Variable Annuities: The Axa Retirement Investment Option

Variable annuities are long-term financial products designed for retirement purposes. They are essentially contractual agreements in which payments are made to an insurance company, which agrees to pay out an income or a lump sum at a later date. AXA offers a range of variable annuity products, including the AXA Investment Edge Variable Annuity and the AXA Retirement Cornerstone Variable Annuity. These products provide investors with access to a large number of investment options, including sector and specialty investments, and packaged portfolios. They also offer tax-deferral benefits, death benefits, and guaranteed lifetime income options. However, variable annuities tend to be more expensive than other types of annuities, with various fees and charges involved. When considering investing in a variable annuity, it is important to have a clear understanding of your financial goals and risk tolerance.

AXA Investment Edge annuity fees

AXA Equitable Life, now known as Equitable Financial Life Insurance Company, offers a variable annuity product called Investment Edge®. This annuity product enables investors to rebalance their portfolio regularly and stay on track with their retirement goals.

Fees

There are two main fees associated with the Investment Edge® annuity:

• A $50 annual contract fee, which is waived if your account value is at least $50,000
• A 1.10% combined annual operations, administration, and distribution fee

In addition to these fees, there are also expenses associated with the investment funds, which range from 0.58% to 3.89% depending on the fund. These expenses are known as operating expenses.

It is important to note that there is also a five-year withdrawal fee schedule for anyone who withdraws more than the allotted 10% fee-free withdrawal amount. If a withdrawal is made before the age of 59.5 years, the IRS will charge a 10% surtax, in addition to standard income taxes.

Benefits

The Investment Edge® annuity offers several benefits, including:

• Tax-deferral: This allows contributions and earnings to compound and grow without paying taxes until withdrawals are made.
• Tax-efficient distributions: Through the Income Edge program, taxes are distributed evenly over the course of receiving payments, allowing you to pay less tax in the early years of retirement.
• Diversification: Investors can choose from over 100 investment options from well-known money managers, including core investments and alternative investments, to help smooth the effects of market volatility and stay focused on long-term growth.
• Regular rebalancing: Investment Edge® enables investors to rebalance their portfolios regularly without costs, taxes, or tax paperwork, helping them stay on track with their investment strategy.

Should You Invest in AXA Variable Annuity for Retirement?

When considering whether to invest in an AXA variable annuity for retirement, it is important to weigh the fees, benefits, and risks associated with the product. While the Investment Edge® annuity offers benefits such as tax-deferral and diversification, it is important to consider the impact of fees on investment returns. Variable annuities are also subject to market risk, and the returns you receive will depend on the performance of the investments you choose. Therefore, it is recommended to consult a financial advisor to help you make an informed decision about whether this product is suitable for your retirement income plan.

Pros and cons of AXA variable annuities

Pros

• AXA has been providing stability and reliability to its clients since 1859.
• The company is the world's second-largest financial services provider based on revenue, with a market cap of over $63.5 billion.
• AXA is considered financially strong and stable, earning high ratings from insurer ratings agencies.
• Variable annuities are not subject to contribution limits.
• The money in them grows tax-deferred.
• Many states protect them from creditors.
• They are exempt from probate.
• They offer a guaranteed lifetime income.
• They offer a death benefit for a named beneficiary.
• They provide flexibility in diversifying assets, with 100 different investment funds to choose from.
• They offer a tax-efficient way to grow money.
• They allow you to transfer money from the Investment Account to the Protected Benefit Account.
• They provide access to a wide range of professionally managed investment funds that invest in indexes and various market sectors.
• They offer a free benefit rider called the "Income Edge" program, which can save you money on taxes in the short term.
• They offer downside protection, allowing you to limit how much value you're willing to let your contract lose.
• They offer a standard death benefit, which means your heirs would receive a payout if you die before taking withdrawals.
• They allow you to select a settlement option when you're ready to set up a dependable stream of income for retirement.
• They offer the potential for your investment to experience tax-deferred growth.
• They provide a guaranteed minimum interest rate and a reliable source of retirement income.
• They offer tax deferral, which can be a major benefit for growth.
• They can be an important part of your retirement plan.

