Bonus Annuity

A bonus annuity is a type of Fixed or Fixed Index Annuity that provides an upfront premium bonus, calculated as a percentage of your initial investment. Generally, longer contract terms yield higher bonuses.

For instance, purchasing a bonus annuity with a 5% bonus for $100,000 would result in a $5,000 bonus, making your initial account value $105,000.

If your goal is to accumulate savings with a guaranteed interest rate, you may prefer a fixed annuity instead.

Annuity Providers Offering Bonus Annuities

Here’s a quick comparison of carriers and their bonus offerings:

Carrier	Annuity	Bonus	Rating	Max Age	Term
Allianz Life Insurance Company	Allianz 222	15%	A+	80	10 years
Athene	Performance Elite 15 Plus	15%	A	73	15 years
Athene	Performance Elite 10	10%	A	78	10 years
Equitrust	Market Power Bonus Index	10%	B++	75	14 years
National Western Life	NWL Ultra Future	9%	A	86	15 years
Fidelity & Guaranty Life Insurance	Performance Pro w/ GMWB	9%	A-	80	10 years
North American Company	Charter 14 Plus	8%	A+	75	14 years
American Equity	Retirement Gold	8%	A-	78	10 years
Oxford Life Insurance Company	Royal Select	8%	A-	80	10 years

 

Key Factors to Consider

1. Available Indexes: Bonus annuities may track stock market indexes. Check available options from each insurance carrier.
2. Crediting Methods: Interest credited to your account depends on cap rates, spreads, or participation rates.
3. Insurer Ratings: Choose a financially strong insurer based on independent ratings.
4. Investment Term: Terms range from 3 to 15 years. Longer terms often offer higher yields but less liquidity.
5. Liquidity: Annual free withdrawals (e.g., 10% or interest-only) without penalties vary by contract.

Bonus Annuity Pros and Cons

Pros:

• Can offset penalties from surrendering other investment products.
• Boosts lifetime income payments when used with an income rider.

Cons:

• Long surrender charge periods (often 7+ years).
• Bonuses may have vesting schedules, risking partial recapture if you exit early.
• Typically lower future earning potential due to reduced caps or interest rates.

Is a Bonus Annuity Right for You?

Bonus annuities are ideal for offsetting surrender charges or enhancing lifetime income. However, if your primary goal is long-term growth, a non-bonus annuity might offer better accumulation potential.

For more details on Fixed Index Annuities, consider reading FINRA’s guide, “The Complicated Risks and Rewards of Indexed Annuities.”