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.
In this article, we will discuss in-depth the FG AccumulatorPlus Fixed Indexed Annuity. FG AccumulatorPlus is a deferred, fixed-indexed annuity that may be a good option if you are looking for a no-frills fixed-indexed annuity with a core focus on accumulation and the safety of the principal. This annuity offers some good indexing options, which have the ability to provide good 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 FG AccumulatorPlus Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Rates and Costs Associated with the AccumulatorPlus Fixed Indexed Annuity
- What Makes This Product Stand Out?
- What I Don’t Like
- Company Details
Product Description - F&G Accumulator Plus Fixed Indexed Annuity
The F&G Accumulator Plus 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 plain vanilla fixed indexed annuity (with no optional paid riders such as enhanced lifetime income, enhanced death benefit, etc.) and aim to grow and protect their retirement savings and an option of leaving a legacy for their beneficiary(s).
Let’s have a look at the high-level fine print of the F&G Accumulator Plus Fixed Indexed Annuity, and then we will discuss each point in detail.
|Product Name||F&G Accumulator Plus|
|Issuing Company||Fidelity & Guaranty Life Insurance Company|
|AM Best Rating||A- (4th of 13 ratings)|
|Withdrawal Charge Period(s)||7 and 10 years|
|Maximum Issue Age||85 Years|
|Minimum Initial Purchase Amount||$10,000|
|Surrender Charge Schedule||Varies for different tenure policies|
|Crediting Period and Strategies||1-year point-to-point with participation rate, 2-year point-to-point with participation rate, 1-year point-to-point with caps, 1-year monthly index average, or 1-year fixed with interest rate guaranteed|
|Plan Types||IRA, Roth IRA, Nonqualified Account, SEP IRA, SIMPLE IRA, 401(a), etc.|
|Indexes||S&P 500 Index, Barclays Trailblazer Sectors 5 Index, GS Global Factor Index|
|Free Withdrawals||10% of the annuity’s Accumulated Value per year, starting from year 2|
|Death Benefit||Upon the annuitant’s death, the beneficiary will get Account Value as lumpsum|
|Riders||Free Nursing Home and Terminal Illness Waivers No optional paid riders|
|Surrender Value||Account Value (less any withdrawal charges/MVA)|
The F&G Accumulator Plus Fixed Indexed Annuity is almost identical for both policy tenures, except for the crediting strategies and surrender charge schedule. For ease of discussion and better clarity, we will discuss the F&G Accumulator Plus 10 Fixed Indexed Annuity for the rest of the article.
How does the F&G Accumulator Plus annuity work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the F&G Accumulator Plus 10 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 F&G Accumulator Plus 10 annuity offers the annuitant to choose from one or more of the three indexes to determine his earnings crediting formula. They are the S&P 500, Barclays Trailblazer Sectors 5 Index, and GS Global Factor Index. The S&P 500 offers the annuitant an option to choose from five crediting strategies, four from the GS Global Factor Index and one from Barclays Trailblazer Sectors 5 Index (making it a total of 10 strategies). Besides this, it also provides an option to choose from a fixed interest rate of 4.5%. We will discuss each available index briefly:
- 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 F&G Accumulator Plus annuity offers the S&P 500 index with participation rates or cap rates in place, meaning that you will be credited only a part of the S&P 500 return to your annuity. These rates tend to change frequently; I will discuss more on the rates shortly.
- Barclays Trailblazer Sectors 5 Index: Trailblazer aims to track a diversified portfolio of assets with the highest return potential for a given level of risk. Trailblazer utilizes 14 ETFs that provide diversified exposure to the stock and bond markets, plus a cash component. The ETFs are the growth engines of the portfolio and provide the potential for earning returns. However, since stocks and bonds carry risks, so do the ETFs.
The Barclays Trailblazer Sectors 5 Index was created in July 2016 and targets a 5% annualized realized volatility. 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.
