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 discusses an in-depth review of the EquiTrust MarketForce Bonus Fixed Indexed Annuity. EquiTrust MarketForce Bonus Indexed Annuity 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 premium bonus and accumulation. This annuity offers some good indexing options, which have the ability to provide reasonably expected (good but not the best) 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 EquiTrust MarketForce Bonus 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 EquiTrust MarketForce Bonus 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 a premium bonus and accumulation potential.
Let’s have a look at the high-level fine print of the EquiTrust MarketForce Bonus Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | EquiTrust MarketForce Bonus |
|---|---|
Issuing Company | EquiTrust Life Insurance Company |
AM Best Rating | B++ (5th of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Maximum Issue Age | 80 Years |
Minimum Initial Purchase Amount | $10,000 |
Initial Premium Bonus | 8% premium bonus on premiums paid in year 1 |
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 greater of (i) Account Value or (ii) Surrender Value |
Free Benefits |
|
Riders | Paid, Rate Buy-Up Indexing Options |
Surrender Value | Account Value less any withdrawal charges/MVA |
RMD Friendly | Yes |
Product Policy
How does the EquiTrust MarketForce Bonus Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 80) can purchase the EquiTrust MarketForce Bonus Fixed Indexed Annuity with a minimum initial purchase amount of $10,000, 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 annuity offers a premium boost that helps the annuitant increase their initial investment value, providing a head start in the accumulation phase. We will discuss this further in the latter section of this annuity review.
The EquiTrust MarketForce Bonus Fixed Indexed Annuity allows the annuitant to choose from one or more of the four indexes (S&P 500 Index, S&P 500 Dynamic Intraday TCA Index, Barclays Focus50 Index, and S&P MARC 5% Excess Return Index) to determine their earnings crediting formula. The S&P 500 index has 4 crediting strategies; the S&P 500 MARC Excess Return Index has 2, and the other two indexes have 1 strategy each. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 9 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, similar to most other annuities, the EquiTrust MarketForce Bonus Fixed Indexed Annuity offers the S&P 500 index with cap rates, participation rates, and performance-trigger rates in place, meaning that your actual interest credited will be lower compared to the actual index return. These rates change frequently; I will discuss the rates in detail shortly.
2. S&P MARC 5% Excess Return Index
The S&P MARC 5% Excess Return Index is a multi-asset index designed to provide diversification within a risk-weighted framework. It tracks three underlying component indices representing equities (S&P 500), commodities (S&P GSCI Gold), and fixed income (S&P 10-Year U.S. Treasury Note futures). The index dynamically rebalances between these asset classes and cash to target a 5% level of volatility. This approach aims to protect against market downturns but also limits the index upside.
3. S&P 500 Dynamic Intraday TCA Index
The S&P 500 Dynamic Intraday TCA Index is a financial index designed to provide exposure to the S&P 500 through the use of E-mini S&P 500 futures. This index employs a dynamic approach, utilizing 13 observation windows throughout the trading day to adapt to changing market conditions. By doing so, it aims to offer a more stable volatility experience for investors. The index combines a trend-following mechanism with the capability to rebalance multiple times during the day, allowing it to respond swiftly to market movements and optimize performance.
4. Barclays Focus50 Index
The Barclays Focus50 Index is a rules-based equity index that selects and tracks a portfolio of 50 large-cap U.S. companies from the S&P 500. It is designed to focus on factors such as growth, quality, and stability, which are believed to contribute to long-term outperformance. The index's strategy combines these equities with U.S. Treasury bonds, creating a dynamic mix that seeks to balance growth opportunities with risk management. By employing this approach, the Barclays Focus50 Index aims to offer investors a potentially more stable investment option in the U.S. stock market. However, it is important to note that although this approach aims to protect against market downturns, it also limits the index upside.
It is very important to note that like other Fixed Indexed Annuities, the EquiTrust MarketForce Bonus Fixed Indexed Annuity comes with cap rates, participation rates, etc., for these indexes, meaning that you will be credited only a part of the index return to your annuity. These rates change frequently; I will discuss more on these rates more 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 change from time to time. The 1-year Fixed Value Rate for the 10-year withdrawal charge period at the time of writing this article was 3.00%.
