American Legacy Signature 1 review

It depends, and more than usual. This is a good annuity for someone who specifically wants market participation inside a tax-deferred wrapper and is going to use one of the optional guarantees, whether that is lifetime income, an enhanced death benefit, or long-term-care support. It is a poor fit for someone who just wants accumulation, because the layered fees make it hard to compete with a fixed indexed annuity or a low-cost brokerage account. Unlike a fixed or indexed annuity, your principal is exposed to market losses unless you add and pay for a rider that protects it.

The main reason to buy American Legacy Signature 1 is to get equity-market growth potential with the option to attach a guarantee that fits a specific plan. Someone who wants the upside of a diversified fund portfolio but also wants the choice to lock in future income, leave a larger death benefit, or fund potential care needs can configure all of that in one contract. The secondary reason is tax deferral on a flexible-premium basis, which lets growth compound without annual tax drag. In practice, this is the type of annuity someone buys when they have already decided they want market exposure and a guarantee, not when they are choosing between a CD and a fixed annuity.

I think this annuity is best for someone in the pre-retirement or early-retirement window who is comfortable with market risk, wants a guarantee layered on top, and plans to hold for the full surrender period or longer. The wide 0-85 issue-age range also makes it usable for legacy-focused buyers who care more about the death benefit than accumulation. It is less attractive for conservative savers who cannot tolerate principal loss, for anyone who wants the lowest-cost path to growth, or for someone who might need full access to the money within the first several years.

Strip away the brochure language and you are buying a tax-deferred container for mutual-fund-style investing, plus the right to attach guarantees that cost extra. Your money goes into subaccounts that rise and fall with the markets, so there is no built-in floor on losses the way an indexed annuity has. What you pay for is the wrapper itself: the mortality-and-expense structure, tax deferral, and access to optional living and death benefits. The guarantees are not part of the base contract. If you want protected income or an enhanced death benefit, you elect a rider and pay an additional annual fee for it. Understanding that separation is the whole game with this product.

The core of American Legacy Signature 1 is its subaccount lineup. The spec describes 36 variable subaccounts, including American Funds mutual funds and Lincoln's LVIP funds, with net expense ratios running from roughly 0.72% to 1.15%. You allocate your premium across those funds, and your account value moves with their performance, minus expenses. There is no cap, participation rate, or spread limiting your upside the way there would be in an indexed product, but there is also no protection against a down market at the subaccount level. The contract is sold in two flavors: Signature 1 carries a 1.30% base charge with a 7-year surrender schedule, while Signature 2 is a higher-cost liquidity option at 1.65% with a shorter 4-year schedule. This review covers the Signature 1 standard option.

The most meaningful secondary feature is the optional rider menu, because it is where this contract earns or loses its keep. On the income side, the spec lists several optional guaranteed living benefit riders such as Lincoln Lifetime Income Advantage 2.0, Market Select Advantage, Max 6 Select Advantage, 4LATER Select Advantage, and the iALIFE Advantage options, with a stated 6.00% roll-up on at least one of them. These are optional, not built-in, so income is something you choose to pay for. There is also a long-term-care rider and a set of death-benefit options including a Guarantee of Principal benefit, an Enhanced Guaranteed Minimum Death Benefit, and Estate Lock. That breadth is the real argument for this product over a plain brokerage account, but each rider carries its own fee, and the specific terms on these riders are medium-confidence in the source materials, so anyone shopping it should request the current rider prospectus rather than relying on the summary figures here.

The Signature 1 option uses a 7-year surrender schedule that starts at 7% and steps down to zero after year seven, as shown below. During those years, you can take the greater of 10% of account value or 10% of total purchase payments each year without a charge, and you have full access once year eight begins. The spec notes no market value adjustment applies, which is a point in the contract's favor since it means your surrender penalty does not also swing with interest rates. The thing to keep in mind is that the surrender charge is separate from market risk: even when you are inside the free-withdrawal amount, the value you are pulling from can be down because it is invested in market subaccounts. This is a contract for money you can leave invested through a full market cycle, not money you might need in a pinch.

This is where a variable annuity demands the most scrutiny, because the costs come in layers. The Signature 1 base contract carries a 1.30% annual charge, which covers the mortality-and-expense and base administrative cost. On top of that sit the subaccount expenses, which the spec puts at roughly 0.72% to 1.15% depending on the funds you pick. There is also a $35 annual contract fee, waived after year 15 or once account value tops $100,000, plus a 0.10% administration charge. Then come the optional riders. The income riders are listed at roughly 1.50% to 1.35% for single life and a wider 1.60% to 0.40% range for joint life depending on which one you choose; death-benefit riders run 0.05% to 1.60%; and the long-term-care rider is priced off the benefit base and age, in a 0.26% to 0.76% annual range. Add a base charge, a fund expense, and one or two riders together and the all-in cost can climb well past 2.5% a year. The honest framing is that you are paying for guarantees and tax deferral. Whether that is worth it depends entirely on whether you use the riders. If you buy the contract for plain growth and never turn a guarantee on, the fee stack is hard to justify. The rider fee figures here are medium-confidence in the source spec, so confirm the exact charges on the riders you are considering before deciding.

Legal Entity: The Lincoln National Life Insurance Company

Parent: Lincoln Financial Group