Guaranteed Principal Solution

This review is meant to show you the strengths and weaknesses of the TransAmerica Variable Annuity Series L-Share. As with all annuities, they work well doing some aspects and poorly at other. I’ll walk through the details of how TransAmerica Variable Annuity Series L-Share works, so you know what to expect. This review will be on the TransAmerica Variable Annuity Series L-Share. We’ll breakdown the investment options and the potential returns.

• Product Type
• Fees
• Investment options that are available and their realistic long-term investment return expectations
• Understanding the income rider
• How it can best help you as part of your financial plan
• How it’s most poorly used as part of your financial plan

TransAmerica Variable Annuity Series L-Share Quick Facts

Product Name	TransAmerica Variable Annuity Series L-Share
Issuer	TransAmerica
Type of Product	Variable Annuity
Standard & Poor’s Rating	“AA-” (Strong)
Phone Number	1-800-797-2643
Website	https://www.transamerica.com/individual/products/annuities/variable-annuity/

There are a few ways that Agents might pitch this product

• Get guaranteed lifetime income.
• Be able to withdraw 5% for the rest of your life no matter what the market does.
• To be in the stock market while at the same time have guaranteed lifetime income.
• To get a 7% Principal Back Solution.

The TransAmerica Variable Annuity Series L-Share is a 4 year variable annuity with high costs some visible and some not.  There are important details to know before buying. If you’ve elected the 5% for life or 7% withdrawal option living benefit. Understand that TransAmerica can move you to bonds. This is called Portfolio Allocation Method or PAM. The worst part is that the bonds may be earning rates under the rate of fees. I’ll break down exactly how this works and what you need to know before buying.

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If it happens that you’re on this website for the first time, we’re dedicated to helping you with a second opinion viewpoint. So to help you see through some of sales pitches that aren’t what they seem. We hope with the information we provide you’ll be better educated to make an informed decision before you buy.

Before we go into detail, here is an important legal disclosure.

This review of TransAmerica Variable Annuity Series L is meant to be an independent review at the request of readers. In addition, so they could see my perspective as a Certified Financial Planner CFP®, Designee when breaking down the positives and negatives of this particular model annuity. This is an independent product review, not a recommendation to buy or sell an annuity. TranAmerica has not endorsed this review in any way, nor do I receive any compensation for this review. Before purchasing any investment product, be sure to do your own due diligence. Consult a properly licensed professional, should you have specific questions, as they relate to your individual circumstances.  This is not meant to be specific advice and your advisor may know more about your circumstances to make an appropriate recommendation.  All names, marks, and materials used for this review are property of their respective owners.

Information on TransAmerica

Today, the Transamerica companies are as committed to helping people as they were 100 years ago. Customers now have access to an even wider range of services, from life insurance to retirement plans, to secure their financial futures.

TransAmerica has built a solid financial foundation for now and future. And they’ll continue to do so with insurance and financial products that are as affordable as they are exceptional.

Understanding the Real Value of TransAmerica Variable Annuity Series L-Share Guarnteed Principal Solution

One of the most common questions I get here on Annuity Edu is understanding whether the income rider is worth the high costs.  Often these income riders are tough to understand so I’ll break down the important numbers you need to know.

TransAmerica Fee Breakdown

M&E Cost 1.5%.

Return of Premium Death benefit  0.15%.

Guaranteed Principal Solution-  1.25%.

7% Principal Back Total Withdrawal Base or 5% for Life Total Withdrawal Base.

Average sub account fee 1%.

Total Annuity fee’s 3.9% annually.

If you’re being recommended TransAmerica Variable Annuity Series L-Share, odds are you’re wondering whether it makes sense to have the guaranteed principal solution. The guaranteed principal solution guarantees you principal by allowing to withdraw 7% for 14 years until 100% of your principal is recouped or pull 5% for life. You can withdraw 5% for 20 years until you reach 100% of your principal investment. Does that make sense?  Make sure you understand how this works.  You can’t literally just get your principal back like it sounds.  Another aspect of this rider is that TransAmerica can move your investments to PAM Accounts. PAM stands for Portfolio Allocation Method.  There’s no guarantee that this type of market timing will be profitable. I’ll explain how it works and you can see if it makes sense.