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. The company has a few rates, caps, and performance triggers 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 EquiTrust MarketForce Bonus Fixed Indexed Annuity rate sheet (as of August 2024) to understand how the earnings are determined.
| Index | Strategy | Rates | Annual Fee |
|---|---|---|---|
1-Yr Fixed Interest | Fixed Rate | 3.00 | |
Index accounts with no fee | |||
S&P 500 | 1-Yr Pt-to-Pt Cap | 5.00% | |
1-Yr Pt-to-Pt Performance Trigger | 4.50% | ||
S&P 500 Dynamic Intraday TCA | 1-Yr Pt-to-Pt Par | 50.00% | |
S&P MARC 5% ER | 1-Yr Pt-to-Pt Par | 130.00% | |
Rate buy-up index accounts with annual fee | |||
S&P 500 | 1-Yr Pt-to-Pt Cap with fee | 8.00% | 1.50% |
1-Yr Pt-to-Pt Par with fee | 50.00% | 1.50% | |
Barclays Focus50 | 1-Yr Pt-to-Pt Par with fee | 170.00% | 1.50% |
S&P MARC 5% ER | 1-Yr Pt-to-Pt Par with fee | 190.00% | 1.50% |
From the above rate chart, you will notice nine interest crediting options (one fixed and eight indexed) along with an initial premium bonus. You will also notice that there are some indexing accounts with an annual fee (rate buy-up index accounts with an annual fee). Let’s take a closer look at the various terms the company uses in the EquiTrust MarketForce Bonus Fixed Indexed Annuity rate chart:
- Point-to-point with Cap Rates: 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.
- Point-to-point with Participation Rate (PR): The 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 agreed time. In that case, the annuitant will be eligible for 150% of the return, i.e., 6%.
- Performance-Triggered Index Option with Declared 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 4.50%. It means that if the S&P 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 4.50% irrespective of the S&P 500 actual return.
- Fixed Account Rate: If you opt for a fixed account rate, you simply earn the fixed rates for a particular period specified by the company before your policy begins. These rates are usually 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 3.00%.
Rate Buy-up Index Accounts with Annual Fee
Rate buy-up accounts allow annuity holders to enhance their growth potential by offering higher cap and participation rates. This comes with a 1.50% annual fee, which is deducted from the Accumulation Value at the beginning of each contract year. The fee applies only to the portion of the Accumulation Value allocated to the rate buy-up accounts, and it remains fixed throughout the contract.
The rate buy-up accounts offer enhanced terms compared to the standard index accounts, as highlighted in the rate sheet:
- S&P 500 1-Year Point-to-Point Cap without a fee is 5.00%, but with the buy-up, it increases to 8.00%.
- S&P 500 MARC 5% Excess Return Index 1-Year Point-to-Point Participation Rate increases from 130.00% to 190.00% when using the buy-up option.
However, the higher growth potential is balanced by the annual fee. If the index performance in a given year is insufficient to cover the fee, the Accumulation Value in the rate buy-up accounts may decrease. This trade-off provides an opportunity for greater upside but requires careful consideration of market performance and the associated costs.
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 6% initial bonus and invest $100,000, the insurance company will add an extra $6,000 to your account. As a result, your account value will immediately be $106,000. 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.
In the EquiTrust MarketForce Bonus Fixed Indexed Annuity, an 8% premium bonus is applied to premiums added within the first year, and both your premium and the bonus are credited to your Accumulation Value. From there, you will earn interest and index credits on the total amount, including the 8% bonus, enhancing the potential growth of your annuity.
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 lower cap, participation, and other 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.
Among these strategies, I prefer the S&P 500 Index with the 1-year point-to-point cap option, as well as the S&P 500 MARC ER Index, either with or without a fee. I avoid any S&P 500 strategies with a participation rate because the company offers a very low participation rate for the S&P 500 Index, even after paying the rate buy-up fee.
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 EquiTrust MarketForce Bonus Fixed Indexed Annuity.
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 16% | 14.5% | 13% | 11.5% | 9.5% | 8% | 6.5% | 5% | 3% | 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 EquiTrust MarketForce Bonus Fixed Indexed Annuity is slightly higher than that of other annuity issuers.
