The research paper was written by CANNEX Financial Exchanges Limited and was sponsored by New York Life.
IMPORTANT: The projections or other information generated by the Monte Carlo analysis used in the study regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Also, please keep in mind that results may vary with each use and over time.
Multiple cap and participation rates are shown in the study to demonstrate a balanced comparison of a range of fixed indexed annuities available in the market today. The rates used in this analysis represent the common and competitive rates, respectively, currently available and were obtained from CANNEX’s FIA Rate Service. It should be noted that although this analysis uses a single cap and participation rate to simplify these hypothetical examples, the cap and participation rates for actual fixed indexed annuities may change over time based on market conditions.
To do the analysis in this study, Monte Carlo simulations for 10,000 market scenarios were used to simulate the range of possible outcomes. Each scenario started with a $100,000 account value and was run through randomly generated annual rates of return to determine the ending account value for all 10,000 scenarios at the end of a 10-year period. Applicable fees, caps and participation rates were also included in the analysis.
Annuities are long-term financial products designed for retirement purposes. There are fees, guidelines, limitations, restrictions and risks to consider. Variable annuities are subject to market risk including loss of principal. Withdrawals or surrenders may be subject to ordinary income taxes and, if made prior to age 59½, may be subject to a 10% IRS penalty.
The New York Life Premier Variable Annuity II with the accumulation benefit rider, Investment Preservation Rider 3.0, guarantees a portion of retirement assets for a holding period. This “VA with AB rider” guarantees premiums made in the first year are protected from market declines after completion of a 10-year holding period—essentially a 10-year point-to-point product with no cap. The Investment Preservation Rider 3.0 does not protect the owner’s investment from day-to-day market fluctuations or against losses that could be realized prior to completion of the holding period.
Fixed Indexed Annuities (FIAs) are popular products for investors seeking equity market exposure, with little to no downside market risk. These products guarantee a floor on the account value, while tying interest credited to the growth of an index—such as the S&P 500. However, the returns within most FIAs are “capped,” meaning the upside to the policy is limited. As a result, these products may be less volatile than pure equity investments
Both products offer premium protection over a 10-year period. The FIA is a 1-year point-to-point meaning the floor is applied each year. Both products have a surrender charge period. The VA with AB rider offers premium protection on completion of the holding period. The cap of a FIA is the implicit cost of the annual flooring, meaning investors are not charged a direct fee, rather the caps on upside growth are the implied fee. The premium protection in the VA with AB rider is provided by the rider fee. Over a 10-year period, the VA with AB rider outperforms in most scenarios, because the cost of the FIA’s annual flooring limits upside potential. While both products fulfill an investor’s desire for accumulation with downside protection, there are differences. They differ in the amount of upside potential and the time period on which account value is guaranteed.
Features and benefits of the annuity should be explored before the client makes a purchase decision. Financial professionals must ensure the suitability of every annuity transaction, based on the client’s financial situation and needs, investment objectives, experience, and risk tolerance.
Please remind your clients to carefully consider the investment objectives, risks, charges and expenses of the investment carefully before investing. The prospectuses contain this and other information about the product and underlying investment options. Please remind your clients to read the prospectuses carefully before investing.
The New York Life Premier Variable Annuity II is issued by New York Life Insurance and Annuity Corporation (“NYLIAC”), a Delaware Corporation and is offered through properly licensed registered representatives of NYLIFE Securities LLC (member FINRA/SIPC), a licensed insurance agency. NYLIAC and NYLIFE Securities are wholly owned subsidiaries of New York Life Insurance Company (NY, NY).
SMRU 1813377 For registered representative use only.