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.
A few days ago, we wrote a detailed review of the Athene AscentPro Annuity and the Athene Performance Elite Annuity, and this time, we will be covering another popular annuity from Athene. This article discusses an in-depth review of the Athene AccuMax Fixed Indexed Annuity. Athene AccuMax is a deferred, fixed-indexed annuity that may be a good option if you are looking for accumulation, the safety of principal, good indexing options, and a plain zero-rider product. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the Athene AccuMax 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 Athene AccuMax 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 approaching retirement and aim to grow and protect their retirement savings. This plan is also recommended for people who are looking for higher accumulation with a plain zero-rider product, in addition to protecting and growing their retirement savings.
Let’s have a look at the high-level fine print of Athene AccuMax Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | AccuMax |
|---|---|
Issuing Company | |
AM Best Rating | A (2nd of 13 ratings) |
Withdrawal Charge Period(s) | 7 years |
Maximum Issue Age | 83 Years |
Minimum Initial Purchase Amount | $10,000 |
Surrender Charge Schedule | 9%, 8%, 7%, 6%, 5%, 4%, 3% |
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 can either choose from (i) Accumulated Value /Interim Value or (ii) Minimum Guaranteed Contract Value
|
Riders |
|
Surrender Value | Greater of Accumulated/Interim Value (less any withdrawal charges/MVA) and the Minimum Guaranteed Contract Value |
RMD Friendly | Yes |
Product Policy
How does the Athene AccuMax Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 83) can purchase the Athene AccuMax 7 Fixed Indexed Annuity with a minimum initial purchase amount of $10,000, 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 Athene AccuMax 7 Fixed Indexed Annuity offers the annuitant to choose from one or more of the three indexes (S&P 500 Index, AI-Powered Multi-asset Index, and Shiller Barclays CAPE Allocator 6 Index) to determine his earnings crediting formula. Each index offers 2 strategies to choose from; The plan also offers a fixed-rate guaranteed interest strategy (making a total of 7 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 the Athene AccuMax Fixed Indexed Annuity offers the S&P 500 index with caps in place, meaning that your interest-earning capacity is capped. These rates tend to change frequently; I will discuss the rates in detail shortly.
2. AI-Powered Multi-asset Index
The AI-Powered Multi-asset Index (AiMAX) is an index developed by HSBC that uses IBM Watson’s AI engine to create a risk-controlled, excess return index that tests each possible combination of the 15 investable asset classes in order to measure each portfolio’s forecasted return, volatility, and correlation.
It is very important to note that this is a risk-controlled index, meaning that both the upside and downside are limited. However, the limited downside doesn’t bother us as much as the limited upside, as our downside is anyway floored.
3. Shiller Barclays CAPE Allocator 6 Index
The index is a member of the Barclays family of Shiller Barclays CAPE® indices, which are based on principles of long-term investing distilled by Professor Shiller and expressed through the Cyclically Adjusted Price to Earnings (or CAPE) ratio. The Index aims to provide stabilized exposure to US equities. It does this by identifying sectors that appear to be undervalued according to their CAPE® ratio.
Again, It is very important to note that this is a risk-controlled index, meaning that both the upside and downside are limited. However, the limited downside doesn’t bother us as much as the limited upside, as our downside is anyway floored.
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 at the time of writing this article was 3.7%.
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 and caps 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.
The formula to calculate the earnings credited is:
- For Strategies with Participation: (Participation Rate % X Index Return)
Let’s have a look at the Athene AccuMax 7 rate sheet (updated as of July 2024) to understand how the earnings are determined.
From the rate chart, we can see that this annuity offers all the strategies based on participation rates. Participation rate describes the annuitant’s participation percentage in a return of an index. For example, suppose the participation rate is 60%, and the index returned 10% over the agreed time. In that case, the annuitant will be eligible for only 60% of the return, i.e., 6%. Similarly, suppose if the participation rate is 300% and the index returned 3%, the annuitant will be eligible for 300% of 3%, i.e., 9%.
For all the strategies with participation rates, this annuity offers five point-to-point options and 1 Annual Interval Sum option. The annual interval sum is a new concept in fixed-indexed annuities. It provides the benefit of higher crediting rates through a multi-year strategy but with the ability to measure index performance in annual steps. Let’s see how it works:
Suppose you select the 7-Yr Annual Interval Sum S&P 500® Index (SPX) with a Participation Rate of 50%. You pay a premium of $100,000 at the beginning of year 1. The returns of the hypothetical 7 years are shown below:
- The annual sum is the total of each year's index performance multiplied by the Participation Rate in years when the index performance is positive. In years when the index performance is negative, the sum decreases by the amount it went down, but only to the floor of -10%.
