What’s Covered in this Review?
In this review I’ll be covering the following information on the Security Benefit Total Value Annuity:
- Product type
- Current rates
- Realistic long term investment expectations
- How it is best used
- How it is most poorly used
What you’ll find is that like all annuities, the Total Value Annuity does some things really well. However, there are things some agents might say about its performance that is not entirely true. It’s important you understand the differences, so you can determine if it really is a good fit as part of your financial plan.
For readers who have found my website for the first time and don’t know much about me, I am a fee only financial planner. I don’t get paid to sell annuities nor do I personally sell annuities. Unlike other fee only planners though, I do think annuities can be a smart part of a comprehensive financial plan when used correctly. Since my compensation is not tied to their sale, I really have no incentive for or against them. This makes my view impartial and objective.
Let’s dig in!
Security Benefit Total Value Annuity at a Glance
|Product Name||Total Value Annuity|
|Issuer||Security Benefit Life Insurance Company|
|Type of Product||Fixed Index Annuity|
|Standard & Poor's Rating||"A-" (Strong)|
Opening Thoughts on the Total Value Annuity
Over the past year, the #1 most requested annuity review from site visitors has been for the Total Value Annuity. Thousands of investors are recommended this product every month as a safe way to grow their money, then turn it into a future income stream for retirement. Most of the questions we get have to do with the 5 Year Annuity Linked TVI Index and the Transparent Value Blended Index – as they are exclusive to this single annuity contract.
For those not familiar, the TVI (Trader Vic Index) is a crediting method that links annuity returns to the 5 year return of the index. The index itself is comprised of 24 different futures contracts based on commodities, US interest rates, and global currencies. In theory, it’s supposed to be non-correlated to the stock market (i.e., they don’t both go up or down at the same time), and in back-testing provide higher overall returns.
I tested this and my findings are in this review.
In a nutshell, it is different, with returns that are not highly correlated to traditional stock indexes. Used correctly, this can prove to be quite useful as a diversification tool. Unlike other indexes (S&P 500, Dow Jones Industrial Average, etc), the TVI does have a somewhat limited history. Even the backtested returns only go back to 1990, rather than 60+ years for most other indexes, so we need to understand that it’s difficult to see just how beneficial this index would be in the high inflation era of the late 1960’s to early 1980’s (when commodities type investments would have been great inflation fighting tools).
The Transparent Value Blended Index (TVBI), is a crediting method that links the returns to the 5 year return of that index as well. Like the Trader Vic, it has a somewhat short live history, but does have a backtest available going back to 2000 that can be found at http://tvblendedindex.com. You can also find a very detailed description of the index and access up to date performance information.
The Transparent Value Blended Index is what really makes this product tick, in my opinion. Since it is stock based, it tends to do very well in up markets. However, since it can actively move out of stocks (and aims to avoid stocks that have poor fundamentals) when markets are bad, it also shows a very nice return in historically poor markets. See the chart below for the full history of the index going back to 2000:
Since many people who are considering this annuity are either in retirement, or close to it – the Guaranteed Lifetime Withdraw Benefit (GLWB) is another feature of interest. This is an optional rider, and when selected allows for either a guaranteed income for life to be taken immediately, or deferred to a future date based on a “roll up” value. The way this works is quite a bit different in reality, than the way many agents explain it. To be clear, it’s a nice benefit – but some people suggest it will allow for 5%-7% (or higher) returns on a guaranteed basis. To be 100% clear, the rider doesn’t work quite that way. It is a great way to build up a guaranteed income base, but the actual return will still be largely driven by the return of the index crediting methods described above.
When using the Guaranteed Lifetime Withdraw Benefit, the longer you can defer taking income, the higher the guaranteed income will be. The income amount is based on an income account value that will grow by “stacking” a 4% base with the index gains. This could grow the income base by as much as 10% annually, but never less than 4%. The actual income amount is then determined by the age of the owners when they take income. Security Benefit has a history of paying some of the highest income amounts relative to income bases in the industry, making the GLWB benefit very popular. The best way to see just how this will work for your situation is to work with an honest advisor and have some illustrations run specific to your situation. If you’d like to see this done, we’ll show how to get in touch later in the review.
Before we get into the gritty details, here’s some legal disclosures…
This is an independent product review, not a recommendation to buy or sell an annuity. Security Benefit Life has not endorsed this review in any way nor do I receive any compensation for this review. This review is meant to be an independent review at the request of readers so they could see my perspective when breaking down the positives and negatives of this particular model annuity. 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.
How Security Benefit Life Describes The Total Value Annuity
Per the Total Value Annuity brochure, here are some key points as to how it’s marketed:
- Accumulation potential with minimal risk
- A unique interest crediting option – the Annuity Linked TVI Index Account and now the Transparent Value Blended Index
- Guaranteed income for life
- Optional death benefit rider to enhance assets passed down to beneficiaries
There’s a few more bells and whistles, but those are the basics. If you’re looking for the full brochure, you can download it here.