Contract/Administrative Charge
The EquiTrust MarketForce Bonus Fixed Indexed Annuity levies no annual contract or administrative fees.
Riders
The EquiTrust MarketForce Bonus 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 EquiTrust MarketForce Bonus has free in-built nursing home and terminal illness waivers.
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 75% of the contract’s accumulated value if he is diagnosed with a terminal illness. 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.
Besides the Nursing Home Waiver and the Terminal Illness Waiver, the company also offers a Minimum Guaranteed Contract Rate (MGCR) provision.
Minimum Guaranteed Contract Rate (MGCR) - The Minimum Guaranteed Contract Rate (MGCR) provision ensures that the account value of your annuity will be no less than 87.5 of the initial premium, adjusted for any withdrawals, upon reaching the 10-year milestone.
Suppose you invest an initial premium of $100,000 in an annuity product that offers an MGCR feature. Over the course of 10 years, you make withdrawals totaling $20,000.
Initial Premium: $100,000
Total Withdrawals: $20,000
Net Account Value (Initial Premium - Withdrawals): $80,000
The MGCR feature guarantees that your account value will be at least 87.5% of the initial premium, less any withdrawals, at the 10th anniversary.
MGCR Calculation:
87.5% of Initial Premium = 0.875 * $100,000 = $87,500
Adjusted for Withdrawals: $87,500 - $20,000 = $67,000
Therefore, at the end of the 10-year period, the MGCR ensures that your account value will not be less than $67,500, regardless of market conditions or investment performance.
What Makes This Product Stand Out?
The EquiTrust MarketForce Bonus 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 Index with decent indexing options
- Optional rate buy-up index accounts (with an annual fee) offer the potential for higher accumulation.
- Free 8% premium bonus for premiums added in year 1
- Free MGCR Provision
- 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 60 and includes both a Qualified Nursing Care and Terminal Illness Benefit:
- Multiple Payout Options: Lupsum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
- Enhanced Income Withdrawals for Chronic Illness
What I don’t like
This product is decent for those seeking growth and safety, but there are a few aspects that could provide more value to the annuitant. Some of the features I don't like about the policy are:
- Surrender charges are higher when compared to similar annuities.
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.
EquiTrust Life Insurance Company
EquiTrust Life Insurance Company, established in 1996, is a national provider of annuity and life insurance products. Known for its niche offerings, EquiTrust specializes in fixed-indexed annuities and single-premium life insurance products. The company has developed a strong reputation, particularly among retirees, due to its focus on wealth transfer solutions and income annuities.
The company was acquired by Guggenheim Partners in 2011, which further strengthened its investment management capabilities. Despite its relatively small size in the industry, EquiTrust has consistently been recognized for its financial stability, having been listed in the Ward’s Top 50 life and health insurance companies for several years.
EquiTrust serves customers nationwide through independent agents and independent marketing organizations (IMOs), focusing primarily on providing income solutions and helping individuals secure their financial future through tax-deferred growth options.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | B++ |
S&P | A- |
Fitch Ratings | A- |
Although the ratings are not the best when we compare them with bigger players, they are good enough for you to consider buying an annuity. As of year-end 2023, some of the financial highlights for EquiTrust Life Insurance Company include its:
- $2.4 billion of capital and surplus
- $27.2 billion in total assets
- 94% of assets invested in Investment-Grade portfolio
Going by the operating history, financial numbers, and ratings, we can safely gauge that you can trust your savings with EquiTrust Life Insurance Company.
Conclusion
With the advancement in healthcare and technology, the average person 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 EquiTrust MarketForce Bonus FIA is a decent annuity for those looking to grow their retirement savings with reduced risk. Its account value bonus, along with respectable caps and participation rates, offers the potential for faster growth while ensuring principal protection. For those seeking higher growth potential, the optional rate buy-up index accounts provide enhanced caps and participation rates, but at the cost of an annual fee. These accounts can increase accumulation potential, although the trade-off in fees must be considered, especially in years when index performance may not offset the additional cost. However, with a B++ AM Best Rating, those who prioritize top-tier financial strength may have concerns. Given these factors, it may be worth exploring other options that provide a stronger combination of growth potential and financial stability.
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.