Cons

• Variable annuities are not very good at producing income.
• They can end up generating significant taxes.
• They usually come with high fees.
• They are complex, and many owners don't understand them.
• They are exposed to extensive market downturns, and investors can suffer the loss of principal.
• They are illiquid, with surrender penalties for the first four to seven years of the contract.
• Gains are taxed at ordinary rates, while most long-term investment gains are taxed at the lower capital gains rate.
• Gains are taxed first, and distributions that aren't regular payments are taxed at ordinary income rates until there are no gains left in the contract.
• They are expensive, with fees and expenses upwards of three percent.
• Early withdrawals may have surrender charges and tax penalties.
• They are long-term investments, and if you don't have other funds on hand, they may not be a good choice.
• They are complex, and it can be difficult to understand how they work.
• They are poorly marketed and understood by both salespersons and consumers.
• The 5% growth guarantee pitched by agents is typically much less than 5%.
• Riders' earnings are not guaranteed on a federal or state level.
• They are a long-term commitment, and in most cases, you won't be able to withdraw more than 10% of your money annually without high surrender fees.
• Withdrawing money before the age of 59.5 could have tax implications, with a 10% income tax penalty.
• Returns are difficult to predict.
• They are not suitable for those seeking moderate to high growth of their capital.
• The income rider is not as valuable as it seems.
• The fees for this variable annuity are high when compared to the guaranteed agents pitch.
• They are not suitable for those seeking to increase their guaranteed lifetime income.
• The maximum opportunity for market growth can be cut short due to the cap.
• In exceptionally high growth periods, the investor may not be able to realize their full potential return.
• They are one of the most expensive financial products in the marketplace.
• They are not suitable for those who are not making maximum contributions to their IRA or employer-sponsored plan.
• The surrender period is usually long, sometimes exceeding seven years.
• The fees and expenses with optional riders can be over 3%.
• The mortality and expense fee is typically between 1% and 2% per year, in addition to the underlying fund expenses.
• There is an additional fee for any optional riders.

AXA Retirement Cornerstone Variable Annuity

AXA, now known as Equitable, is a financial services company that offers variable annuities, life insurance policies, individual retirement accounts (IRAs), brokerage accounts and advisory accounts. The company has a long history, having first opened for business around 160 years ago.

The AXA Retirement Cornerstone Variable Annuity is a relatively new and attractive offering from the company. It is particularly appealing if you are 65 or younger, want an income rider and are interested in an enhanced death benefit.

The Retirement Cornerstone annuity offers a 5% annual payment, compounded, for both joint and single accounts, which is more than most competitors for those under 65. Deferred payment rollups also increase by 5% annually. If the 10-year U.S. Treasury note rate, plus two additional percentage points, exceeds 5%, this becomes the new guaranteed payment rate.

The growth potential of this annuity is also a significant advantage. You can choose from 20 accounts managed by 10 investment management companies, mostly balanced funds, and invest up to 80% in the stock market across all of them. This feature is especially attractive to younger annuity owners, as they can benefit from potential market growth over time.

The enhanced death benefit is another valuable component of the AXA Retirement Cornerstone Variable Annuity. It offers your beneficiary or beneficiaries 100% of your principal and any interest earned that you did not withdraw. This benefit comes with a 1.25% annual fee.

It is important to remember that this variable annuity does not provide downside protection if the stock market declines over a year. Therefore, buyers need to be confident about stock market prospects. Additionally, variable annuities are subject to market risk, including the possible loss of principal invested, and various fees such as mortality and expense charges, account fees, investment management fees, and administrative fees.

Overall, the AXA Retirement Cornerstone Variable Annuity can be a good option for those seeking an income rider, enhanced death benefit, and potential market growth. However, it is important to carefully consider your financial goals, risk tolerance, and the potential fees involved.

AXA annuity death benefits

AXA Equitable Life Insurance Company, now known as Equitable, offers a range of annuities, including variable annuities, which are a type of tax-deferred financial product designed to allow investors to invest for growth potential and provide income for retirement or other long-term life goals.

