This review is meant to show you the strengths and weaknesses of the National Western Life Annuity Income Outlook Plus 5. I’ll also go into the details you need to know in regards to the Income outlook plus 5 rider and how to find out if it’s worth it for you. As with all annuities, they work very well doing some aspects and poorly at other aspects. I’ll walk through the details of how National Western Life Annuity Income Outlook Plus 5 works, so you can know what to expect. This annuity is often positioned with an income Secure rider, so I’ll go into detail on how the income rider works.
- Product type
- Current rates
- Investment options that are available and their Realistic long term investment return expectations
- Understanding the 7% Bonus!
- Understanding the Guaranteed 4% income Rider and its true value
- How it can best help you as part of your financial plan
National Western Life Annuity Income Outlook Plus 5 Quick Facts
|Product Name||NWL Impact 10 Income Outlook Plus 5 Rider|
|Issuer||National Western Life Insurance Company|
|Type of Product||Fixed Indexed Annuity|
|Standard & Poor’s Rating||“A” (Strong)|
Is any of this True?
In a sense, it is, however, the details are important because things aren’t always what they seem. While many of the statements above are true, they don’t tell the whole story. My goal is to help you understand more about the details and exactly what you can expect, so you can see deeper into an overly simplified sales pitch.
The most often misunderstood and misstated by agents is the idea that you get a 4% guaranteed growth in the annuity in years you don’t take income. While it’s true the income base does increase by a guaranteed 4%, understand that this is not the equivalent of earning 4%. You can’t just walk away with the Income Rider’s 4% growth and spend the money. This 4% increases your income value which increases your income by 4% every year you don’t take income.
The insurance companies are smart and nobody is guaranteeing 4% right now with interest rates so low so let’s understand how the insurance companies think that way we can make the best decision for our retirement and not the insurance companies!
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If it happens that you’re on this website for the first time. We’re dedicated to helping you with a second opinion viewpoint so to help you see through some of sales pitches that aren’t what they seem. We hope with the information we provide you’ll be better educated to make an informed decision before you buy.
Before we go into detail, here is an important legal disclosure.
This review of National Western Life is meant to be an independent review at the request of readers, in addition, so they could see 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. National Western 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 and your advisor 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.
Information about National Western Life
National Western Life Insurance Company is chartered by the State of Colorado and a wholly owned subsidiary of National Western Life Group, Inc. National Western’s domestic operations extend to forty-nine states, the District of Columbia and four U.S. territories. The Company is also licensed in Haiti and accepts applications at its Home Office in Austin, Texas from – and issues policies to – non-U.S. residents. National Western operations extend globally to domestic and foreign markets.
NWL’s mission is to provide high quality insurance products on a global basis to meet the financial security needs of well-defined market segments. They provide professional and friendly service to policyholders and agents and are responsive to the needs of their employees, shareholders and the community. The Company is publicly traded and trades on the NASDAQ ticker NWLI.
See more at www.NationalWesternLife.com
How do agent’s typically Pitch this Product?
- As a way to get a high level of Guaranteed Lifetime Income
- To get 4% growth every year you don’t take income
- Guaranteed growth with market upside potential
- To receive a 7% upfront Bonus!
- To get market upside with potential to lock in gains
- Principal protection over a 10 year period while going for growth
- Getting tax deferred accumulation
Guaranteed Lifetime Income?
This National Western Life Annuity Income Outlook Plus 5 strength, as with most annuities, comes in guaranteeing lifetime income. National western life insurance company is saying that for every year you get older and don’t take income they’ll give you 4% more.
In other words every year you lose 100% in income and according to their life expectancy tables their promise to pay you income for your lifetime is getting less due to you getting older their willing to give you 4% more. The question is how much is the 4% rider really worth and is worth it for you? Throughout the rest of the review, we’ll go through some factors you should consider when answering that question.
What is the National Western Life Annuity Income Outlook Plus 5 Surrender schedule?
How much does the National Western Annuity Income Outlook Plus 5 Impact 10 Rider Cost?
As you can see the National Western Life is a 10 year commitment. It’s important to understand all the details before you buy because it has a very unforgiving surrender schedule.
The annual cost of the rider is 1.50%. If your account value is 150,000 but your income value 250,000 the fee is 1.50% of your income benefit account which is around 2.5% of the account value. It’s important to note that this will make it very difficult for the account value to grow especially while taking withdrawals.
As a principal protected way to get up capped market growth?
National Western Life Annuity Income Outlook Plus 5 can help you get growth with principal protection. It’s important to note, however, that it’s not the same as being in the market as far the upside. I’ll walk you through the expected return by looking at the rates. This annuity has some of the most complex and confusing crediting methods that I’ve seen on an annuity. To make things worse the company doesn’t show any historical performance of the crediting methods making it very difficult to see what we can expect.
There are 4 different Index crediting options.
With this National Western Life Annuity Income Outlook Plus 5 the first year participation rates will higher then ongoing participation rates. For example current 1st year participation rates are 75% for option A and 55% for option K.
Option A –
Indexed Interest rate Annual Rachet with Monthly average- Any Indexed Interest Earned is calculated from the beginning index Value for each policy year whether higher or lower than the previous year. All indexed Interest is credited annually on the Policy Anniversary and locked-in. Future decrease in the Index alone with reduce your financial low.
