F&G Flex Accumulator Fixed Indexed Annuity Review

How does the F&G Flex Accumulator annuity work?

Any annuitant (maximum age at the time of policy issue: 85) can purchase the F&G Flex Accumulator 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 Flex Accumulator annuity offers the annuitant to choose from one or more of the four indexes to determine his earnings crediting formula. They are the S&P 500 Index, Barclays Trailblazer Sectors 5 Index, BlackRock Market Advantage, and CIBC Balanced Asset 10 Index. The annuity offers annuitants to choose from three strategies from the S&P 500 index, two from the Balanced Asset 10 Index, and one from the Barclays Trailblazer Sectors 5 Index and BlackRock Market Advantage Index each (making it a total of 7 index based strategies). Besides this, it also provides an option to choose from a fixed interest rate of 4.0%. 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 Flex Accumulator 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. 
BlackRock Market Advantage Index: The BlackRock Market Advantage Index is structured to provide an investment portfolio that is both diversified and managed for volatility. The index seeks to outperform traditional multi-asset class benchmarks by balancing investments across five key macroeconomic drivers that influence asset classes' performance, ensuring a more stable risk-adjusted return profile. Key components of this index include various iShares® ETFs, the iShares S&P GSCI Commodity-Indexed Trust, and cash holdings. The primary aim is to limit risk through a daily volatility-control mechanism. With a 6% Target Volatility, it has the flexibility to leverage up to 125% exposure. 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.
Balanced Asset 10 Index: The Balanced Asset 10 Index takes a classic approach to its portfolio construction with a 60/40 allocation. Combined with rebalancing and volatility control features, the index seeks to provide excess returns across market conditions through a tactical combination of equity and fixed-income ETFs.The CIBC Balanced Asset 5 Index was created in June 2020 and targets a 10% 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. 

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 4.0%, which, in my opinion, is very decent when compared to other annuities at this time.

Rates and Costs associated with the F&G Flex Accumulator 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 Flex Accumulator 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 four indexes, and each index has multiple strategies. All in all, it gives us an option to allocate our contract to a maximum of 8 strategies (7 index-based and one fixed). The company displays three 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.
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.

When allocating premiums in a fixed indexed annuity, individuals can distribute their money across these different indexing strategies. 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 Flex Accumulator annuity has an option to enhance Performance by paying a charge. Through this, you can opt to increase the Participation Rates, Cap 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 Flex Accumulator offers good rates 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 Flex Accumulator annuity is among one of 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
S&P 500 1-year monthly point-to-point with Cap
Barclays Trailblazers Sectors 2-year point-to-point with participation rate
Balanced Asset 10 1-year point-to-point with participation rate

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.

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 the F&G Flex Accumulator annuity.

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 Flex Accumulator annuity product for select states. For complete details about each state, you may contact your trusted financial advisor.

Contract/Administrative Charge

The F&G Flex Accumulator annuity levies no annual contract or administrative fees.

Riders

The F&G Flex Accumulator 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, the F&G Flex Accumulator Fixed Indexed Annuity offers a notable feature for policyholders who are focused on legacy planning — an enhanced death benefit at no additional cost. 

This benefit includes an Interest Multiplier, also termed as the Guaranteed Minimum Death Benefit add-on factor, which serves to significantly augment the death benefit provided to heirs.

For policyholders aged between 0-69 at the issue date, the annuity automatically doubles the earned interest rate on the account value, effectively increasing the death benefit base by 200% for each crediting period. For those who purchase the annuity at age 70 or above, the death benefit base grows at a rate of 150% of any earned interest rate, which, while reduced compared to the younger age bracket, still substantially enhances the death benefit over time.

This mechanism exemplifies how the enhanced death benefit can accumulate value. As policyholders reach the end of their chosen interest crediting period, any interest gained is locked in, thereby securing the increased death benefit amount. This locked-in growth ensures that policyholders can leave a more considerable legacy for their heirs, provided that no withdrawals are made from the account value.

In essence, the F&G Flex Accumulator Fixed Indexed Annuity provides a dual advantage: the potential for account value growth linked to market indices, and a robust mechanism to boost the death benefit, reinforcing the annuity's value as a tool for estate planning.

Note that the enhanced death benefit in the F&G Flex Accumulator Fixed Indexed Annuity is distinct from the account value, meaning it can't be surrendered or withdrawn. 

Also, as with most annuities, the Flex Accumulator 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 Flex Accumulator is an ideal 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 OptionsThe F&G Flex Accumulator 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.
Free Enhanced Death Benefit RiderThe F&G Flex Accumulator Fixed Indexed Annuity boosts the death benefit for heirs—doubling earned interest for policyholders under 70 and increasing it by 150% for those over 70, with no withdrawals.
Penalty-free withdrawal on terminal illness or home or nursing careThis 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 returnsThe 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 amountThe 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 Flex Accumulator 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 Flex Accumulator annuity may not be the perfect annuity for you.
A limited number of riders to choose from - The F&G Flex Accumulator annuity doesn’t offer any enhanced living or lifetime income riders, so it may not be useful for people who are sure that they will need a guaranteed income stream from this annuity.

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.

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:

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.

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. 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 Flex Accumulator 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 accumulation and leaving a legacy, the F&G Flex Accumulator annuity may be 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.