The death benefits available to investors depend on the type of annuity they have purchased.

Investment Edge® Variable Annuity

The Investment Edge® variable annuity offers a Protected Premium Death Benefit, which is an optional benefit that may be elected by investors aged 85 and younger. This benefit allows investors to build a legacy for their family while also accessing a robust investment option lineup.

If the investor's account value falls below their death benefit amount, they will pay a charge for the death benefit during that period. If their account value is higher than their death benefit, there is no charge for the death benefit during that period. The benefit can be cancelled at any time but must be elected when purchasing the contract.

The death benefit amount equals the sum of the contributions paid and will be adjusted for withdrawals on a proportionate (pro rata) basis.

Retirement Cornerstone® Series B Variable Annuity

The Retirement Cornerstone® Series B annuity offers two optional riders: the Guaranteed Minimum Income Benefit (GMIB) and the Guaranteed Minimum Death Benefits (GMDBs). The GMIB rider helps protect retirement income, while the GMDBs rider is intended to keep the death benefit intact to aid beneficiaries.

Structured Capital Strategies® Series C Variable Annuity

The Structured Capital Strategies® Series C variable annuity does not explicitly mention death benefits, but it does offer a Return of Premium Death Benefit for an extra fee. This benefit guarantees that beneficiaries will receive at least the value of the premium payment upon the annuitant's death.

Structured Capital Strategies® Plus Variable Annuity

The Structured Capital Strategies® Plus annuity also offers a Return of Premium Death Benefit, which guarantees that beneficiaries will receive at least the value of the premium payment upon the annuitant's death.

Accumulator® Series Variable Annuity

The Accumulator® Series variable annuity offers a "Greater of" Death Benefit, which is an optional guaranteed minimum death benefit. The death benefit is calculated using the greater of two benefit bases: the Roll-up benefit base and the Highest Anniversary Value benefit base. There is an additional charge for this death benefit.

AXA annuity income benefits

AXA, now known as Equitable, offers a range of annuities, including variable annuities, which can be a good option for retirement planning. Variable annuities are long-term financial products designed for retirement purposes, offering tax-deferral benefits, investment opportunities, and guaranteed income streams. Here are some key benefits of AXA annuity products:

• Tax Deferral: AXA annuities offer tax-deferral advantages, allowing your contributions and earnings to grow tax-free until withdrawals are made. This feature can result in substantial tax savings over time.
• Guaranteed Lifetime Income: AXA annuities provide the assurance of a steady income stream during retirement. The "Income Edge" program, offered with certain annuities, optimises distributions to reduce taxes in the early years of retirement when you may need the money the most.
• Investment Opportunities: AXA annuities give you access to a wide range of investment options, including well-known money managers and a variety of portfolios. This enables you to build wealth through diversification and potentially achieve higher returns.
• Death Benefits: AXA annuities offer death benefits that secure an income for your spouse or beneficiaries in the event of your death. This feature ensures that your loved ones will continue to receive the benefits of the annuity insurance.
• Financial Security: AXA annuities provide financial security by allowing you to choose your risk level and generate a steady income stream, even after your regular income stops. This can be especially beneficial for senior citizens.
• Partial Protection and Growth Potential: Some AXA annuities, such as Structured Capital Strategies PLUS®, offer partial protection against market downturns while still providing upside potential. This can be attractive if you want to balance growth opportunities with a level of protection for your wealth.
• Low Fees: Certain AXA annuities, like Structured Capital Strategies PLUS®, have zero explicit fees, maximising your investment returns.
• Flexibility: AXA annuities provide flexibility in terms of investment options, withdrawal schedules, and beneficiary choices. You can customise your annuity to fit your specific needs and goals.

When considering an AXA variable annuity for retirement, it is important to weigh the benefits against any associated fees and charges. Variable annuities typically carry fees for investment management, administration, and optional benefits. Additionally, withdrawals may be subject to taxes and penalties if made before a certain age. It is always recommended to consult a financial advisor to determine if an AXA annuity is a suitable option for your retirement planning.

Frequently asked questions