Fair and Objective Annuity Reviews

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Lincoln Financial Group Investor Advantage Variable Annuities

Sherlock3Let’s Get Started

The Lincoln Financial Group Investor Advantage Variable Annuities are a group of variable annuities offered by Lincoln Financial Group which are part of their Lincoln Investor Advantage suite.   Currently there are 4 variable annuity choices in the Lincoln Investor Advantage suite and all 4 choices have very similar sounding names and operate mostly the same way with just slight variations.  The 4 choices are: (1) the Lincoln Investor Advantage B-Share, (2) the Lincoln Investor Advantage C-Share, (3) the Lincoln Investor Advantage Fee-Based, and (4) the Lincoln Investor Advantage RIA.  I will not get into the slight differences between the 4 choices,  but feel free to contact us here at Annuity Investigator if you want more details on the differences.

Let’s start with a brief overview of variable annuities before we get into the details of the pros-and-cons of the Lincoln Financial Group Investor Advantage Variable Annuities suite.


annuity2What Is a Variable Annuity?

A variable annuity is a contract between a person (like you) and an insurance company. It’s a generally designed as a long-term investment for retirement purposes. The person opening the variable annuity account places money in professionally managed investment portfolios, where potential growth can accumulate in a tax-deferred manner. When the person who opened the variable annuity account retires, the monies that potentially accumulated in the variable annuity can be used to generate a stream of regular income payments that are guaranteed for as long as they live. Additionally some variable annuities  may provide a guaranteed death benefit for the persons beneficiaries.


How Does a Variable Annuity Differ From a Fixed Index Annuity?

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?

First off, generally speaking variable annuities have higher fees than fixed index annuities.  Also, variable annuities usually have a more complex structure than fixed index annuities making them difficult to determine exactly what fees are charged, what penalties might be incurred for lump sum withdrawals and how gains are credited.  For example the Lincoln Investor Advantage B-Share prospectus is 153 pages long.

stock marketIn addition, 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.


fee2What Else Do You Need To Know?

Fees, penalties and fine print.  And the Lincoln Financial Group Investor Advantage Variable Annuities have lots of them.  Are you ready?

Fees:  To start there is a nominal $35 annual account fee and .10% admin charge.  Next there are the mortality and expense risk charges which can run from 1% to 1.15% depending on the product and the death benefit charge can run anywhere from 1.40% to 1.70%.  Finally the annual investment choice fees run from .79% to 1.71%.  You may find some lower fees and some higher fees, but that was the lowest and highest I found. You are welcome to scroll through them yourself here, I found them starting on page 15 of 153.

Penalties:  The early withdrawal penalties (surrender penalty) is for the first 5 years on the B-Share product.  The first year it is 7%, 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 Lincoln Investor Advantage C-Share variable annuity.

big-logo copyPersonal Note

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).


CautionFor Your Consideration

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.





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