Nationwide Destination L 2.0/Destination B 2.0 Review
This review will show you the strengths and weaknesses of the Nationwide Destination L 2.0 Flexible Premium Deferred Variable Annuity. We will walk through the riders, its features, potential returns and the details of how Nationwide Destination L 2.0 works, so you can know what to expect. As with all annuities some aspects work well, and others work poorly. Therefore, to make an informed decision it is important to consider all available facts.
In this review we’ll cover
- Product Type
- Investment options that are available and their realistic long-term investment return expectations
- Understanding the income riders
- Understanding the death benefit
- How it can best help your financial plan
- How it is most poorly used as part of your financial plan
Nationwide Destination L 2.0 Quick Facts
Nationwide Destination L 2.0
Nationwide Life Insurance Company
Type of Product
Flexible Premium Deferred Variable Annuity
Standard & Poor’s Rating
Before we go in the details, please read this legal disclosure.
This review of the Nationwide Destination L 2.0 Annuity is an independent review at the request of readers. My intention is to explain my perspective when breaking down the positives and negatives of this model annuity. This is an independent product review, not a recommendation to buy or sell an annuity. Nationwide 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 circumstances. This is not meant as 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.
Information about Nationwide
Nationwide is a stock life insurance company organized by Ohio Law in March 1929. They do business in all 50 states, the District of Columbia and Puerto Rico and offer life insurance, retirement products, mutual funds and annuities. After more than 85 years in operation this company has become one of the largest insurance financial service companies in the world. Furthermore, Nationwide is popular with many people as they pride themselves in focusing on customers and valuing people.
You can learn more about this from www.nationwide.com
How do Agents Typically Pitch This Product?
- Guaranteed lifetime income for retirement.
- An option to receive 7% guaranteed income.
- Income for your spouse and loved ones when you pass.
- Diversified investment options and market-performance linked returns.
- Tax deferred accumulation.
Is any of this True?
Nationwide annuities can help investors outlive their income by giving investors periodic payments that last a lifetime. Therefore, the periodic payments on this investment can indeed last for life and leave behind a payment for a chosen beneficiary. However, these annuities are long-term investments because of the 10% tax penalty that an investor would occur if they began to withdraw before the age of 59.5 years old.
The Nationwide Destination L 2.0 is a flexible deferred variable annuity, so annuitants have the choice to make an initial investment via one lump sum or via payments over a time. It has a reasonable minimum investment requirement of $10,000 and gives investors the opportunity to invest in one lump sum or in payments over a year. Above all, those who invest $500,000 to $999,999 get 0.50% on their investment credit to their Fixed Account and those with $1,000,000 receive a 1% credit on their investment.
Additionally, extra credit offered on the principal you invest is not uncommon with annuities. Many agents on other annuities pitch can “Start-up bonuses” as high as 7% or more. However, reading the small print, looking further into the annuity, investors later realize that the start-up bonus is nowhere near as high as 7%. It is usually found nearer to the 0.5% or the 1% that pitched for this Nationwide Destination L 2.0.
Fixed Account Payments
Now in terms of the payment and payment accounts, you’ll receive returns yearly on the contract anniversary date and this annuity offers two types of payment options. Fixed Account Payments or Variable Annuity Payments. The Fixed Account Payments come from a Nationwide Account used to fulfill annuity obligations to their clients. The payments you receive are typically low and remain the same throughout annuitization.
Variable Annuity Payments vary yearly throughout annuitization as they are received and based upon Sub Accounts invested in the underlying mutual funds. Typically (depending on your propensity to risk) Variable Annuity Payments sound appealing to those that want market linked performance returns. But the terms and conditions of these Sub Account linked funds mean that your returns are not actually linked to publicly traded funds but instead replica funds.
Whether you have chosen Fixed or Variable annuity payments, the guarantees on this investment are both heavily affected by any additional riders you may have chosen. The fee structure and the investment options chosen. Therefore, it is important that we look further into these factors and understand them correctly.
Let’s look further into the details of this annuity.
As with a lot of variable annuities the Nationwide Destination L comes with many costs in its fee structure.
