Today’s review is on the Pacific Life Odyssey Variable Annuity, with the purpose of showing you its 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
Pacific Life Odessey Annuity Quick Facts
|Product Name||Pacific Odessey|
|Type of Product||Variable Annuity|
|Standard & Poor’s Rating||“A+” (Strong)|
+ 1 (800) 800-7646
Before we go into detail, here is an important legal disclosure.
This review of Pacific Life Odyssey 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 Pacific Life Insurance Company
Pacific Life Insurance Company is an American insurance company providing life insurance products, annuities, and mutual funds, and offers a variety of investment products and services to individuals, businesses, and pension plans.
Pacific Mutual Life was founded in 1868 by former California Governor, Leland Stanford in Sacramento, California. Stanford also was the first policyholder of the company. After Stanford died and his university was strapped for money, his wife used the money from the policy to pay for professors. Starting in 1885, Pacific Mutual Life began issuing accident insurance, which was an innovative move for a life insurance company at the time. In 1906, Pacific Mutual Life merged with Conservative Life, a Los Angeles-based life insurance company. Following the 1906 San Francisco earthquake, Pacific Mutual Life’s board of directors moved the company to Los Angeles. Since 2005, the company is domiciled in the state of Nebraska.
There are a few ways that Agents might pitch Pacific LIfe Odyssey Variable Annuity
- Guaranteed income
- Flexible Investment Options
Is any of this True?
Pacific Life Odyssey Variable Annuity offers different benefits, like tax-deferral and flexible investment options like most variable annuities in the market. But when it comes to guaranteeing income, you have to be careful and know what you are signing up to.
It is important to evaluate different options before buying an annuity, and most importantly compare them to other alternatives, after doing all the due diligence you should have more information to make an educated and informed decision.
Pacific Life Odyssey Variable Annuity Fee Breakdown:
Surrender Charge Fees: No surrender charge
|Type||Pacific Life Odyssey|
|Mortality & Expense Fee||0.15%|
|Portfolio Operating Expenses (Funds)||0.40%-2.20%|
|Future Income Generator (Single and Joint) Rider||2.50%-2.75%|
|Enhanced Income Select 2 Charge (Single and Joint) Rider||2.50%-2.75%|
|Aprox. Current Fees Without Riders||1.5%-2.5%|
|Aprox. Current Fees With Riders||4.25%-5.25%|
We can say that this is a low fee annuity plus it does not have a surrender charge so you can access your money at any time. However, like with many other variable annuities, this one has the option to buy an income rider that “supposedly” is going to provide you with lifetime income. The two-income rider options this annuity offers are quite expensive and you have to be aware of the consequences if you decide to purchase one of these income riders.
Later on this review, we are going to take a look at these riders in-depth and see how they really work, but as you see above having to pay a 4-5%, would very possibly eat all your returns, does not sound that appealing. The case that you would probably lose all your money only just for the “guaranteed” lifetime income would probably not beat inflation. That is definitely something to worry about, and you have to be prepared for it. Most of the time retirees don’t need an income rider or an expensive annuity to have income for the rest of their life, however, insurance agents often recommend these products because it is the easy thing to do, but you are the one that is going to pay the consequences later in your retirement. That’s why it is important to hire a specialist! A Certified Financial Planner is the highest accreditation in this industry. A CFP can provide you with a comprehensive income analysis that may tell you the best course of action to take in your situation, but without getting the numbers right it is not possible to see what is the best scenario for you.
Investments for Pacific Life Odyssey Variable Annuity
When checking the guide brochure of this annuity you can see that they recommend you to diversify, which I think they are correct about it, but also they tell you that the Pacific Life Odyssey Variable Annuity is going to help you to do this, but is this true?
Well, we can agree that this annuity has a variety of funds that you can choose from to invest, but does this mean you are diversifying? Not actually, in order to diversify you have to invest in uncorrelated assets that can keep your risk/reward balance on point. This is something that variable annuities fail to do because they limit you to invest in the funds that they offer. Another thing is the fees that these funds add to your current fees, as well as the returns that some times are not that good.
They also offer Investment Options that are focused on asset allocation, which means pre-built portfolios that offer you different attributes depending on your risk tolerance and reward potential.
It is important to mention that some of these funds can potentially help your portfolio grow but you don’t necessarily need an annuity to buy these funds, even sometimes you can buy these or similar funds outside of an annuity for a lower fee.
In AnnuityEdu we believe that an annuity should not give the annuitant any limitation but instead give you value. An annuity can definitely help you if you allocate a portion of your portfolio to it, but not in all cases and definitely not a variable annuity.
How do the Guaranteed Minimum Income Rider Work?
The way The Pacific Odyssey Variable Annuity Rider works, is not that different from other variable annuity riders, they have 2 purposes, 1) promise you a lifetime income until your death, and 2) Deplete all your money to zero. So, once you understand that you are going to run out of money at some time, and likely the guaranteed lifetime income/withdrawal won’t keep up with inflation, then you can make an educated decision whether to buy a rider or not.
Future Income Generator Rider:
This rider allows you to withdraw your own money regardless of market performance, also it will keep paying you money after you contract value is depleted to zero. This rider will start paying you income after 59 ½ and you cannot request a termination after purchased. Also, for the first 10 years the Protected Payment Base will be increased by the annual credit amount, only if there are no withdrawals made.
Enhanced Income Select 2:
The difference between this rider and the future income rider is that this one will not only allow you to withdraw a fixed withdrawal amount each year but also the Income Rollover Amount which is, in case of, a remaining amount of the previous year that you did not withdraw, for example, if your rider allows you to withdraw $5,000 per year but last year you only withdrew $2,000, then in the current year you will have the option to withdraw the $3,000 left from last year and the $5,000 of the current year.
Below you can see the guarantee rates for each rider:
|Age||Future Income Generator (Single &Joint)||Enhanced Income Select 2 (Single &Joint)|
|Before 59 ½||0.00%|
|60 – 64 years old||4.00% – 3.50%||4.50% – 4.00%|
|65 – 74 years old||4.75% – 4.25%||7.00% – 6.50%|
|75 – 84 years old||5.00% – 4.50%||7.50% – 7.00%|
|85 and older||5.00% – 4.50%||7.50% – 7.00%|
|Guaranteed lifetime Income||3.00%||3.00%|
This Annuity works Best:
- For those who want to deplete their money to zero.
- Tax-deferred growth.
- For those looking for lifetime income
This Annuity Works Worst:
- Those who need liquidity after buying a rider.
- For those looking for high returns and low risk.
- For those who want principal protection.
The Pacific Life Odyssey Variable Annuity is designed like other annuities to give you tax-deferred growth for retirement. I don’t see too many red flags for the standard contract, however, the problems arise when you buy one of the riders because not only the fee increases but you also are locked into it for the rest of your life and you cannot cancel the rider. One good aspect that we can get from this annuity is that if you don’t buy the income rider you can withdraw all your money without any surrender penalty, which is really comforting characteristic to have in an annuity.
If you have this annuity or are planning to buy one don’t hesitate and contact us, we are experts on this topic, and we have saved thoughts of dollars to our clients by helping them get out of these expensive and most of the time unnecessary products.