Option B –
Fixed Rate—This is similar to fixed annuity but it can float and adjust if rates go up or down. Check your current rate sheet for up to date information.
Option C –
Indexed Interest rate—Annual rachet with monthly cap
Option K –
Interest on the account value is linked in part to the S&P500- Composite stock index, the Nikkei 225, index and Eurostoxx index.
This can change subject to participation rates.
Understanding the Income Outlook plus 5 Rider and the 4% compounded growth rate 4% Guaranteed return, sign me up! Not so fast.
It’s important to understand the rate of return this provides to your financial plan when analyzing whether the Income outlook rider is appropriate in helping you reach your financial goals. To see through the smoke and mirrors, it’s important to test this annuity versus others for the internal rate of return that it provides to you.
The way National Western Life gives you 4% every year, you don’t take income is based on mortality tables. They know that every year you don’t take income is a year that their promise to pay your lifetime income is getting less, so they’re willing to give you 4% additional in years that you do take income because they know they’ll on average be required to give you income for less years.
The insurance companies are smart and they know their numbers, so it’s important to analyze all your options and know your numbers. You can do this by testing the annuity for the internal rate of return, so you can make the smartest decision to see if the numbers will provide for you in your financial plan.
Here’s and example to explain what I mean. Let’s assume you’re age 65 and you put $100,000 into this National Western Life Impact 10 Annuity with Income outlook plus 5. In the 1st year you’ll receive a 7% bonus and at the end of year 1 year 1 your benefit base will be $116,480 allowing you an annual income of $6,406.40 for life. This means by year 15 you’ve taken $96,096 in income. By the time you’re 80 you haven’t made a positive return on the income feature yet. Age 80 is also above the life expectancy. Assuming you live to 90 you’ll receive total payments of $160,000 over 25 years. This is a return of 60% over 25 years.
Just using simple return, that’s a simple annual return of 2.4% which is much less than the 4% that most agents make it seem you’re getting. The compounded rate of return on that scenario which gives us much more realistic returns when comparing against other alternatives is 2.02% annually much less then the smoke and mirrors 4%.
Another example we can use is if you’re 65 and let it defer for 5 years until age 70. By the time you’ve decided to take income, the income value will be around $136,265.13. At age 70 you can take 6% withdrawals which are equal to $8,175.91. If you take income for the next 15 years until age 85 years old, you’ll receive total income of 122,638.65. By then you’ve earned 22% over a period of 20 years which is under 1% compounded annually! I don’t think agents fully understand these IRR numbers that you’re reading. It’s a lot easier for them to state the big numbers like 4% compounded growth and 6% withdrawal and hope nobody like me does the math! So did you really make 4% guaranteed in those years? Definitely not.
The longer you live, the higher the return you can make, but are you confident that you can afford to make no return in retirement for the first 15 years?
National Western Life Income Outlook Plus 5 Annuity may still have a role, but if you’re counting on the 4% income rider to help you hit the 4% return goal that you need, you may want to look elsewhere. Test this annuity, as part of your retirement income plan, to see if it can help you reach your goals. Often an agent may not realize what I’ve just explained to you.
Consider that if you pass away, your beneficiaries don’t get the income base value that increases by 4% annually. They may be able to get the joint income value. Compare this money with other safe alternatives.
National Western Annuity Income Outlook Plus 5
Where it Works Best:
- For Producing a pension like lifetime Guaranteed Income Stream with the Income Rider
- For those looking for a conservative growth and want to guarantee their principal over a relatively short 7 year period.
- Those who want to make sure they never lose their principal and will to accept safety over return
- For those looking for guaranteed growth to pass money to their heirs with Inheritance Enhancer or Income Sustainer Plus
- For those looking for tax deferral and conservative growth
Where it works worst:
- Those looking for maximum growth
- Those who need a return on their investment in the first decade of retirement if using Income rider
- Those who need a return of over 3% annually in retirement to maintain their lifestyle
- For those who want more clarity in how their cash value will perform
AnnuityEdu’s Summary of the Income Outlook Plus 5 NWL Impact 10 with 7% Premium
National Western Life Annuity Income Outlook Plus 5 has some good and bad features. It makes me uneasy that the company doesn’t show historical performance. Also the crediting methods are much more confusing than most annuities. Other companies I’ve seen do show historical performance so I don’t think it’s a legal or compliance issue. It makes me think why don’t they want to show performance? What do they have to hide.
Relative to many annuities on the market, the 10-year surrender is standard. National Western Life has a high amount of income relative to other carriers. Especially with the bonus but overall the internal rate of return is still very low.
This annuity is best for conservative growth. Also, for guaranteeing lifetime income that you can’t outlive no matter how long you live. This annuity should outperform cash and perform.
Buying an Annuity is a long-standing commitment and the decisions you make will determine your success in retirement. It’s imperative to test this annuity versus various others to see which fits your goals and objectives the most. This is something we offer free here at annuityedu.com.
Unfortunately, I believe many agents think that the 4% roll up rate is the rate of return and may not fully understand the real returns that they’ll deliver to you.
We’ll use our proprietary calculator to illustrate for you how this annuity will likely perform in your specific situation.
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 all of the vital information before you buy.
Have Questions on National Western Life Annuity Income Outlook Plus 5? Have any comments?
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