There are 4 factors that can effect  the PAM aka Portfolio Allocation Method

1.  If the Policy value increases they transfer money to the investment options.

2. The policy value decreases they sell the stocks funds and move to PAM sub-accounts which is government bonds.

3.  Interest rates increase they transfer to the Stock funds.

4.  If volatility increases they sell stocks funds and transfer to the PAM sub-accounts which is government bonds.

Another way to look at this is if the investments go down they sell. If the investments go up they buy. In other words, TransAmerica sells low and buys high for you! Genius…..

This can greatly reduce the long term growth of your portfolio and be one of the hidden costs. In the prospectus TransAmerica states that transfers to the PAM Investment Option first occur when the policy value drops by a cumulative of 3% to 5% over any time period. The stock market fluctuates moves of 3% to 5% all the time. This seems excessive but it’s up to you to ultimately decide if you want TransAmerica selling your stock funds to buy low yielding government bonds on every 3% to 5% move down. I would prefer to have them sell my stock funds after every 3%-5% move up rather than down!

In reality, I rather have them leave my stocks funds alone but just giving you an example to help you understand what they’re doing inside the annuity in order to charge you these high fees.

Regarding the 5% income for life. You can put your money in your mattress and withdraw 5% for 20 years before you run out so is it worth paying fee’s for this weak guarantee? I don’t think so.

 

 

 

 

Understanding the Surrender Charge

Contract Year	1	2	3	4	5+
Withdrawal Charge	8%	8%	7%	6%	0%

Are you considering a Conservative or Moderate allocation within the Annuity with the TransAmerica?

Due to the high fee’s it’ll be difficult to make money in the conservative allocation especially with the rider. Interest rates are low, this applies if your earnings are 2%-3% in fixed income, but paying over 3.5% in fees. TransAmerica will be making more money on your bonds then you will! You mind as well keep that money under your mattress because at least you won’t be earning a guaranteed negative return.

 

 

 

 

Investment options

TransAmerica allows you to choose from 64 Investment options.  This is good however the fact that they can sell the funds you choose whenever they want to buy government bonds concerns me and should concern you as well.

Where it works Best:

• Producing a pension like lifetime guaranteed income stream.
• Those looking for moderate capital appreciation but in which guaranteed lifetime income is important.
• Conservative investors who need guarantees to dip into stock market based investments.

Where it works Worst:

• Those who want to outperform inflation.
• Those who need liquidity.
• Who want maximum capital appreciation
• For those who want minimal volatility and may choose conservative investment options.

Annuity Edu’s Summary on the TransAmerica Variable Annuity Series L-Share

Overall, this annuity does not impress me. If you’re looking to grow assets, it’s one of the worst annuities. The PAM is a big weakness in the annuity. There are other annuities that can guarantee your principal with much more upside then this one. This has a lot of risk and not much reward in my opinion. Often I feel agents may use this annuity to give the soothing words of principal guaranteed to their clients but there are better options. To understand how bad something is it’s important to understand how this compares to other similar alternatives. 

Put it to the test!

This is something we do for free here at annuityedu.com. The only way to know if this annuity is a good fit for you is to have it tested. We’ll use our proprietary calculator to illustrate for you how this annuity will likely perform in your specific situation. To be sure, Click here to request a complimentary, no obligation Annuitycheck® Report to test an existing annuity or an annuity before before you buy. If your agent was honest with you, the numbers will match up – if not, well at least you know before you buy.

If you have an existing Annuity you may need an Annuity Rescue.  Rescue you from being upside down or Rescue your annuity from Drowning in Fee’s.  You may think your’re trapped but it is possible that there may be options to increase your Guaranteed lifetime income and Reduce your fees.  Contact us and Request an Annuitycheck® Rescue Report on your current Annuity.

Have Questions on the Transamerica Variable Annuity Series L-share Annuity? Have any comments?

We hope you found it helpful as you’re conducting your own research on this Trans america Annuity.  Cheers to a Prosperous Retirement!

All the best,

Annuityedu.com 

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