Let’s Review The Security Benefit Total Value Annuity

What’s The Benefit?

The Security Benefit Total Value Annuity is a fixed index annuity and like all fixed index annuities what it is designed for and what it does best is providing guaranteed income for life.  Period.  If an agent is telling you that you that you can expect an 8.5% growth rate with this product be very cautious of whatever else your agent is telling you.  Can you get 8.5% growth on your money with the Security Benefit TVA?  Yes, it is possible.  Is it probable that you will get 8.5% returns with the Security Benefit TVA?  Very unlikely, but if you are happy with the minimum guaranteed growth rate on the income account than you might be very happy with this product.

Link to Security Benefit Total Value Annuity brochure: https://www.sbelitepartners.com/resources/client-materials.aspx

You: What is an income account? Why did you italicize it?

Me: The income account is just an imaginary account with your name that the insurance company keeps to calculate how much income for life they are going to pay you.  There is no real money in it that you can withdrawal.  It works this way, let’s say that there is \$100,000 of imaginary money in this account, now when you go to turn on your income for life stream the insurance company looks in this account and the multiple the amount of imaginary money in this account by some percentage and this is the amount of real money that the insurance company will pay you for life.  So in this example I will use 6.5%, so in this case \$100,000 X 6.5% = \$6500.  So in Security Benefit TVA example the insurance company will pay you \$6500 in real money for the rest of your life.  The older you are the bigger percentage rate they use in calculating your real money income amount.

You: So Security Benefit offers a guaranteed minimum growth rate on my imaginary numbers income account?  What is the guaranteed minimum growth rate on the imaginary dollars income account?

Me: The guaranteed minimum growth rate on the income account is 4%.  So keep in mind what that means is that no matter how poorly the market performs the real money that you plan to live on is growing at 4% per year!

You: Wow that is better than my savings account.

Me: Yes and the income never runs out as long as you live. When the money runs out in your bank accounts it is gone.

You: Can I just give them imaginary numbers to fund the annuity?

Me: Hah!. That’s a good one, but no unfortunately you have to give them real dollars.  They actually keep your real dollars in a separate account which we’ll call the principle account and you can earn returns on this as well.  The principle account is the account where you would make lump sum withdrawals in case of an emergency, but be aware withdrawals out of this account my be subject to withdrawal penalties and could effect you lifetime income stream amounts as well.  So for example if you had \$100,000 in your principle account and \$200,000 in your income account you would only have the \$100,000 available for emergency withdrawal less any withdrawal penalties.   The \$200,000 in the income account is just used for calculating your lifetime income stream, it is not available for lump sum cash withdrawals.  The balance in the income account is for computational purposes only.

Let’s take a look at how you can earn money in both your principle account and in your  income account dollars.

The fixed index part is language in the contract that says the value of your income account has the ability to increase.  The increases are not guaranteed and are many times over emphasized or misrepresented by commissioned agents (imagine that!). There is however the potential for capturing gains on an annual basis when a particular chosen market index goes up and there is no chance of losing those annual gains if that particular market index decreases once the gains have been captured.

You:  What? You mean I only get market upside exposure and no market downside exposure?

Me: Yeah that is what I am saying.

You: But, but that sounds too good to be true!

Me: Wait a minute take a step back and think about this.  I didn’t say you would get all the market upside, just no market downside.  Think about it, there are other ways to avoid market downside risk like bank Certificates of Deposit or US Treasury bills and/or other fixed interest accounts.

You: Oh yeah, you’re right.

Me: These are very conservative investment accounts, they are not designed for huge accumulation.  Will they beat many fixed interest accounts in the long run?  Yeah, “probably yes” would be my guess, but it is not guaranteed.  Will they beat the overall market? Highly unlikely.

You: What do you mean by “particular chosen market index”?

Me: What I mean is that when open the annuity account the insurance company gives you options to chose which index you want your income account and your principle account to follow.  As I said previously once your accounts are linked to the index you chose when that index increases you can get a portion of the annual increase of the index you chose or in some cases you can receive all the annual gains of your chosen index, and just to repeat myself again if the index has no gains or even losses your accounts do not experience the downside of the indexes, only the upside movements which are credited to your accounts on an annual basis.  If you do not like any of the indexes than you can usually just chose a fixed interest earning account.

Which Indexes Options Are Available With The Security Benefit Total Value Annuity Credit?

The Security Benefit Total Value Annuity offers 4 different account crediting options to chose from: the Fixed Account and three Index Accounts: the S&P 500 Annual Point to Point Index Account (no dividends), the Transparent Value Blended Index Account, and the 5 Year Annuity Linked Trader Vic Index Account.

You: Which index is the best?

Me: How could I possibly know that?  That means I know the future, and nobody knows the future.  Additionally, the past performance of each index changes constantly.  Currently as of this writing the S&P 500 Annual Point to Point Index Account would be my choice.

You: Could you tell me a little more about the indexes?

Me: Sure, let’s start with the S&P 500 Annual Point to Point Index.  The S&P 500 Annual Point to Point Index is basically just a comparison of two snapshots of the the S&P 500 Index.  The insurance company looks at the S&P 500 on the day you opened the annuity account and then they look at if one year later, if there has been an increase from one year to the next than they credit you some portion of the increase.  You can see the performance of the S&P 500 at the link at the end of this paragraph.

Link to S&P 500 performance: http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#{“allowChartStacking”:true}

Next let’s look at the Transparent Value Blended Index.  The Transparent Value Blended Index blends two indices, the Transparent Value Large-Cap Defensive Index without dividends and the S&P 2-Year U.S. Treasury Note Futures Total Return Index. I just said a mouthful, I know.  If you want to read more here I posted two links at the end of this paragraph, one that tells more about the nature of the index and the other shows its performance.  I think knowing the performance of the index is more important than knowing the features and in my humble opinion the performance of the Transparent Value Blended Index has been less than spectacular.

Finally let’s look at the 5 Year Annuity Linked Trader Vic Index which is an index choice that is unique to the Security Benefit Total Value Annuity.  Is this some extra special index for an extra special annuity?  Probably not, but it is a choice so let’s investigate it further.  The 5 Year Annuity Linked Trader Vic Index is basically a hybrid of other indexes.  Once again, its features are not as important as its performance and once again there is nothing special or spectacular about the performance of this index as compared to the others.

Offers up to an 8% Bonus on the income account value.  This means that the \$100,000 you deposited to open the account would be worth \$108,000 for lifetime income purposes.

Optional Death Benefit Rider to increase the amount beneficiaries receive.

Up to 10% penalty free annual withdrawals from the principle account starting the second year.

The Bottom Line

The Security Benefit Total Value Annuity is a good annuity product for persons looking for a fixed income stream for life not someone looking for spectacular gains.  It is for a person looking for some market upside potential without the chance of loss of principle due to index performance, it is not for a person looking to capture all the gains of the market.   If you have any other questions click on the link.

This is an independent product review, not a recommendation to buy or sell an annuity.  This review is not endorsed by any insurance company and I do not receive any compensation for this review.  This review is meant to be an independent analysis to provide the reader with information and concepts to help them make informed decisions.  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.  All names, marks, and materials used for this review are property of their respective owners.