How Financial Advisors Might “Pitch” This Annuity
Since this is a fixed index annuity (FIA) with multiple benefits – there are a few different ways it might be pitched. My experience, however, is that most agents will cling to two main components:
- The safety combined with return potential of the Annuity Linked TVI Index or Transparent Value Blended Index
- The guaranteed income for life rider
Some might use the term “hybrid annuity” – which really is just a term some have created to explain an annuity that gives you a form of growth, access to capital, and guaranteed income – all rolled into one.
While those are true statements, this annuity (nor any financial product) is not perfect. It works really well when used correctly, but has shortcomings just like any other financial strategy. One of the biggest issues I’ve run into, is that many agents misrepresent how this annuity will actually perform. That’s a problem.
From the many people I’ve talked to personally about their experience with agents, most seem to have been told this annuity will perform “better” than other annuities. I’ve even heard from potential buyers this annuity has a minimum return of 4% per year, but would have produced nearly 10% per year the past 20 years.
Is any of that true? Not exactly.
If your agent/advisor explains this annuity correctly, you should never get the impression you’ll earn more than 6-8%. If that’s part of your agents sales pitch – run, don’t walk, to find a more honest financial advisor. It certainly has the potential for upper single digit returns (and could even produce low double digit returns), but could also return less. A lot of the return potential will be determined by how you allocated your deposit in the annuity, so having a good advisor that knows how to best structure the product is paramount.
The Annuity Gator’s End Take on the Total Value Annuity
Where it works best:
- For producing a reliable, “pension like” guaranteed income stream (so long as GWLB rider is elected, and used shortly after purchase)
- For producing an income for life that cannot be outlived by a surviving spouse
- For investors who have a family history of life longevity
- For producing additional income for home healthcare needs (subject to state approvals and annuity holder qualification)
- For investors that have no need for their money or generating large returns, but want it to grow safely until transferred to their beneficiaries
Where it works worst:
- For those who need to have substantial liquidity with their financial assets (this does have liquidity, but just not 100% without incurrent penalties during the surrender period)
- For those seeking maximum long term growth
- For those expecting real returns of greater than 8% per year on average (this is possible, but realistically I think the expectation should be more in the 6% to 8% range)
The Total Value Annuity does best what it’s name implies – provides numerous potential benefits, rolled up into one product. Think of it like a swiss army knife – it can do a whole bunch of things, it just doesn’t do any one thing the best if you try to use all the features simultaneously.
One of the most important things for investors to understand is that the “roll-up rate” is not the actual return, nor is the “lifetime withdraw rate” the actual return. It has the potential to produce very good returns, but I’ve seen some advisors suggest that better than 10% is realistic. That’s possible, but based on my testing I think 6% to 8% is more realistic if held 10+ years.
For someone strictly looking for guaranteed income with no market risk, you’ll want to make sure you have this annuity tested against numerous others to ensure it’s the right fit for your unique situation. For someone looking for an investment that cannot go down, and won’t need their money for 10 or more years – this might be a very good fit. In fact, it actually does have more “growth” potential than most other annuities on the market today.
My biggest concern with this annuities (and most annuities in general), is that some agents don’t realize what the real return potential is, and significantly over-promise what’s realistic – so be especially wary of anyone who suggests this annuity will work better than how I illustrated it here. If the agents are being upfront and honest, you’ll notice their explanations match very closely (if not exactly) as described in this review. When that happens, you have an agent you can trust. If you’d like to have us check up on your agent, or refer to one we we know in your area, just click here to reach out via our secure contact form.
As a recap, the Total Value Annuity will not actually return 8% or greater on a guaranteed basis. When financial advisors use those numbers they are referring to percentages used to calculate the income guarantee, and they are entirely hypothetical (i.e., non-guaranteed). But, it does have the potential to make very good returns and grow more than other index annuities thanks to the potential of the Annuity Linked Trader Vic Index and the Transparent Value Blended Index.
The only way to know if this annuity is a good fit for you, is to have it tested. We do this free at AnnuityGator.com, so just get in touch with us and we’ll use our proprietary calculator to illustrate for you what returns for your situation are likely to be. If your agent was honest with you, the numbers will match up – if not, well then you might want to reconsider who your agent is.
Have Questions on the Security Benefit Total Value Annuity? See any Mistakes?
If you have questions please let me know. [You can reach the Annuity Gator via the Free Annuity Help form here]
I know annuities can be confusing and a lot of people are pushing investors very hard to buy them. But you need to know the real facts to make sure if you go that route you don’t end up regretting it later. After all, annuities are long term investments with contracts, surrender penalties, etc. For some people they won’t make sense at all, but for some they might.
If you know anyone who has an annuity or is thinking of buying one, please share this post with them. I know a lot of people are getting very conflicting information and my goal in writing this review and making the video was to educate in an objective way. If you have a Facebook account you can click on the little “Facebook” icon and share this article. That way more people will be able to find it and hopefully more people will benefit.
Thanks for bearing with me on this rather long post, I hope you found it beneficial in your research on the Security Benefit Total Value Annuity.
Lastly, like all humans – I do make mistakes. If you see one on this review please reach out and let me know. I’m always more than happy to make corrections and give credit where it is due. If you’re an investor and this review causes confusion and creates questions feel free to reach out as well. I can’t always get back right away but usually I can clear up those questions within a few days.
The Annuity Gator