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. 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 provides an in-depth review of the Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity. The Atlantic Coast Accumulation Protector Plus Annuity is a deferred, fixed-indexed annuity that may be a strong choice for those seeking a well-rounded policy with a premium bonus, growth potential, principal protection, and diverse indexing options. Based on extensive research and due diligence, this review offers an unbiased analysis of the plan.
The review of the Atlantic Coast Accumulation Protector Plus 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 Atlantic Coast Accumulation Protector Plus is a Fixed Indexed Annuity (FIA) that offers annuitants the opportunity to earn a portion of returns linked to a market index without exposure to downside market risk. This plan is well-suited for individuals nearing retirement who aim to grow and preserve their savings. It also appeals to those seeking a guaranteed initial premium bonus, providing both protection and growth potential for retirement funds.
Let’s have a look at the high-level fine print of Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Accumulation Protector Plus |
|---|---|
Issuing Company | |
AM Best Rating | B++ (5th of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Maximum Issue Age | 85 Years |
Minimum Initial Purchase Amount | $5,000 |
Surrender Charge Schedule | 10%, 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, 0% |
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 (Lumpsum) or (ii) Minimum Guaranteed Surrender Value
|
Free Benefits | Nursing Home Waiver and Terminal Illness Waiver |
Riders | Annuitants can choose an optional paid, rate enhancement rider |
Surrender Value | Greater of Accumulated Value (less any withdrawal charges/MVA) and the Minimum Guaranteed Surrender Value |
RMD Friendly | Yes |
Product Policy
How does the Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity with a minimum initial purchase amount of $5,000, and in return, they 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 Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity allows annuitants to choose from one or more of three indexes—the S&P 500 Index, the Diversified Macro 5 Index, and the Momentum Index—to determine their earnings crediting formula. The S&P 500 and Diversified Macro 5 Index each offer three strategies, while the Momentum Index provides four strategies. Additionally, there is a fixed-rate guaranteed interest strategy available, bringing the total to 11 strategy options. We will discuss each available index briefly.
1. S&P 500 Index
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 Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity offers the S&P 500 index with participation or 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. Momentum Index
The Credit Suisse Momentum Index is a global, multi-asset index designed to adapt to varying market conditions by dynamically allocating across equities, bonds, and commodities in four global regions. It employs a momentum-driven strategy, taking long positions in components exhibiting strong trends and short positions in those with weaker trends. The index features a built-in risk control mechanism aimed at maintaining a targeted volatility level, supporting consistency in returns. However, while this approach mitigates risk, the volatility cap can constrain its potential upside, especially in rapidly advancing markets.
3. CS ESG Macro 5 Index
The CS Diversified Macro 5 (ESG Macro 5) Index is a financial index that combines ESG principles with a multi-asset macro strategy. Launched in August 2022, this USD-denominated index offers exposure to global equities, fixed income, commodities, and currencies while prioritizing positive ESG scores through four regional MSCI indices. The index's macro component aims to identify market trends and capitalize on yield differences across various instruments. It employs a rules-based approach and a daily risk control mechanism targeting 5% volatility to generate consistent returns. However, while this approach mitigates risk, the volatility cap can constrain its potential upside, especially in rapidly advancing markets.
It is very important to note that the Accumulation Protector Plus Fixed Indexed Annuity comes with cap rates, participation rates, or triggered rates for these indexes, meaning that you will be credited only a part of the index return to your annuity. These rates tend to change frequently; I will discuss these rates shortly.
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 tend to change from time to time. The No-rider Fixed Rate for the 10-year withdrawal charge period at the time of writing this article was 3.00%, which is decent when we compare it with competitors. You can view the latest fixed 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 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 with the help of your trusted advisor and/or on the company’s website. You can view the latest indexing rates of this annuity.
The Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity uses eleven crediting strategies:
| S&P 500 Index | Diversified Macro 5 Index | Momentum Index |
|---|---|---|
1-year Point-to-Point Option with Participation Rate | 1-year Point-to-Point Option with Participation Rate | 1-year Point-to-Point Option with Participation Rate |
2-year Point-to-Point Option with Participation Rate | 2-year Point-to-Point Option with Participation Rate | 2-year Point-to-Point Option with Participation Rate |
1-year Point-to-Point Option with Cap Rate | 3-year Point-to-Point Option with Participation Rate | 3-year Point-to-Point Option with Participation Rate |
1-year with Trigger Rate | ||
Fixed Account Interest Option | Fixed Account Interest Option | Fixed Account Interest Option |
- Point-to-point with Cap: The cap rate is a key term in a Fixed Indexed Annuity (FIA). It defines the maximum rate at which your interest-earning potential is capped. For example, if an index returns 13%, but your contract’s cap rate is 7%, you will receive an interest credit of only 7%. No matter how much the index exceeds the cap rate, the maximum interest you can earn is limited to the cap rate.
