Introduction
Fixed Index Annuities are contracts between the annuitant and an insurance company in which the insurance company promises to credit interest based on the performance of a certain stock market index, such as the S&P 500. Fixed Index Annuities have an inbuilt capital protection feature, so your principal will remain safe even if the index goes down.
Annuities are complex products, and many advisors try to missell them without properly understanding the buyer’s needs. Thus, you must educate yourself on these products and not solely depend upon the annuity agent’s high-pressure sales pitch.
This article discusses an in-depth review of the Aspida WealthLock Accumulator Fixed Indexed Annuity. WealthLock Accumulator is a deferred, fixed-indexed annuity that may be a good option if you are looking for a fixed-indexed annuity that offers tax-deferred growth and downside protection with a core focus on accumulation. This annuity offers some good indexing options, which have the ability to provide reasonably expected returns in the market. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the Aspida WealthLock Accumulator Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Product Policy
- Rates and Costs
- Riders
- What Makes This Product Stand Out?
- What I Don’t Like
- Company Details
- Conclusion
Product Description
The Aspida WealthLock Accumulator is a Fixed Indexed Annuity (FIA) plan that offers the annuitant (annuity investor) an opportunity to earn a market index-linked return without having to incur the risk of market downside. This is a suitable plan for people who are looking for a fixed-indexed annuity that offers tax-deferred growth and downside protection with a core focus on accumulation.
Let’s have a look at the high-level fine print of the Aspida WealthLock Accumulator Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Product NameWealthLock Accumulator |
|---|---|
Issuing Company | |
AM Best Rating | A- (4th of 13 ratings) |
Withdrawal Charge Period(s) | 5, 7, and 10 years |
Maximum Issue Age | 90 Years |
Minimum Initial Purchase Amount | $25,000 |
Surrender Charge Schedule | Varies for different tenure policies |
Crediting Period and Strategies |
|
Plan Types |
|
Indexes |
|
Free Withdrawals | 10% of the annuity’s Accumulated Value per year |
Death Benefit | Upon the annuitant’s death, the beneficiary will get full account value plus prorated index credits |
Free Benefits |
|
Surrender Value | Account Value less any withdrawal charges/MVA |
RMD Friendly | Yes |
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The Aspida WealthLock Accumulator Fixed Indexed Annuity is almost identical for all three policy tenures, except for the crediting strategies and surrender charge schedule. For ease of discussion and better clarity, we will discuss the Aspida WealthLock Accumulator Fixed Indexed Annuity for the rest of the article.
Product Policy
How does the Aspida WealthLock Accumulator Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 90) can purchase the Aspida WealthLock Accumulator Fixed Indexed Annuity with a minimum initial purchase amount of $25,000, and in return, he will earn market index returns (calculated through a formula that we will discuss shortly), credited as per the chosen crediting period. Apart from the regular crediting period, there are various events that may trigger earnings credit: On free withdrawals, for a long-term care event or terminal illness or injury event, or when a death benefit is payable.
The Aspida WealthLock Accumulator Fixed Indexed Annuity offers the annuitant to choose from one or more of the four indexes (S&P 500 Index, Invesco Peak Index, Franklin Factors US Index, and Janus SG Lighthouse Index) to determine their earnings crediting formula. The S&P 500 index has two strategies, and the Invesco Peak Index, Franklin Factors US Index, and Janus SG Lighthouse Index have three strategies each. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 12 strategy options. We will discuss each available index briefly:
The S&P 500 index is one of the most popular and oldest indexes in the world. It tracks 500 large-cap publicly traded stocks listed in the United States. It is a reliable index and has often succeeded in the test of time. It is very important to note that, similar to most other annuities, the Aspida WealthLock Accumulator Fixed Indexed Annuity offers the S&P 500 index with par rates and caps in place, meaning that your interest-earning capacity is capped. These rates change frequently; I will discuss the rates in detail shortly.
2. Invesco Peak Index
The Invesco Peak Index is a multi-asset, target volatility index. The Index provides exposure to equities with a focus on high-quality companies and to fixed income through US 2- and 10-year Treasury bonds. The Invesco Peak Index focuses on high-quality companies, responsive bond exposure, and dynamic asset allocation. It aims to deliver smoother performance by balancing stock, bond, and cash holdings based on market conditions. Key components include management quality, operating efficiency, and earnings quality. The Index also adapts its bond exposure, primarily using 10-year Treasury bonds, and shifts between assets to manage risk and performance. Asset class allocation is dynamically updated daily to seek to provide a consistent volatility profile of 5%. While these volatility controls may result in less fluctuation in rates of return when compared with indexes that don’t use them, they also may reduce the overall rate of return compared with those other indexes.
