How does a Jackson annuity work?

Before purchasing an annuity, it is important to have a good understanding of how the annuity works, and how it fits into your overall financial goals. If you are considering investing in Jackson annuities, you should understand how the various annuity products work

Jackson National Life Insurance offers a variety of annuity products that provide a guaranteed stream of income. The main types of Jackson annuity products include variable annuities, fixed annuities, fixed-index annuities, and registered index-linked annuities. To purchase an annuity from Jackson, you must work with an insurance agent since the company does not offer online quotes.

What is Jackson National Life Insurance?

Jackson National Life Insurance was established in 1961 as a family-owned business. The company sold life insurance products for much of its history, but it discontinued the life insurance line of business in 2012. 

Jackson National focuses on annuities, and it is one of the top-rated annuity providers in the United States. In 2021, the company was ranked number one for total annuity sales for the year, with a net income of over $3 billion.

Jackson National Life Insurance provides a variety of annuity products, including fixed annuities, variable annuities, and fixed index annuities. These annuity products are designed to meet the needs of customers at different stages of their retirement planning journey. Variable annuities provide the potential for higher returns by investing in various investment options while fixed annuities offer a fixed rate of return for a predetermined period.

Types of Jackson National Life Insurance Products

Although Jackson National discontinued life insurance products, it offers a variety of annuity products that provide a guaranteed income stream during retirement.

Here are the main types of annuities offered by Jackson:

Variable annuities

Variable annuities allow annuity owners to spread their wealth across various investment options. These annuities offer potential tax-deferred growth. In a strong market, variable annuities can experience tremendous growth, but they also face significantly higher risk since the annuity can lose value more quickly.

Variable annuities have an interest rate that is tied to an investment portfolio. If the investment portfolio performs well, the annuity owner can expect to receive higher payments. However, if the portfolio performs dismally, the expected payments from the annuity will decline.

Fixed Annuity

Fixed annuities have a fixed interest rate, and they are not tied to market performance or specific forms of investment. When you purchase a fixed annuity, Jackson guarantees to pay you a fixed interest rate on your annuity for a predetermined period. Hence, these annuities have a low risk than variable annuities, and investors are protected from market volatility.

Individuals who invest in fixed annuities also benefit from tax deferral. You can let the earnings grow tax-deferred over time, and only pay taxes when you make a withdrawal.

Registered Index-Linked Annuities

A registered index-linked annuity is tied to the growth of a market index such as the S&P 500. When the index grows, the annuity owner can expect to receive higher payments; if the index performs dismally, the annuity owner can expect reduced returns or losses.

However, a registered index-linked annuity allows annuity owners to limit the amount of loss they are willing to take on. This protects the annuity from losing its value or ending up with zero returns. 

Fixed Index Annuities

A fixed-index annuity combines the benefits of a fixed annuity with the potential to earn interest based on the returns of an index. It is tied to the performance of an index, and it allows individuals to participate in and benefit from market growth.

A fixed-index annuity protects investors from losses in exchange for a cap on the potential earnings they can get; this protection can be in the form of an earnings floor, where investors are guaranteed a minimum return.

Jackson National Life Insurance Annuity Riders

Jackson offers a range of optional benefits add-ons or riders for its annuity product at an extra charge. Some of these riders include:

Death benefit

The death benefit rider is optional when you purchase a variable annuity, and it guarantees a payout if the annuitant dies. The death benefit is paid to the beneficiary, and it equals the amount invested or a percentage of the original premium. This benefit also protects the annuitant’s benefits against a decline in value due to market conditions.

Guaranteed income for life

This rider guarantees that the annuitant will receive a minimum amount of income for a specified period, regardless of the performance of the annuity. It is available on variable annuities, and it gives a piece of mind to annuitants who want a guaranteed income over their lifetime.

Living benefit

When you purchase an annuity from Jackson National, you will receive guaranteed payouts from your annuity while you are alive. For example, the annuity may allow the annuitant to make lifetime withdrawals from an annuity if the annual withdrawals are below certain limits.

Jackson Annuity Fees

When you purchase an annuity product from Jackson National Life Insurance, there are various fees you can expect to incur. Depending on the type of annuity you purchase, the annuity fees you pay can vary, and they may be calculated as a flat charge or a percentage of the annuity value.

One of the fees you can expect to incur when you purchase an annuity is a surrender charge. This fee is imposed when an annuitant withdraws funds from the annuity before the surrender period expires; this period can range from 6 to 10 years after you purchase the annuity.

You will also incur mortality and expense risk fees, which cover the cost of insuring against the annuitant’s death. If the annuity includes investment options, you will incur investment fees, which are charged as a percentage of your annuity value.

Pros and Cons of Jackson Annuity Products

Jackson offers a variety of annuity products, each with unique features and benefits. Here are the pros and cons of Jackson annuities:

Pros

Growth potential

Annuities provide opportunities to grow your assets to fund your retirement lifestyle. Depending on the annuity product your choose, you may get protection against market movements; some annuities cap losses to safeguard the annuity value. Annuities also provide investors with opportunities for growth through various investment options like stocks and mutual funds.

Income protection

Annuities provide a guaranteed stream of income in retirement, and they are designed to last through the annuitant’s lifetime. You can purchase add-on benefits to ensure the annuity provides lifetime income if you outlive your income, and even pay death benefits to your beneficiaries.

Tax-deferred growth

Annuitants enjoy tax-deferred annuity growth, meaning that they won’t pay taxes on the annuity earnings until when they are withdrawn.

Cons

Fees

Jackson annuity product comes with a variety of fees, including administrative fees, surrender charges, and inflation risk. These fees eat into your annuity returns, hence reducing the payments you receive.

Limited liquidity

Annuities are long-term investments, and hence they are not ideal investments for individuals looking to get quick access to their funds. Instead, annuities are designed to provide a guaranteed stream of income over time in retirement.