- Point-to-point with Participation Rate: The amount of interest that the company will credit is based on a declared participation rate on the selected index on a point-to-point basis. Once the index gain is determined (if any), it is multiplied by the participation rate. The remaining amount is credited to the contract for that term. Formula to calculate interest credit for strategies with participation rate: (Participation Rate % X Index Return).
- Trigger Rate: A flat or positive index return triggers the declared interest rate to be credited to the contract value. If the index return is negative, no interest is credited, but there will be no loss, and the contract value will remain the same. Suppose the change in the value of the index during a particular year is zero or positive. In that case, the declared index gain interest rate is multiplied by the option’s account value to determine the index interest credits. The declared interest rate is set at contract issue and applies for the entire withdrawal charge period. In this case, the performance-triggered rate for the S&P 500 Index is 9.00%. It means that if the Momentum Index doesn’t go negative for a given 1-year period (even if the growth is 0% and not negative), the interest credited to the annuity will be 9%, irrespective of the Momentum Index’s actual return.
- Fixed Rate: If you opt for a fixed 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 very low compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario. The 1-year No-rider fixed rate on this policy at the time of writing this article was 3.00%.
These strategies offer flexibility to allocate across different indexes, tenures, and indexing options. For example, you might allocate to the S&P 500 Index with a 1-year annual point-to-point option using a cap rate and simultaneously choose a 1-year point-to-point option with a participation rate, along with other combinations.
Let’s look at the Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity rate chart to better understand earnings crediting strategies. Note that these rates are updated as of October 2024. These rates tend to change from time to time. You may check the latest rates.
From the above rate sheet, we know that there are 11 interest-crediting strategies: three S&P 500 Index strategies, three Diversified Macro 5 Index strategies, four Momentum Index strategies, and one fixed rate strategy. You will notice Cap rates and participation rates in place, limiting your maximum interest-earning potential. Also note that these rates vary for the “No Rider” and “Rate Enhancement Rider.”
The participation rates for the CS Momentum Index and CS ESG Macro 5 Index 1- and 2-year point-to-point strategies are guaranteed for 10 years from the annuity issue date. These rates remain available for the full 10-year period, regardless of the amount allocated to those strategies at issue.
Rate Enhancement Rider
When an annuitant purchases this rider, the fixed, participation, cap, and trigger rates are enhanced, allowing the annuity to benefit more from positive market performance. Currently, the rate enhancement rider costs 0.95% annually, deducted from the annuity's accumulated value each year. If strong market performance is anticipated, this rider can be advantageous; however, the cost may not be worthwhile if the market underperforms.
Example
Suppose an annuitant has chosen to link their annuity's growth to the Momentum Index with a 1-Year Point-to-Point Participation Rate.
- Without the Rate Enhancement Rider: The participation rate for this strategy is 210%. This means that if the Momentum Index increases by 5% over the year, the annuity will apply a growth rate of 210% of that 5% increase, which is 10.5%.
- With the Rate Enhancement Rider: The participation rate increases to 260%. If the Momentum Index grows by the same 5%, the annuity will apply 260% of this growth, resulting in a 13% increase to the annuity’s value.
Based on the index constituents, past performance, and volatility, I believe that the Momentum Index 1-year with Trigger Rate and the Diversified Macro 5 Index have the highest return potential. I would not recommend you go with the S&P 500 strategies because the company offers very mediocre participation and cap rates on the S&P 500 index.
Initial Premium Bonus
In a fixed indexed annuity (FIA), the initial premium bonus is a percentage of the amount you invest, added to your account value at the time of purchase. This bonus is designed to provide a head start on growth, enhancing the initial value of your annuity. The bonus is typically offered as an incentive to choose a particular annuity product and can boost the long-term accumulation potential of your annuity.
For example, if you purchase a fixed indexed annuity with a 5% initial bonus and invest $100,000, the insurance company will add an extra $5,000 to your account. As a result, your account value will immediately be $105,000. This bonus will continue to grow along with your account value based on the performance of the chosen crediting strategies (fixed or indexed), potentially enhancing your future income or withdrawal benefits.