3. Franklin Factors US Index
The Franklin Factors US Index is a quantitative, rules-based index targeting steady growth while managing downside risk. It employs a multi-factor approach for selecting top-quality U.S. stocks and dynamically adjusts the allocation of stocks, bonds, and cash based on market signals. The goal is to achieve consistent returns through quality stock screening and responsive asset shifts. Key features include a 5% volatility target, use of leverage, and composition of U.S. large-cap equity, 10-year U.S. Treasury futures, and cash. While these volatility controls may result in less fluctuation in rates of return when compared with indexes that don’t use them, they also may reduce the overall rate of return compared with those other indexes.
4. Janus SG Lighthouse Index
The Janus SG Lighthouse Index is a strategic financial index that employs a guidance strategy, focusing on U.S. companies providing earnings guidance. It incorporates a balanced approach, investing in bonds and utilizing a Smart Duration Signal to manage bond exposure during market stress. This index uses a volatility control mechanism, targeting 8% volatility, adjusting exposure based on market conditions. While these volatility controls may result in less fluctuation in rates of return when compared with indexes that don’t use them, they also may reduce the overall rate of return compared with those other indexes.
Note: In addition to allocating the funds in the following indexes, the annuitant also has the option to allocate funds at a fixed interest. These fixed rates change from time to time. The Fixed Value Rate for the 5-year withdrawal charge period at the time of writing this article was 4.75%. It is noteworthy that the fixed rates offered by Aspida are better than those offered by most other fixed-indexed annuities. You can view the latest rates of this annuity.
Rates and Costs
The earnings crediting formula
The earnings crediting formula is the most important part of this annuity discussion. It is important to know that we don’t simply get the index return credited to our annuity. There are a few rates, caps, spreads, and triggers that the company has in place that affect our earnings. These rates tend to change over time, and the updated rates can always be checked on the company’s website.
Let’s have a look at the Aspida WealthLock Accumulator Fixed Index Annuity rate sheet (as of May 2024) to understand how the earnings are determined.
The first thing to note is that we have an option to choose between four indexes, and each index has multiple strategies. All in all, it gives us an option to allocate our contract to a maximum of 12 strategies (11 index-based and one fixed). The company displays three types of rates across all strategies. The index allocation rate (participation rate) and the cap rates are the most important.
- 1-year Point-to-point with Participation Rate: The 1-year point-to-point with participation rate describes the annuitant’s participation percentage in a return of an index. For example, suppose the participation rate is 150%, and the index returned 4% over the 1-year time. In that case, the annuitant will be eligible for 150% of the return, i.e., 6%.
- 1-year Point-to-point with Cap Rate: This refers to the rate at which your interest-earning capacity is capped. For example, if an index returns 12% but the contract’s cap rate is 6%, the annuitant will be eligible for an interest credit of 6% only. It doesn’t matter how much the index goes above the cap rate; the maximum interest that can be earned is the cap rate.
- 2-year and 5-year High Watermark Participation Rate Strategy: The 2 and 5-year High Watermark Participation Rate Crediting Strategy offers growth by crediting a portion of the index's growth, determined by its highest quarterly value during the term. Interest is credited and locked in every two or five years. A notable feature, QuarterLock, provides four opportunities annually to automatically secure increases in index values. This strategy is designed to optimize returns by capturing the best quarterly index performance within the selected crediting period.
- Fixed Interest Rate: If you opt for a declared strategy / fixed account rate, you simply earn the fixed rates for a particular period specified by the company before your policy begins. These rates usually tend to be low/at par as compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario. The 1-year fixed rate on this policy at the time of writing this article was 4.75%, which is higher than what most fixed-indexed annuities offer.
- Bailout Provision: For the S&P 500 1-year point-to-point strategy with cap, if the company lowers any rate below the Bailout Cap rate, you’ll have full access to withdraw your annuity’s accumulated value - free of any charges or Market Value Adjustments.
In the example, the 5-Year High Watermark Participation Rate Strategy was assumed to have a participation rate of 150%, while the traditional 5-Year Point-to-Point with Participation Rate was assumed to be 200%. Both strategies began with an index value of 75. The ending index values were 148 for the High Watermark Strategy and 86 for the Point-to-Point Strategy.
Amongst these indexes, I would prefer to invest in the following strategy options because of the higher participation and/or cap rates:
- S&P 500 1-year Point-to-point with Cap Rate
- 2-year Invesco Peak Index High Watermark with Participation Rate
- 5-year Invesco Peak Index High Watermark with Participation Rate
There are very few Index annuities that have the ability to offer high caps and par rates. However, you must keep in mind that insurance companies tend to change rates frequently, and you must keep an eye on updated rates. You must consult a trusted financial advisor to know what indexes and strategies suit you best.
