AI Overview
The Nationwide New Heights 9 Fixed Indexed Annuity (FIA) offers a balance of principal protection and potential market-linked growth, which can appeal to conservative investors nearing retirement
. However, its complex structure and various fees can limit returns and liquidity. Pros of the New Heights 9 FIA
- Principal protection: Your initial investment is protected from market losses due to the performance of the chosen index, offering security during market downturns.
- Tax deferral: The earnings on your annuity grow on a tax-deferred basis, meaning you don't pay taxes until you withdraw the funds. This can allow your investment to compound more efficiently over time.
- Growth potential: The annuity offers growth potential linked to the performance of various market indexes, such as the S&P 500, MSCI EAFE, and J.P. Morgan Mozaic IIS Index.
- Guaranteed income options: The annuity can be customized with optional riders (for an additional fee) to provide a guaranteed stream of lifetime income in retirement.
- Protection for a spouse: A death benefit feature can protect a spouse regardless of who owns the contract or passes away first.
- Free withdrawals: After the first contract year, you can withdraw a percentage of your contract value (7% in most states) annually without incurring surrender charges.
- Strong insurer: Nationwide is a financially stable company with high customer satisfaction, which can provide confidence in the annuity's guarantees.
Cons of the New Heights 9 FIA
- Limited upside: While the annuity offers market-linked growth, the returns are capped by contractual provisions. Your potential gains are limited by factors like caps, participation rates, and spreads, meaning you will not capture the full market upside.
- Limited liquidity and high surrender charges: The New Heights 9 has a nine-year surrender charge period, with significant penalties (up to 9% initially) for withdrawals exceeding the annual free amount. This makes the annuity a long-term, illiquid investment.
- Complex mechanics and fees: Fixed indexed annuities have a complex design that can be difficult to understand. Optional riders, such as guaranteed income benefits, come with ongoing charges (0.95%–1.25% per year) that can eat into your returns.
- Potential for misleading sales pitches: Some annuity illustrations may project higher-than-realistic returns based on strong index performance. Investors should focus on the guaranteed income, as high non-guaranteed returns are highly unlikely.
- Not a direct market investment: Your money is not directly invested in the stock market. Instead, your interest is linked to the performance of a chosen index, so you aren't actually participating in the market and its dividends.
- Income payments use your principal first: When you begin taking income payments, they come out of your principal first. It is only after your account value reaches zero that you begin receiving the annuity's guaranteed return.
Who should consider this annuity?
The Nationwide New Heights 9 is best for a specific type of investor:
- Retirees seeking guaranteed income: Those who prioritize a steady income stream that can't be depleted by market downturns.
- Conservative investors: Individuals who want principal protection and low volatility, even if it means sacrificing higher potential gains.
- Long-term investors: People with a long time horizon who won't need to access their invested funds early and can wait out the nine-year surrender period.
Who should be cautious?
This annuity may not be suitable for other investors:
- Aggressive investors: Those who seek high returns and are comfortable with market risk may find the capped gains too restrictive.
- Investors needing liquidity: People who might need to access their funds early should avoid this product due to the high surrender fees.
- Investors wary of complexity and high fees: The layered fees, complicated contract, and limited potential for high returns may not be a good fit for all portfolio
