offset all the tax-burden, but it is going help a little bit at least. Plus, you have to add how much having this rider represents in fees when the death enforced.
Another important thing to mention about this rider is that it cannot be elected in combination with the Five For Life Plus Rider.
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:
- Showing clear total fees
- Those who need liquidity.
- Principal Protection
When you first look at the Midland National Vector II Variable Annuity, it looks like a low fee variable annuity, since even in the prospectus adding all the fees you get a 2.15% max fee, however, as we saw they don’t show you the visual image of how it would look like if you approximate and add riders and fund fees, which we did in this review. They don’t lie at any moment, they tell you the truth about the base fees, but they as well hide the total possible fees which are really high as we saw in this review.
Before buying an Annuity, the most responsible thing to do is to do your research and consult with experts to see if it is the right thing for you. Remember that an annuity is a long-term commitment and if you are sold on the fact that it would give you lifetime income, then buying an annuity can be the worst financial decision that you can make. In short, we encourage you to contact a specialist that can run the numbers for you and show you different scenarios that YOU can choose from to meet your retirement goals.