- GS Global Factor Index: The GS Global Factor Index, formulated by Goldman Sachs International, dynamically allocates between Global Equities, influenced by factors like Value and Momentum, and U.S. Bonds, symbolized by 10-year U.S. Treasury Futures. A non-yielding Hypothetical Cash Position is also included. Each month, the Index adjusts asset volatility multipliers based on an economic signal. During rebalancing, it aims for equal risk contributions from assets, adjusting for market indicators. Weights are averaged over ten days and tweaked to meet a 5% Volatility Target with a 150% leverage cap. Again, 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 tend to change from time to time. The Fixed Value Rate at the time of writing this article was 4.5%, which, in my opinion, is very decent when compared to other annuities at this time.
Rates and Costs associated with the F&G Accumulator Plus 10 Annuity
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 advisor. You can also check the latest rates on their website.
Let’s have a look at the F&G Accumulator Plus rate sheet (as of 06/10/2023) to understand how the earnings are determined.
The first thing to note is that we have an option to choose between three indexes, and each index has multiple strategies. All in all, it gives us an option to allocate our contract to a maximum of 11 strategies (10 index-based and one fixed). The company displays four types of rates across all strategies. The index allocation rate (participation rate) and the cap rates are the most important.
- Point to point with Participation Rate: The 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 (generally one-year point-to-point). In that case, the annuitant will be eligible for only 60% of the return, i.e., 6%.
The formula for the same is (Participation Rate % X Index Return).
- Point to point with Cap: Cap rate is the most important terminology in an FIA. It means at what rate your interest-earning capacity is capped. For example, if an index returned 13% but your contract’s cap rate is 7%. In this situation, You will be eligible for an interest credit of 7% only. It doesn’t matter how much the index goes above the cap rate; the maximum interest you can earn is the cap rate.
- Annual Declared Rate on Gain: 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 declared rate on gain for the S&P 500 Index is 7.75%. 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 7.75% irrespective of the S&P 500 actual return.
- Spread and Par Rate: This indexing strategy applies BOTH participation rate and spread to determine the index interest credit. Let’s take an example where the participation rate is 60%, the spread is 2%, and in a given year, the index returned 10%. In this case, the interest credited to the annuity account would be 60% of 10% (PR), less 2% (SP), i.e., 4%. Ideally, You should never opt for the Spread + Participation index crediting strategy.
- One-Year Monthly Index Average: 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, along with a set maximum rate (called a cap rate), helps decide the interest added to the annuity. The cap rate is like a ceiling, limiting the maximum interest one can earn.
When allocating premiums in a fixed indexed annuity, individuals can distribute their money across these different indexing strategies (minimum $2000 per index option). This means you can decide how much of your premium goes into each strategy, allowing for a tailored approach to potential growth and risk based on your financial goals and comfort level.
Performance Enhancement by Paying Charge: The F&G Accumulator Plus annuity has an option to enhance Performance by paying a charge. Through this, you can opt to increase the Participation Rates, Cap Rates, and Declared Rates and/or reduce the spreads. In the above chart, you will notice that the indexing options with “charge” have higher participation rates and caps when compared to their “no charge” counterparts. At the time of writing this article, this charge was set at 1.25% annually. It is subtracted from the crediting option’s account value at the beginning of the interest crediting period.
The F&G Accumulator is one of my favorite annuities for accumulation. The cap rates that the annuity provides, even on indexes like the S&P 500, are among the highest when compared to other similar annuities. The earnings potential of the F&G Accumulator Plus annuity is among the highest of all fixed-indexed annuities that are at least A-rated.
If I were to choose the indexing strategies, I would have opted for one or many of the following strategies:
- S&P 500 1-year point-to-point with Cap and Charge
- S&P 500 1-year monthly index average Cap and Charge
- S&P 500 1-year declared rate and Charge
- GS Global One year point-to-point
There are very few Index annuities that have the ability to offer high caps and par rates. But, you must keep in mind that insurance companies tend to change rates frequently and you must keep watch on the updated rates. You must consult a trusted financial advisor to know what indexes and strategies suit you best.