With the optional benefits selected the total fee guaranteed to incur is 4.45%. To clarify, I’ll break down the important numbers you need to know.
Annual admin fee: 0.20% of daily net assets
Mortality fee: 1.55% of daily net assets
Mutual Fund trading fee: 1%
Mutual Fund operating expenses: 0.43%-2.45%
Surrender charges: 0% at 4 years/ 5% at 3 years/ 6% at 2 years/ 7% at 1 year/ 7% at 0 years.
Death Benefit fee: 0.20%-2.20%
Spouse Continuation Fee: 0.40%
Beneficiary Protector Charge: 0.35%
Lifetime Income 2.0 Rider fee 1.50% annually
The Variable Annuity Payment Option has a guaranteed Investment Return Factor of 3.5%. After paying fees you are actually left with a minus return of 0.95%. So, in order for you to even break even on your investment with the Variable Payment Option you would need the underlying funds to perform at least 1.95% every year.
This may seem achievable when considering the average annual return on the S&P 500 for 2017 was 22%. However, as mentioned previously the underlying investment funds are not actually linked to publicly traded funds but instead replica funds. Unfortunately, the performance on these replicas are very poor and year after year the one year average return on these funds are double-digit minus returns.
The goal of investing in your retirement is to help your money grow and provide a nest egg for you and your family when you no longer work. You could put $100,000 in your mattress and take 3.5% or $3,500 a year yourself for 28 years before you would run out of money without paying fees to do so.
Furthermore, lets discuss the income rider as you’re probably thinking that if you have this option then this can save your investment from these low returns as pitched 7% Guaranteed Income for life. After fees and with the terms and conditions on this rider annuitants are still left with a less than 2% return. What agents don’t pitch is that this Income rider guarantees income for life based on your age. Annuitants aged 45-59.5 receive 3%, those aged 59.5-64 receive 4%, those ages 65-80 receive 5% and those aged over 81 receive 6%.
Understanding the Death Benefit
Certainly, some of you may have always understood that the return on this annuity was very low because of the guarantee of lifetime income for your family after your death via the Death Benefit option. Unfortunately, this guarantee is also not as pitched. Beneficiaries only get payments after your death for the 10-year or 20-year term that annuitants meant to select when they first invest in this annuity. If a term is not selected there is no guaranteed number of payments. Therefore, it is possible that if the Annuitant dies before e.g. the second annuity payment date, the Annuitant will receive only one annuity payment and no death benefit requires payment.
Where it works best:
- Producing a guaranteed pension like income stream,
- Those not looking to earn more than 2% on their capital
- Those who value safety of their principal over return
Where it works worst:
- Moderate or maximum growth
- Those needing a large return on their investment
- Those who need a return of over 2% annually
Annuity Edu’s Summary on the Nationwide Destination L 2.0 Annuity
As we can see this annuity has many loopholes and it seems created to keep your money for as long as possible whilst charging you fees and giving you the minimum in return to do so.
The 7% Guaranteed Income is not actually 7% it’s up to 7% depending on your age. When you buy the annuity and the fees are taken annually from your Contract Value regardless of how the underlying funds perform. This causes your contract value to deplete to 0$ fairly quickly which leaves you with only the small guaranteed payments for the remainder of the 10- or 20- year term you chose.
Therefore, as mentioned previously this is a long-term investment that you should take careful consideration on how it can benefit you before locking your money into it for an extended period of time.
Overall the Nationwide Destination L 2.0 has low returns which is fine for those of you who do not need your premium to maintain your lifestyle throughout retirement. It is important to test all annuities versus various others to see which one fits your goals and objectives the most. This is something we do for free here at annuityedu.com. The only way to know if this annuity is a good fit for you is to have it tested.
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 important information before you buy.
Have Questions on the Nationwide Destination L 2.0 Annuity? Have any comments?
If you still have questions about this annuity, or you’re an investor that’s still confused about this annuity. You can reach out to us by email. We can’t always respond right away, but we strive to respond within 24 hours.
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All the best,