The bonus vests over a 10-year period. Each year, you become vested in an additional 10% of the total bonus until you are 100% vested at the beginning of the 11th policy year. The vested amounts of the bonus are the portions you do not forfeit due to an early partial withdrawal or surrender. The bonus is fully vested in the death benefit and the optional guaranteed lifetime withdrawal benefit payment. However, it's important to note that withdrawals may reduce the vested bonus amount.
If you take a partial withdrawal or surrender, you will receive the vested portion of your bonus according to the schedule below. Any partial withdrawals or surrenders exceeding the penalty-free amount during the first ten policy years will result in the forfeiture of some non-vested bonus amounts.
Bonus Vesting Schedule
| Policy Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Vested % | 0% | 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% |
It’s important to review any conditions or restrictions related to the bonus, as there might be limitations on accessing it early or specific withdrawal provisions that could reduce its impact.
However, as with most financial products, there are no free lunches. This bonus is compensated by slightly lower cap and participation rates compared to similar products that don’t offer a premium bonus. The trade-off here is between getting an immediate boost in your account value through the bonus or potentially achieving higher long-term growth with better crediting rates. The decision ultimately depends on your financial goals and whether you prioritize short-term gains or long-term growth potential.
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 Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity.
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 10% | 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 Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity is slightly higher than that of other annuity issuers.
Contract/Administrative Charge
The Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity levies no annual contract or administrative fees. However, if you opt for the rate enhancement rider, an annual charge of 0.95% applies, which is calculated and deducted from the account value.
Riders
In an insurance policy, riders are additional provisions that can be added to enhance the benefits of the base policy. The Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity offers an optional paid Rate Enhancement Rider, as discussed previously. Additionally, as with most annuities, the Atlantic Coast Accumulation Protector Plus includes built-in nursing home and terminal illness waivers at no additional cost.
Nursing Home 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 Atlantic Coast Accumulation Protector Plus Annuity offers some features that not many fixed-indexed annuities offer. The ones that I like the most are:
- The plan offers good rates on the Momentum Index and Diversified Macro 5 Index
- The optional Rate Enhancement Rider offers enhanced cap and participation rates, which can potentially yield higher returns in a rising market
- Free Initial Premium Bonus
- 10-year rate guarantee on the CS Momentum and CS ESG Macro 5 Index
- No annual contract, mortality & expense, or administrative fees
- Low initial premium requirement: $5,000 is the minimum initial premium, while most other competitors demand between $10,000 - $25,000
- Multiple Payout Options: Life Only, Life with Period Certain, Joint and Survivor Life, Period Certain.
What I don't like
Some of the features that I don’t like about the policy are:
- Low Participation and Cap rates on the S&P 500 Index
- The AM Best rating of Atlantic Coast is B++, which is not bad but not the best. Other players that offer similar features have better AM Best ratings.
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.
Atlantic Coast Life Insurance Company
Atlantic Coast Life Insurance Company has been in the business since 1925. It is one of the oldest providers of fixed and fixed-indexed annuities in the US.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | B++ |
Although the rating is not the best, it is not even that bad. The company is privately managed by Advantage Capital post its sale in 2015. It is considered to be strong and stable financially. As of year-end 2022, some of the other financial highlights for Atlantic Coast Life Insurance Company include its:
- $903 million in total sales / direct written premium
- $91.6 million of capital and surplus
- $16.14 million in net operating income
- $693 million in total assets
Conclusion
With advancements in healthcare and technology, the average American now lives longer than ever. Therefore, it’s essential to have a steady income stream that grows safely and can provide guaranteed income during retirement years. This approach not only helps mitigate the risk of outliving your income but also ensures you can maintain a comfortable lifestyle throughout retirement.
The Atlantic Coast Accumulation Protector Plus Fixed Indexed Annuity offers a decent blend of growth potential, flexibility, and security. With its optional Rate Enhancement Rider, annuitants can benefit from increased cap and participation rates, which can provide greater upside in favorable markets. Additionally, the built-in features, such as the nursing home and terminal illness waivers, add a layer of financial protection without additional cost. While the annuity may appeal to those looking for enhanced growth opportunities and protection in volatile markets, the cost of riders and the structure of index crediting should be carefully considered in relation to individual financial goals and market outlook.
If you are considering a Fixed Indexed Annuity for accumulation and market protection, the Atlantic Coast Accumulation Protector Plus FIA could be a worthwhile option. However, it may be beneficial to compare this policy with those of larger providers (with stronger credit ratings) who might offer similar features at comparable or even lower costs.
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. Dive deeper into our extensive reviews.