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 F&G Accumulator Plus 10 annuity
|Completed Contract Years||1||2||3||4||5||6||7||8||9||10||11+|
|Surrender Charge %||12%||11%||10%||9%||8%||7%||6%||5%||4%||3%||0%|
Any time a withdrawal incurs a surrender charge, a Market Value Adjustment (MVA) will be made. For withdrawals above the annual penalty-free withdrawal amount for the purpose of a required minimum distribution, F&G will waive any surrender charges and market value adjustments.
Note that this surrender charge schedule is only valid for the F&G Accumulator Plus 10 annuity product for select states. For complete details about each state, you may contact your trusted financial advisor.
The F&G Accumulator Plus annuity levies no annual contract or administrative fees.
The F&G Accumulator Plus 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 deep-dive into the complex methodologies the riders often come up with. However, as with most annuities, the Accumulator Plus has free in-built home health care, 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 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.
Home Health Care Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is unable to perform at least 2 of 6 activities of daily living (for at least 60 days and is expected to continue for at least 90 days after requesting withdrawal. 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. While many annuities offer Nursing Home and Terminal Illness Waivers, the Home Health Care waiver is not something that many annuities offer.
What makes this product stand out?
The F&G Accumulator Plus is one of the best fixed-indexed annuities for accumulation. This annuity offers some of the features that not many fixed-indexed annuities offer. The ones that I like the most are:
- Good Indexing Options
The F&G Accumulator Plus annuity offers very good Indexing crediting strategies on some of the good-performing indexes, such as the S&P 500 Index. It offers higher caps, par rates, etc, than most of the other similar fixed-indexed annuities.
- Penalty-free withdrawal on terminal illness or home or nursing care
This no-fee rider is automatically included for the annuity owner at issue and includes a Qualified Nursing Care, Terminal Illness, and Home Health Care waiver.
- Optional Rider to increase potential returns
The Performance Rate rider helps to Increase cap, participation rate, etc, on available strategies for more accumulation options that can align with a wide variety of goals. But one must keep in mind that it comes with a fixed fee, varied according to the strategy selected.
- Low minimum purchase amount
The minimum purchase amount for this annuity is low at $10,000. Many of the popular annuities available in the market require a high minimum purchase amount of anywhere between $25,000 and $100,000. The low minimum purchase requirement enables even small investors to purchase annuity products.
What I don’t like
This product is generally good on all fronts for people looking for income growth; still, there are some features that I believe could add more value for the annuitant. Some of the features that I don’t like about the policy are:
- High Surrender Charge - The surrender charge of the F&G Accumulator Plus fixed indexed annuity is on the higher side when compared to similar annuities in the market. If you think that there is a possibility that you will need to surrender the policy, the F&G Accumulator Plus annuity may not be the perfect annuity for you.
- A limited number of riders to choose from - The F&G Accumulator Plus annuity doesn’t offer any enhanced living or death benefit riders, so, it may not be useful for people who are sure that they will need a guaranteed income stream from this annuity.
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.
Fidelity National Financial
F&G is a subsidiary of Fidelity National Financial. Fidelity National Financial is one of the oldest title insurance companies and has been in the business for over 18 decades. It is a Fortune 500 company ranking #359.
It is rated as follows by the rating agencies:
|AM Best||A- (4th of 13 ratings)|
|Moody’s||A3 (7th of 21 ratings)|
|S&P||A- (7th of 21 ratings)|
|Fitch||A- (7th of 21 ratings)|
Fidelity has managed to maintain strong ratings for many years. Fidelity is considered to be strong and stable financially. As of 2022, the company had $1.8 billion in reserves for claims payment. As of year-end 2022, some of the other financial highlights for Fidelity include its:
- $11.6 billion in total sales / direct written premium
- $47.6 billion of a total investment portfolio
- $1.2 billion in operating income
- $65.5 billion in total assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with F&G.
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. 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 F&G Accumulator Plus annuity is one such annuity that helps you grow your savings with less risk. Through its Fixed Income Annuity, It offers tax deferral, principal protection, and the opportunity to participate risk-free in the market index. If you are considering buying a Fixed Income Annuity with a major focus on accumulator, the F&G Accumulator Plus annuity is an ideal 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. To delve deeper into our extensive reviews, click here.