American Legacy Signature 1 (NY) review

It depends on what you want. For a New York resident who specifically wants market exposure inside a tax-deferred annuity and is comfortable paying for an optional living benefit, it is a reasonable, well-built contract. For someone whose real goal is principal protection or a guaranteed rate, it is the wrong tool entirely, because the account value here rises and falls with the markets you choose.

The rational reason to buy this is to get equity-style growth potential with tax deferral, then attach a guarantee that fits your retirement plan. If you want guaranteed lifetime income, you add the Market Select Advantage withdrawal rider. If you want a structured, tax-efficient way to draw income while staying invested, you add i4LIFE. If legacy matters, you add an enhanced death benefit. The product is essentially a build-your-own platform rather than a one-decision annuity.

I think this is best for a New York resident in the pre-retirement or early-retirement window who is comfortable with market risk, wants more growth potential than a fixed or indexed annuity offers, and intends to use at least one of the optional living-benefit riders. It works for both qualified and non-qualified money. It is a poor fit for someone who cannot tolerate seeing their balance drop, someone who wants the simplest possible annuity, or someone who would buy the base contract and skip the riders, in which case the fees buy you very little.

Strip away the brochure language and you are buying a tax-deferred investment account with optional insurance attached. Your premium goes into a selection of the 36 available subaccounts, which behave like mutual funds, and your value moves with those markets. There is no cap, no floor, and no participation rate, because there is no index-crediting formula. The standard contract simply invests your money and returns the account value at death. Everything that makes it feel like a guaranteed-income product, the lifetime withdrawal rider, the i4LIFE income feature, the principal-protection death benefits, is an optional add-on you pay extra for.

The core engine is the subaccount lineup. You allocate premium across up to 36 investment options, and Lincoln also offers Dollar Cost Averaging accounts that pay a stated rate (3.00% on the three-month, six-month, and 12-month DCA+ options as of the brochure date) while systematically moving money into the subaccounts over time. Net subaccount fees run 0.72% to 1.15% per year on top of the base contract charge.

The headline optional feature is the Market Select Advantage guaranteed lifetime withdrawal rider. It builds a separate Benefit Base that grows at a 5.00% simple annual rollup for up to 10 years (capped at age 85), and that Benefit Base, not your account value, determines your guaranteed lifetime withdrawal amount. Importantly, withdrawals before you turn income on reduce the Benefit Base proportionally, so it is not free liquidity. The rider runs 1.50% currently (up to a 2.25% maximum) charged quarterly on the Benefit Base, or 1.60% for joint life.

The most distinctive secondary feature is i4LIFE Advantage, Lincoln's signature income-distribution rider, which the spec classifies as a guaranteed minimum income benefit. Rather than guaranteeing a fixed withdrawal percentage, i4LIFE converts your account value into a stream of income payments using an annuity-factor method while keeping you invested in the subaccounts, which can let payments grow if markets perform and offers favorable tax treatment on non-qualified money. At 0.40% annually on the account value, it is far cheaper than the lifetime-withdrawal rider. The tradeoff is that i4LIFE works differently from a traditional GLWB and is harder to understand, so it rewards buyers willing to learn the mechanics. The two riders solve overlapping problems in different ways, and choosing between them is the central decision this contract asks of you.

This is a 7-year commitment with a declining surrender charge that starts at 7% and steps down to 3% by year seven, as shown below. There is no market value adjustment, which is a small plus. Each year you can withdraw the greater of 10% of account value or 10% of premiums paid without penalty, which is reasonable liquidity for an annuity. Lincoln also includes surrender-charge waivers for nursing-home confinement, terminal illness, and disability, so a genuine health event does not trap your money. The product is RMD-friendly. Just remember that if you own the lifetime-withdrawal rider, withdrawals before income starts cut into the Benefit Base, and under i4LIFE they affect income dollar-for-dollar, so liquidity and your guarantees are linked.

The fees are where this product demands honesty. The base contract carries a 1.25% annual charge (1.15% mortality and expense plus 0.10% administration), and there is a $35 annual contract fee that is waived at $100,000 or after 15 years. On top of that, every subaccount has its own fund expense of 0.72% to 1.15%. So before any rider, a typical buyer is paying roughly 2% to 2.4% a year. Add the Market Select Advantage lifetime-withdrawal rider at 1.50% on the Benefit Base and you can clear 3.5% all-in. The i4LIFE rider is much lighter at 0.40%, and the optional death benefits add either 0.50% (Guarantee of Principal) or 0.30% (Enhanced GMDB). The trade is clear: you are paying market-grade fees plus insurance fees to get growth potential with optional guarantees. Whether that math works depends entirely on whether you actually use the guarantees you are paying for.

Legal Entity: Lincoln Life & Annuity Company of New York

Parent: Lincoln Financial

AM Best Rating: A