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 MarketTen Bonus Fixed Indexed Annuity. EquiTrust MarketTen 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 lifetime income withdrawals. 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.
- 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 MarketTen 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 simple fixed-indexed annuity that offers tax-deferred growth and downside protection with a core focus on a premium bonus and an optional lifetime income rider.
Let’s have a look at the high-level fine print of the EquiTrust MarketTen Bonus Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | EquiTrust MarketTen Bonus |
|---|---|
Issuing 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 |
Premium Bonus | 6% premium bonus on premiums added during the first 5 years |
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 | Optional, paid lifetime income rider |
Surrender Value | Account Value less any withdrawal charges/MVA |
RMD Friendly | Yes |
Product Policy
How does the EquiTrust MarketTen Bonus Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 80) can purchase the EquiTrust MarketTen 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 and an optional paid rider that helps the annuitant secure lifetime withdrawals they cannot outlive. We will discuss this further in the latter section of this annuity review.
The EquiTrust MarketTen 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 6 crediting strategies; Barclays Focus50 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 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, similar to most other annuities, the EquiTrust MarketTen 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 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.
3. 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.
4. 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.
It is very important to note that like other Fixed Indexed Annuities, the EquiTrust MarketTen 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 3.25%.
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 MarketTen Bonus Fixed Indexed Annuity rate sheet (as of August 2024) to understand how the earnings are determined.
| Index | Strategy | Rate |
|---|---|---|
1-Yr Fixed Interest | Fixed Rate | 3.25% |
S&P 500 | 1-Yr Pt-to-Pt Cap | 6.00% |
1-Yr Pt-to-Pt Performance Trigger | 5.00% | |
1-Yr Monthly Avg Cap | 7.00% | |
1-Yr Monthly Cap | 1.75% | |
1-Yr Monthly Avg Par | 65.00% | |
2-Yr Monthly Avg Cap | 17.00% | |
S&P 500 Dynamic Intraday TCA | 1-Yr Pt-to-Pt Par | 50.00% |
Barclays Focus50 | 1-Yr Pt-to-Pt Par | 125.00% |
2-Yr Pt-to-Pt Par | 170.00% | |
S&P MARC 5% ER | 1-Yr Pt-to-Pt Par | 140.00% |
From the above rate chart, you will notice eleven interest crediting options (one fixed and ten indexed) along with an initial premium bonus. Let’s take a closer look at the various terms the company uses in the EquiTrust MarketTen 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%.
- One-Year Monthly Index Average with Cap Rate: This strategy begins by recording the initial value of a selected index at the onset of the contract term. Subsequently, the index's value is captured monthly. After a one-year duration, these monthly index values are aggregated and then averaged by dividing the total by 12. This average, capped by a cap rate, helps decide the interest added to the annuity.
- One-Year Monthly Index Average with Par Rate: This strategy begins by recording the initial value of a selected index at the onset of the contract term. Subsequently, the index's value is captured monthly. After a one-year duration, these monthly index values are aggregated and then averaged by dividing the total by 12. This average, multiplied by a participation rate, helps decide the interest added to the annuity.
- 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 5.00%. 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 5.00% 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 3.25%.
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.
The EquiTrust MarketTen Bonus Fixed Indexed Annuity allows for flexible premium contributions. A 6% premium bonus is applied to all premiums added within the first five years, 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 6% 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 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.
Among these strategies, I prefer the S&P 500 Index with 1-yr point-to-point with a cap option, 2-yr monthly average cap option, and the S&P MARC 5% Excess Return Index with a Par rate option. I avoid any S&P 500 strategy with a participation rate because the company offers a very low participation rate for the S&P 500 Index.
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 MarketTen Bonus Fixed Indexed Annuity.
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 10% | 10% | 10% | 10% | 8.5% | 7% | 5.5% | 4% | 3% | 1.5% | 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 MarketTen Bonus Fixed Indexed Annuity is slightly higher than that of other annuity issuers.
Contract/Administrative Charge
The EquiTrust MarketTen Bonus Fixed Indexed Annuity levies no annual contract or administrative fees. However, if you opt for the lifetime income withdrawal rider, an annual charge of 1% applies, which is calculated and deducted from the account value. We will discuss this rider in more detail in the next section.
Riders
The EquiTrust MarketTen Bonus FIA offers annuitants the option to choose an additional paid Income Benefit Rider (IBR). The Income Benefit Rider in the EquiTrust MarketTen Bonus Fixed Indexed Annuity is designed to provide annuitants with a secure stream of income that they cannot outlive. This rider ensures long-term financial stability, particularly during retirement, by offering guaranteed lifetime withdrawals. Below are the key features of this rider:
Key Features:
- Issue Limit: The issue age for this rider is 40-80 years, based on the age of the covered person. This ensures that individuals nearing or at retirement age can take advantage of the lifetime income benefits.
