VAROOM II review

It depends on why you want it. For an IRA owner who wants a guaranteed lifetime income rider wrapped around low-cost index ETFs, it is a reasonable, fairly transparent option. For someone who just wants cheap index exposure with tax deferral, it is hard to justify — the contract sits inside an IRA, which is already tax-deferred, so you are paying 1.90% a year for a wrapper that duplicates a benefit you already have. The product earns its keep only when you value the income guarantee or the disciplined allocation structure.

The rational reason to buy VAROOM II is the optional guaranteed lifetime withdrawal benefit. It lets you keep market-linked growth potential through the ETF subaccounts while bolting on a floor of guaranteed lifetime income you control the timing of. The secondary reason is cost discipline on the investment side: most variable annuities bury you in expensive actively managed funds, and this one uses index ETFs with net expenses as low as 0.03%. For an IRA holder who specifically wants insurance-backed income but does not want to overpay on fund fees, that combination is genuinely uncommon.

I think this is best for someone in or near retirement, holding qualified money (traditional IRA, Roth IRA, or SEP IRA only — this contract cannot be bought with non-qualified dollars), who wants the option to convert part of their savings into guaranteed lifetime income while keeping market upside. It suits a person who values a short 5-year commitment over the 7-to-10-year lockups common in this space. It is a poor fit for anyone who just wants low-cost index growth — a regular brokerage IRA holding the same ETFs costs far less — and for anyone who needs flexible access to large sums, since allocation and transfer rules here are tightly restricted.

Strip away the brand name and this is a tax-deferred contract that lets you hold one of 20 ETF-based subaccounts (plus a money market option) and, if you choose, add a guaranteed lifetime income rider. The subaccounts are not the ETFs themselves — they are insurance separate-account versions that track funds like the iShares Core S&P 500 ETF and the Vanguard Total Bond Market ETF. The underlying fund expense is low, but the insurance company layers its own 1.90% separate-account charge (covering mortality and expense risk, administration, and distribution) on top. One important structural quirk: you can only hold a single subaccount allocation at a time, and transfers between them are strictly limited. There is also a Systematic Transfer Option — a fixed account that dollar-cost-averages money into a chosen subaccount over a 6- or 12-month term — but the headline takeaway is that this is a fairly constrained, single-strategy contract, not a freely rebalanced portfolio.

The core of VAROOM II is the variable subaccount structure. You direct your premium into one of the available ETF-based subaccounts, and your account value rises and falls with that fund's performance, net of expenses. Because it is a true variable annuity, there is no principal protection on the investment side — if the underlying ETF drops, your account value drops with it. The 20 subaccounts span large-cap, mid-cap, small-cap, growth, value, dividend, real estate, international, emerging markets, and a full range of bond exposures (aggregate, corporate, high-yield, TIPS, international treasury, and short-term). That breadth lets you pick a posture, but the one-allocation-at-a-time rule means you are choosing a single sleeve rather than building a diversified mix inside the contract. The optional Systematic Transfer Option fixed account (shown at a 2.50% DCA+ rate as of the data date — rates change) exists mainly to ease money into a subaccount gradually rather than as a standalone holding.

The optional Guaranteed Lifetime Withdrawal Benefit is what gives this contract a reason to exist beyond a plain IRA. It comes in two flavors: Investment Strategy 1 II (a basic allocation, 1.10% annual fee) and Investment Strategy 2 II (a self-styled allocation, 1.30% annual fee), both capped at a 1.50% maximum and charged on account value daily. Rather than a fixed roll-up percentage applied to a benefit base, this rider works by stepping up the benefit base whenever account value exceeds it, and by increasing your guaranteed withdrawal percentage by 0.10% for each year you wait before taking income (on top of a first-year deferral credit). The mechanics of the deferral bonus are a medium-confidence detail in the source materials, so confirm the exact roll-up and step-up terms on the current rider disclosure before relying on them. The point is that this rider rewards patience and ties your guarantee to actual market performance rather than a phantom growth rate — a meaningfully different design from the high-roll-up FIAs many shoppers compare it against.

The 5-year surrender schedule is shorter than most income-oriented annuities, which is a genuine point in its favor. You can withdraw 10% of your initial premium in year one, then 10% of account value each year after, without a withdrawal charge — and crucially, required minimum distributions tied to this contract come out free of charge even if they exceed that 10%, which matters because the contract is IRA-only and RMDs are unavoidable for traditional-IRA owners at the required age. There is no market value adjustment, so unlike many fixed and indexed annuities, your surrender penalty here is just the stated schedule, not a figure that swings with interest rates. The catch on the downside: there are no hardship or disability waivers, so the relief features are narrower than some competitors offer. Withdrawal charges are also waived if you use the account value to buy an immediate annuity from Integrity (with a life contingency or at least 10 years of payments) at least a year after issue, for GLWB lifetime payouts, or at death.

The headline cost is the 1.90% total annual separate-account charge — 0.75% mortality and expense, 0.35% administration, and 0.80% distribution — assessed daily on account value. That is a high base charge, and it is the single biggest reason to be skeptical: it stacks on top of the underlying subaccount expenses (0.03% to 0.49%), so even before any rider you are paying roughly 1.93% to 2.39% a year for index exposure you could hold for a fraction of that in a regular IRA. Add the optional GLWB and you are paying another 1.10% to 1.30% (up to 1.50% maximum). There is no annual contract fee and no premium bonus. The honest trade is this: the 1.90% wrapper charge only makes sense if you are buying the income guarantee or specifically want the insurance company's separate-account structure. Paying it purely for tax deferral inside an account that is already tax-deferred is the weakest version of this purchase.

Legal Entity: Integrity Life Insurance Company

Parent: Western & Southern Financial Group

AM Best Rating: A+