Today we take a look at the Best of America Achiever Annuity Variable Annuity. If you have read any other reviews here than you know that I am not a big fan of variable annuities because of the fact that: they typically have high fees + they expose the principle balance to market downside + are usually very complex fee and payout structures + they usually contain onerous withdrawal penalties. Is the Best of America Achiever Annuity Variable Annuity any different? In my opinion it isn’t, it only attempts to look like it is. I did make a promise to another analyst here at AnnuityInvestigator that I would be fair minded in this review and discuss the potential positive aspects of the Best of America Achiever Annuity Variable Annuity. (Who says I’m not fair minded? I think I am being fair minded, I just don’t like variable annuities that much compared to other options). Anyway, here goes.
Let’s start with a quote from Nationwide’s Best of America Achiever Variable Annuity performance report:
“Variable annuities are for long-term investing; they’re not appropriate for short-term financial goals. And variable annuities have fees and charges that include mortality and expense fees, administrative fees and contract maintenance fees. These fees are a percentage of the investment account value.”
Is the Best of America Achiever Variable Annuity from Nationwide right for you? Let’s dive into the details and take a look.
To get started an annuity is just a contract between a person (like you) and an insurance company. Usually people who are looking into annuities are looking for certain contractually guaranteed financial terms and/or outcomes. Most often people who are interested in annuities are attracted by the guaranteed lifetime income stream that annuities can provide and usually they are also seeking to grow their money; which potentially is something else that annuities can provide. Additionally they may be interested in other features like death benefits or in-home health care benefits that some annuities may offer.
Although the financial goals and objectives for people interested in annuities are usually quite similar, the way different types of annuities help people achieve those goals and objectives can be completely different. Fixed index annuities can provide a guaranteed income stream for life. Variable annuities can also provide a guaranteed income stream for life. Additionally fixed index annuities can grow your money. Well variable annuities can grow your money too. What’s the difference?
With fixed index annuities your money is never at risk due to market downturns. So what this means is that if the market goes up your money can go up, but if the market goes down your money won’t follow the market down.
With variable annuities your money is at risk of being lost, your money will follow the market down. Worst case? Your money is all gone. Is that a probable or like scenario? No, but be aware of potential. However just like with the fixed index annuity your money can follow the market upwards.
Why would anyone choose a variable annuity over a fixed index annuity? The fixed index annuity does not have the potential market downside losses that the variable has. Why would anyone risk their money to market downturns if they didn’t have to? Drum roll please and the answer is: Risk vs Reward. The typical variable annuity offers a lot more upside potential than the typical fixed index annuity, so consequently it can potentially offer more lifetime income.
According Nationwide’s Best of America Achiever Variable Annuity performance report:
“Variable annuities offer a wide range of professionally managed investment options. With choices such as equity, bond and money market funds, you can create a portfolio designed to meet your investment goals. Please keep in mind that because these investment choices are subject to market fluctuation, investment risk and possible loss of principal, your annuity’s value will vary depending on how they perform.”
So keep in mind you can lose money, but let’s take a look at how you can grow your money with the Best of America Achiever Variable Annuity. After you open your Best of America Achiever Variable Annuity account you are given the option of investing your money in hundreds of different investment choices. I did not count them all, but the list starts on page 4 of the performance report so be sure and have a look yourself. The choices run the gamut, from low-risk and low-yield bond portfolios to high-risk and potentially high-return aggressive allocation portfolios.
Fees & Expenses: The Best of America Achiever Variable Annuity has a minimum annual total fees and expenses charge of 2.00% and a maximum of 3.54%. Wait, wait we’re not done yet because there also are investment management fees. The minimum investment management cost is .45% annually and a maximum of 1.99% annually. Just imagine if your Best of America Achiever Variable Annuity investment account only returns 5% to 6% returns in a year. You’d just be breaking even.
Sales Compensation: The maximum commissions paid on this product are 8%, no wonder your advisor thinks this is such a good choice for you!
Fine Print: The Best of America Achiever Variable Annuity prospectus is 243 pages long. Add to that the underlying investment accounts prospectuses which can be just as long and you have a thousand pages of reading material.
High fees, high risk. Is it right for you? Potentially yes, it might perfectly help you execute your financials plans and has the right balance between risk-vs-reward for you, but please consider it carefully. There is no need to rush into the Best of America Achiever Variable Annuity. Read some of our other reviews and make sure you compare it to some of the fixed index annuities.
You may be able to tell from the review that I am not a big fan of variable annuities, but I did try to be as fair minded as possible. My take on variable annuities is if you what you are looking for is uncapped growth and you are willing to take the downside risks of the market than just open a brokerage account and invest in the positions directly. This way you are going to save on all the variable annuity related fees and you can access your money without having to worry about penalties.
If you are still considering a variable annuity and want to be sure it is right for you than make sure you get the annuity tested. We can do that for you here at AnnityInvestigator and we can help you determine if the returns that your agent or advisor is illustrating for you are realistic. We can also answer additional questions and give you some ideas about strategies that mirror the upside potential of variable annuities but don’t have the downsides of variable annuities (high fees, withdrawal penalties, no downside protection).
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.