- Waiting Period: Income withdrawals under this rider can begin anytime after the first contract year, provided the owner has reached age 50. This allows the annuitant to start receiving lifetime income as soon as they meet these requirements.
- Benefit Base: The Benefit Base grows for 10 years based on a 6% premium bonus, plus a guaranteed 6% growth applied on each anniversary. This compounding growth ensures that the benefit base increases over time, which, in turn, increases the potential lifetime income available. Note that the Benefit Base is only used to calculate the income withdrawal amount — it’s not available at surrender, death, or annuitization.
- Annual Rider Charge Rate: A 1.00% annual charge applies to the rider. This charge is calculated based on the account value and is deducted each year. While this fee may reduce the account balance, the rider's guaranteed income benefits can offset this impact over time.
Rider Termination: The rider may be terminated at any time after the first contract year at the owner's request. However, once terminated, the rider cannot be reinstated. Additionally, the rider will automatically terminate under the following conditions:
- Surrender of the contract.
- Election of a settlement option under the annuity provision of the contract.
- Death of the owner prior to lifetime withdrawal election (unless continued by the surviving spouse).
- Upon the death of the last covered person after lifetime withdrawals have begun.
- Change in ownership or annuitants, unless continued by the surviving spouse.
- Reaching the maturity date if lifetime withdrawals have not commenced.
Calculating Income Withdrawal Amounts
Your payments will be calculated based on this equation:
On your contract anniversary, your income withdrawal amount will be recalculated as the greater of the previous year's income withdrawal amount or the original income withdrawal percentage multiplied by the current Benefit Base.
The income withdrawal percentage is determined by your age when you first elect to receive income withdrawals. It increases by 0.10% for each year between the ages listed below. Once income withdrawals begin, the percentage remains fixed. Here’s how it works for single life and joint life income withdrawals:
Starting income withdrawals later can increase your income over the remaining years, as shown here with a hypothetical example.
Enhanced Income Withdrawals for Chronic Illness
It's well known that the cost of nursing care in later life can significantly impact your retirement savings. To help you prepare for these potential expenses, the IBR includes Enhanced Income Withdrawals at no extra cost.
If you become chronically ill, your income withdrawals can be doubled for up to five years. For joint owners, the increase is 50%. Chronic illness is defined as the permanent inability to perform at least two of six activities of daily living—such as eating, toileting, transferring, bathing, dressing, and continence—or a permanent severe cognitive impairment. After the Enhanced Income Withdrawals period ends, your original income payment amount will resume.
Enhanced Income Withdrawals become available after your contract has been in force for three years, provided the Accumulation Value remains above zero, and the owner is a U.S. resident under age 90. The chronic illness must be certified by a physician annually during the Enhanced Income Withdrawal period.
This rider is ideal for individuals looking to secure a reliable income stream during retirement while benefiting from the growth potential of their annuity. The combination of a benefit base bonus and guaranteed growth provides the annuitant with peace of mind, knowing they have a steady income source that lasts a lifetime.
Also, as with most annuities, the EquiTrust MarketTen Bonus annuity also has free in-built nursing homes 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.
In addition to the Nursing Home Waiver and Terminal Illness Waiver, the company offers a complimentary Return of Premium Rider. This rider ensures that if you decide to surrender your contract, you will receive back the total premiums you’ve paid, minus any withdrawals. This added feature provides an extra layer of financial security for annuity holders, giving them the flexibility to exit the contract without losing their initial investment.
What Makes This Product Stand Out?
The EquiTrust MarketTen Bonus Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are:
1. The plan offers the S&P Index with decent indexing options
2. Free 6% premium bonus for all premiums added between years 1-5
3. Free Return of Premium rider
4. No annual contract, mortality & expense, or administrative fees
5. 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:
6. Multiple Payout Options: Lumpsum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
7. Optional lifetime withdrawal rider
8. 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 MarketTen Bonus FIA is a decent annuity that helps you grow your retirement account with less risk. Through its account value bonus, decent caps and participation rates, It potentially offers faster growth with principal protection. The addition of the optional Income Benefit Rider enhances the product's appeal by offering guaranteed lifetime income, ensuring retirees won’t outlive their savings. However, the B++ AM Best Rating may be a consideration for those prioritizing top-tier financial strength. In many cases, there are better options available, and it may be wise to pass on this one.
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.