- A premium of $100,000 in year 1 would be credited $25,000 in interest at the end of 7 years, for a total of $125,000.
- Since there is a -10% floor, the impact of a market loss in any given year is limited to -10%. If the cumulative performance was negative at the end of the term, there is a 0% floor for total performance. You would maintain your original premium even if the index declined every year. In addition, your Accumulated Value and Death Benefit during the term are guaranteed never to be less than your original premium.
In my opinion, the 7-Yr Point-to-point and Annual Interval Sum crediting strategy based on the S&P 500 Index are the ideal crediting strategies to invest in as the S&P 500 has always proven to give good returns over the long term (although please keep in mind that past performance is no way an indicator of future performance). Also, a long period ensures that we get more stable returns, inhibiting the effects of short-term market ups and downs. The seven-year strategy period is not something that we usually see in other annuities, and it is something that should definitely be looked upon.
Surrender 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 Athene AccuMax 7 Fixed Indexed Annuity.
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8+ |
|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 0% |
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. For a quick comparison of surrender charges across different Athene products, you may visit their fixed indexed annuities product page.
The surrender charge of Athene AccuMax Fixed Indexed Annuity is pretty much in line with all the other annuity issuers.
Death Benefit
Generally, the death benefit in any FIA is the annuity’s accumulated value. However, unlike standard death benefits that only provide the current Accumulated Value, your beneficiary will receive an amount equal to the Accumulated Value plus a portion of any index growth from the current crediting period.
Contract/Administrative Charge
The Athene AccuMax Fixed Indexed Annuity levies no annual contract or administrative fees.
Riders
The AccuMax 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 AccuMax FIA has free in-built confinement and terminal illness waivers.
- Confinement 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 care facility for at least 60 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 Athene AccuMax Fixed Indexed Annuity offers some features that not many fixed-indexed annuities offer. The ones that I like the most are:
- The plan offers the S&P 500 index with multiple crediting methodologies, including a unique 7-yr annual interval sum crediting strategy.
- Higher Participation Rates and Fixed Rate: Another good thing with the AccuMax Fixed Indexed Annuity is that it provides higher participation rates than many of its competitors. It also offers competitive fixed rates.
- No annual contract, mortality & expense, or administrative fees
- Free Confinement and Terminal Illness Waiver Benefit
- Death Benefit: Death benefit includes Accumulated Value plus a portion of any index growth from the current crediting period.
- Multiple Payout Options: Lupsum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
What I don’t like
This product is generally good on all fronts for people looking for growth; 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:
- No optional riders to choose from
- Although the annuity offers good strategies on the S&P 500 Index, the other two indexes have risk control mechanisms in place, which lowers the maximum return earning capacity.
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.
Athene Annuity and Life Company
Athene Annuity and Life Company have been in the business since 2009. It has been one of the largest providers of fixed and fixed indexed annuities in the US for many years and has been regularly in the top ten Fixed Indexed Annuity Sales.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A+ (2nd of 13 ratings) |
Fitch | A+ (5th of 19 ratings) |
S&P | A+ (5th of 21 ratings) |
Moody's | A1 (5th of 21 ratings) |
Athene Annuity and Life Company has maintained decent ratings for many years. It is considered to be strong and stable financially. As of December 31, 2023, some of the financial highlights for Athene Annuity include its:
- $63 billion in gross organic inflows
- $22 billion of regulatory capital
- $3.1 billion in spread relating earnings
- $320.6 billion in total assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with Athene Annuity and Life Company.
On January 1, 2022, Athene Holding Ltd. merged with Apollo Global Management, Inc. (NYSE: APO). Apollo is a high-growth, global alternative asset manager listed on the NYSE that serves institutional and individual investors across the risk-return spectrum in yield, hybrid, and equity strategies.
Conclusion
With the advancement in healthcare and technology, the average American today is living longer than ever. So, it’s very important to have a stream of income that can grow safely and steadily and have the ability to provide a guaranteed income during the retirement years. This not only helps you mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in your retirement.
The Athene AccuMax is one such annuity that helps you grow your savings with much less risk. Through its unique 7-yr point-to-point and annual interval sum strategies, it offers accumulation, principal protection, and access to higher liquidity with much lesser volatility. The plan has no optional paid riders, so it might also be beneficial for people who don’t understand or do not want to deep-dive into the complex methodologies the riders often come up with. If you are considering buying a Fixed Indexed Annuity that works best for accumulation and liquidity, the Athene AccuMax FIA might be a decent product to look after.
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.