Surrender/Early Withdrawal Charge
Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal that is above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies, although certain charges and penalties may apply. Any amount withdrawn in excess of the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule for the Aspida WealthLock Accumulator Fixed Indexed Annuity:
| Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
|---|---|---|---|---|---|---|---|---|---|---|---|
5-Year Plan | 9% | 8% | 7% | 6% | 5% | 0% | |||||
7-Year Plan | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 0% | |||
10-Year Plan | 9% | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0% |
Market Value Adjustments - In case you need to surrender your policy, a Market Value Adjustment (MVA) will be applied to the portion of the withdrawal or surrender that exceeds the free withdrawal amount during the withdrawal charge period. The surrender charge schedule is different for the different tenures of annuities and also changes for some states.
The surrender charge of the Aspida WealthLock Accumulator Fixed Indexed Annuity is in line with all the other annuity issuers.
Contract/Administrative Charge
The Aspida WealthLock Accumulator Fixed Indexed Annuity levies no annual contract or administrative fees.
Riders
The Aspida WealthLock is a plain-vanilla annuity that does not offer any optional paid riders. In my opinion, this actually appeals to many people who don’t understand or do not want to dive deep into the complex methodologies the riders often come up with. However, as with most annuities, the Aspida WealthLock Accumulator has free in-built nursing home and terminal illness waivers.
Extended Care Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is confined to a Qualified nursing home for at least 90 consecutive days. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.
Terminal Illness Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is diagnosed with a terminal illness with a prognosis of 12 months or less. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.
What makes this product stand out?
The Aspida WealthLock Accumulator Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are:
- The plan offers the S&P 500 Index with good caps and participation rates, allowing you to grow your retirement account faster.
- High watermark strategies allow you to optimize returns by capturing the best quarterly index performance within the selected crediting period.
- No annual contract, mortality & expense, or administrative fees
- Free Confinement and Terminal Illness Waiver Benefit: This no-fee rider is automatically included for owners under age 65 and includes both an Extended Care and Terminal Illness Benefit.
- Multiple Payout Options: Lumpsum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
What I Don’t Like
This product is a decent product for people looking for growth and safety; still, there are some features that could add more value for the annuitant. Some of the features that I don’t like about the policy are:
- Although the annuity offers good strategies on the S&P 500 Index, I don’t like the other indexes that the company offers. These indexes have a volatility control mechanism that limits the overall return of the index. However, at the time of writing this article, the company is offering a good participation rate on those indexes to compensate for the low potential return.
- I couldn’t find the Minimum Guaranteed Surrender Value (MGSV) rate on the marketing material of this annuity.
Company Details
You must always keep in mind that, unlike CDs, annuities are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. An annuity's "guarantee" is only as strong as the insurance company that issues the annuity, so it is always important to assess the issuing company before buying an annuity.
Aspida Life Insurance Company
Aspida Life Insurance Company, established in 2021, stands as a relatively new entrant in the life insurance and annuity market. It functions as a direct subsidiary of Aspida Holdings Ltd., which concentrates on offering retirement and reinsurance solutions and is backed by a leading global alternative investment manager, Ares Management Corporation. Aspida distinguishes itself by prioritizing the use of technology and agility to support its clients in realizing and safeguarding their aspirations.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A- (4th of 13 ratings) |
KBRA | A- |
These ratings mean that the company is considered to be strong and stable financially. As of year-end 2023, some of the financial highlights for Aspida Life Insurance Company include its:
- $15.1 billion in assets under management
- $1.3 billion of total GAAP equity
- $428 billion in parent company’s (Ares Management Corporation) assets under management
- 35 global offices
Conclusion
With advancements in healthcare and technology, the average American today lives longer than ever. Consequently, it's crucial to have a source of income that grows safely and steadily, and can provide a guaranteed income during retirement years. This strategy not only mitigates the risk of outliving your income but also ensures a decent standard of living in retirement.
The Aspida WealthLock Accumulator is an annuity designed to safely grow your savings. It offers faster growth with principal protection through its higher caps and participation rates. The product's straightforward nature, devoid of optional paid riders, might actually appeal to those who prefer simplicity over complex rider methodologies. If you're considering a Fixed Indexed Annuity focused on accumulation, the Aspida WealthLock Accumulator FIA could be a worthy option. Although Aspia is a relatively new entrant in the annuity market, it has received favorable ratings from established rating agencies. To compensate for its newcomer status and to attract customers, Aspia is offering higher rates than other annuity providers.
We understand that choosing the right annuity can be a complex decision, influenced by a myriad of factors such as market conditions, individual financial goals, and evolving life circumstances. To better serve you in this critical decision-making process, we regularly conduct in-depth reviews of various annuity products, examining features, costs, and potential benefits. Delve deeper into our extensive reviews.