Principal Strategic Income Annuity review

Yes, for the right buyer. This is a good annuity for someone who wants protected lifetime income, can tolerate the complexity and downside risk of a RILA structure, and wants a market-linked growth phase before income begins. It is less appealing for someone who wants principal protection from market losses, wants a simpler income annuity, or does not want to pay a mandatory rider charge before income starts.

The main reason to buy Principal Strategic Income is to build a guaranteed lifetime income stream while still keeping real market exposure during the accumulation phase. The structured segment design gives buyers higher participation rates than most income-focused fixed indexed annuities offer, which is the tradeoff for accepting defined buffer-style downside risk. The secondary reason is flexibility — the choice between Level and Tiered income allows buyers to match the product to how they actually want retirement income to work.

I think Principal Strategic Income is best for someone in the pre-retirement window who wants both market-linked growth potential and a guaranteed income guarantee in the same contract, is comfortable with the idea that their account value could decline meaningfully in a bad market, and plans to use this as a long-term income vehicle rather than an accumulation product. It is less attractive for someone who wants a simpler annuity, expects to need liquidity above the free amount during the surrender period, or wants full principal protection from market losses — because this contract does not provide that.

You are not buying a principal-protected annuity. That is the most important thing to understand. Unlike a fixed indexed annuity, a RILA puts real market exposure in your account through structured segments. If the index you chose falls more than your buffer protects, your account value goes down. The tradeoff is that RILAs typically offer higher participation rates and caps than FIAs — so the upside potential is more meaningful. Wrapped around that growth potential is a mandatory guaranteed lifetime withdrawal benefit that ensures income for life regardless of what the account does.

The Secure Income Protector II is the center of this contract. It is automatically included — you cannot buy this annuity without it. The rider charges 1.50% annually on your benefit base, deducted quarterly from account value.

At issue you choose between **Level income** and **Tiered income**. Level income pays the same guaranteed percentage for life, never decreasing. Tiered income pays a higher percentage while the account value is still positive, then drops to a lower guaranteed floor once account value reaches zero.

Income is determined by your **secure income percentage** at the time of the first withdrawal. That percentage starts at issue based on your age and income option, then increases by deferral credits each contract anniversary until you take your first withdrawal.

Deferral credits by issue age band: ages 45–54 get 0.25% per year, ages 55–64 get 0.30%, ages 65–69 get 0.35%, ages 70–74 get 0.40%, and ages 75–80 get 0.45%. That means a 60-year-old buyer who waits five years before taking income adds roughly 1.50% to their secure income percentage over that deferral period.

Annual step-ups also lock in market gains into the benefit base each segment end date, provided the account value exceeds the benefit base. Step-ups are available until the owner reaches age 85 or 12 years from the rider effective date, whichever is later.

The income option choice is the most meaningful secondary feature. The payout percentages differ substantially between Level and Tiered income. Under Level income for a 65-year-old on a single-life basis, the secure income percentage is 5.75%. Under Tiered income, the same person starts at 7.25% — but if the account eventually runs to zero, that drops to 3.50%. Under Level income, the rate never drops.

In plain terms, Tiered income front-loads the payout and bets on the account staying solvent. Level income takes a lower but more predictable stream for life. Neither is wrong — they solve different retirement income planning problems. The ability to change the income option once before the first withdrawal adds some flexibility, though doing so will reset the initial secure income percentage and deferral credits.

This annuity uses a 6-year surrender schedule: 8%, 8%, 7%, 6%, 5%, 4%, then 0%. The free withdrawal amount each year is the greater of the secure income benefit payment, 10% of cumulative premiums minus withdrawals since the prior anniversary, or the required minimum distribution for qualified contracts.

There is also a waiver of surrender charges for disability, confinement to a health care facility, or terminal illness — issued automatically with no additional charge.

One important complexity: withdrawals from structured segments taken between the segment start and end dates are subject to daily equity and interest adjustments. Those adjustments can make the actual value of a mid-term withdrawal significantly different from what the account statement shows. For buyers in a structured segment who need cash before the term ends, that is a real risk. Income withdrawals under the rider are subject to the equity adjustment but not the interest adjustment, which is better — but still worth understanding.

The main explicit fee is the Secure Income Protector II rider at **1.50% annually of the benefit base**, charged quarterly. This is not optional. It runs from day one, whether or not you have started income. The maximum the company can raise it to is 2.00%, which is a meaningful range above the current rate.

Beyond the rider charge, there is no separate mortality and expense charge at the contract level. The fixed account currently yields 3.00%, which is lower than what many MYGA buyers can find today.

The structural tradeoffs are harder to see than the rider fee. Because this is a RILA rather than a fixed product, account value can genuinely decline in negative markets. Buffers absorb the first 10% or 20% of losses depending on the segment chosen, but losses beyond the buffer hit the account. In a severe enough market environment, that loss affects the account value but — as long as no excess withdrawals have been taken — the benefit base for income purposes is protected. That distinction matters: your income guarantee survives market losses, but the assets supporting your estate and liquidity do not.

Principal Strategic Income is issued by Principal Life Insurance Company, part of the Principal Financial Group, headquartered in Des Moines, Iowa. Principal Life holds an A+ rating from both A.M. Best and Standard and Poor's as of available materials. Principal Financial Group is a large, diversified financial services company with a long history in insurance and retirement products.