The Jackson National Elite Access Variable Annuity is a variable annuity as the name suggests. If you are not familiar with the term, an annuity is just a contract or agreement between a person (like you) and an insurance company. Commonly people who research (and may ultimately end up investing in) annuities are looking to grow their money, and for the lifetime income stream option that many annuities offer.
The lifetime income stream is called a living benefit because you get the benefit while you are living. Keep in mind that the lifetime income stream is a separate feature from the growing your money feature. Though many (most) fixed index and variable annuities offer both features, the two features are distinct and separate and having one does not guarantee that an annuity has the other. In fact the Jackson National Elite Access Variable Annuity does not have the option of providing a lifetime income stream, the Jackson National Elite Access Variable Annuity is designed for market growth purposes only.
You: You mentioned fixed index annuities, I have heard of them. What is the difference between fixed index annuities and variable annuities?
Me: With fixed index annuities the growth of your money is tied to an index like the S&P 500 Index. Your money is not actually in the market so it 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.
Me: With variable annuities your money is at risk of being lost. Your money is invested in the market so 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.
You: Why would anyone choose a variable annuity over a fixed index annuity?
Me: Because although the fixed index annuity does not have the potential market downside losses that the variable has, the typical variable annuity offers a lot more upside potential than the typical fixed index annuity. Bottom line is that you potentially could grow your money faster in a variable annuity.
The Jackson National Elite Access Variable Annuity as I stated previously is designed to be an investment vehicle only. What makes the Jackson National Elite Access Variable Annuity a little different from other variable annuities is that the Jackson National Elite Access Variable Annuity offers you the option to place some of your portfolio into alternative investment (or “alts” for short).
You: What are “alts” and why would I want them in my portfolio?
Me: “Alts” are just investment choices other than typical stocks and bonds. They are mostly comprised of futures, commodities and arbitrage strategies. The reasoning is (and something that Jackson National promotes in their marketing material) that research has shown that adding “alts” to stock and bond portfolios increases market returns and lowers risk. That does not mean that if your portfolio is comprised of just stocks and bonds that you need to add alternative investments, as always your results may vary.
Me: In addition to alternative investment choices, the marketing material for the Jackson National Elite Access Variable Annuity says that another feature of the annuity is the added benefit of risk management and tactical management. Risk management is a term meaning that they seek to address market unpredictability and volatility while seeking long-term growth. Tactical management just means that they practice asset allocation flexibility strategies that proactively responds to all market cycles, positive and negative.
You: So in other words they move money around to try to avoid big losses and/or make bigger gains.
Me: Yeah, that about sums it up. What a novel idea, huh?
Fees, penalties and fine print. And the Jackson National Elite Access Variable Annuity has lots of them. Are you ready?
Fees: A base fee of 1% annually and investment choice fees that run from .55% to 2.71%. Admittedly this is not as high as many other variable annuities, but still you should be aware of them.
Penalties: The early withdrawal penalties (surrender penalty) is for the first 5 years. The first year it is 6.5%, the second year it’s 6%, third year 5%, fourth year is 4%, and the fifth year is 3%. This product is designed for the long term and lump sum withdrawals in the first 5 years can be very expensive.
Fine Print: The prospectus for the Jackson National Elite Access Variable Annuity is 708 pages long.
Higher fees, higher risk. Is the Jackson National Elite Access Variable Annuity right for you? Not sure…does it perfectly help you execute your financial plans and has the right balance between risk-vs-reward? If you’re not educated fully on it, or how it will affect the rest of your portfolio, slow down and please consider it carefully.
There is no need to rush into the Jackson National Elite Access Variable Annuity. Read some of our other reviews and make sure you compare it to owning a low cost portfolio of indexed funds, or if you want to limit losses, compare it to some of the fixed index annuities reviews on this site.
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 want uncapped growth and you are willing to take the downside risks of the market, then research opening a brokerage account and invest in the positions/funds 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 AnnuityInvestigator 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.