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, such as the S&P 500. 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 Global Atlantic Income 150+ SE Fixed Indexed Annuity. Global Atlantic Income 150+ SE is a deferred, fixed-indexed annuity that may be a good option if you are looking for steady growth, the safety of the principal, and lifetime withdrawals. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the Global Atlantic Income 150+ SE 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 Global Atlantic Income 150+ SE 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 enhanced lifetime withdrawals and aims to grow and protect their retirement savings.
Let’s have a look at the high-level fine print of Global Atlantic Income 150+ SE Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Income 150+ SE |
|---|---|
Issuing Company | |
AM Best Rating | A (3rd of 13 ratings) |
Withdrawal Charge Period(s) | 7 and 10 years *varies as per states |
Maximum Issue Age | 85 Years |
Minimum Initial Purchase Amount | $10,000 |
Surrender Charge Schedule | Varies for different tenure policies |
Crediting Period and Strategies |
|
Plan Types |
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Indexes |
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Free Withdrawals | 10% of the annuity’s Accumulated Value; per year |
Death Benefit | Upon the annuitant’s death, the beneficiary is entitled to the remaining contract value at no additional charge |
Riders |
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Surrender Value | Contract value less Market Value Adjustment (MVA) |
The Income 150+ SE 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 Income 150+ SE 10 Fixed Indexed Annuity (unless other withdrawal charge policies are mentioned) for the rest of the article.
Product Policy
How does the Global Atlantic Income 150+ SE Fixed Indexed Annuity work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the Global Atlantic Income 150+ SE Fixed Indexed Annuity 5 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. All these interest credits are credited to a bucket called “Contract Value.” This bucket is your annuity account balance, and all your withdrawals take place from it.
At the same time, a different bucket called “withdrawal base” is established through which the “lifetime annuity payment” is determined. Your Withdrawal Base will grow using a pre-determined growth rate, which we will see in detail in a later part of this review. Again emphasizing, the withdrawal base is only used for determining the lifetime withdrawal amount, and you can’t take any withdrawals from this account. We will return to this when we discuss the “riders” of this annuity later in this review.
The Global Atlantic Income 150+ SE Fixed Indexed Annuity 10 offers the annuitant to choose from one or more of the six indexes (S&P 500 Index, MSCI EAFE Index, JP Morgan Cross-Asset Strategy Index, BlackRock Diversa® Volatility Control Index, PIMCO Balanced Index, and Franklin US Index) to determine his earnings crediting formula. Each index has multiple strategies to choose from. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 14 strategy options. We will discuss each available index briefly:
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 Global Atlantic Income 150+ SE Fixed Indexed Annuity offers the S&P 500 index with caps, and performance-triggers in place, meaning that your interest-earning capacity is limited. These rates change frequently; I will discuss the rates in detail shortly.
2. MSCI EAFE Index
MSCI EAFE is a widely recognized international equities index consisting of large companies across developed countries in Europe, Australasia, and the Far East, excluding the U.S. and Canada. MSCI EAFE includes equities across a range of industries and regions, providing broad opportunities for growth. Again, It is important to note that the Global Atlantic Income 150+ SE plan has caps in place for the MSCI EAFE index, meaning that you will be credited only a small part of the MSCI EAFE return to your annuity.
3. JP Morgan Cross-Asset Strategy Index
The J.P. Morgan Cross-Asset Strategy Index is designed to allocate exposure to global asset classes through a portfolio of up to seven ETFs and futures-based indices. The index was created with the aim of maintaining a stable level of volatility. The portfolio provides exposure to equities, fixed income, and commodities across various sectors, including real estate, infrastructure, corporate bonds, gold, and Brent crude oil. Additionally, the index is designed to mitigate increases in volatility above certain thresholds by reducing or eliminating exposure to all assets.
4. PIMCO Balanced Index
The PIMCO Balanced Index allocates to U.S. large-cap equities, U.S. fixed income, and cash. Weights are rebalanced daily based on two mechanisms aimed at navigating changing equity and bond markets. As market volatility increases, the allocation to equities decreases in favor of the bond allocation in order to stabilize risk and potentially mitigate losses. As interest rates trend higher and bond prices fall, the Index targets lower treasury futures exposure with the potential to take a short position that can enhance returns.
5. BlackRock Diversa Volatility Control Index
The BlackRock iBLD Diversa® VC7 ER Index is a multi-asset Index designed to deliver a globally diversified portfolio with daily volatility controls to help mitigate downside risk. Because the multi-asset Index is diversified across assets and regions, it provides the potential for more consistent returns than a traditional stock index. The index seeks to capture market opportunities in various environments by dynamically responding to trends in asset returns. Index constituents are comprised of iShares® ETFs. The Index tracks the excess return of the selected iShares® ETF constituents above the return on cash. The index targets a low annualized realized volatility, which limits the return potential of the index.
6. Franklin US Index
The Franklin US Index is designed to deliver long-term stable growth and limit downside exposure by dynamically shifting between high-quality US stocks, bonds, and cash to take advantage of changing marketing conditions.
Amongst these indices, I prefer the strategies with the S&P 500 Index, MSCI EAFE Index, and PIMCO Balanced Index because of the proven historical track record and performances of these 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 for the 5-year withdrawal charge period at the time of writing this article was 2.75%. You can view the latest 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, caps, spreads, and triggers 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 on the company’s website.
Let’s have a look at the Global Atlantic Income 150+ SE Fixed Index Annuity rate sheet (as of January 2024) to understand how the earnings are determined.
From the above rate chart, you will notice that there are 13 interest crediting options (1 fixed and 12 indexed). Let’s have a look at different terms that are used by the company in the Global Atlantic Income 150+ SE chart rate:
- 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%.
- 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%, In this situation, 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.
- 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 that one 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 index interest credits pursuant to this option will never be less than zero. 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 4.00%. 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 will be 4.00% irrespective of the S&P 500 actual return. It is noteworthy that the company offers a good performance-triggered rate for the S&P 500 Index when compared to other similar policies.
- Spread: The amount of interest that the Company will credit is based on a declared spread on the selected index on an annual point-to-point basis. Once the index gain is determined (if any), the spread amount is subtracted. The remaining amount is what is credited to the contract for that term. In the current case, the company offers a spread option with 1% spread rate.
- 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 usually tend to be 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 2.75%.
- Bailout Provision: If the company lowers any rate below the Bailout Cap rate, you’ll have full access to withdraw your annuity’s accumulated value - free of any charges.
Amongst these indices, I prefer the strategies with a cap on the S&P 500 Index, MSCI EAFE Index, and PIMCO balanced Index because of the good cap/participation rate, proven historical track record, and performances of these indexes. Currently, the company is also offering good participation rates on the PIMCO Balanced 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 Global Atlantic Income 150 SE+ Fixed Indexed Annuity.
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 9% | 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. For a quick comparison of surrender charges across different products of Global Atlantic, you may visit their annuities product page.
The surrender charge of Global Atlantic Income 150+ SE Fixed Indexed Annuity is in line with all the other annuity issuers.
Contract/Administrative Charge
The Global Atlantic Income 150+ SE Fixed Indexed Annuity levies no annual contract or administrative fees. However, it comes with a compulsory paid GLWB rider, which costs 1.20% of your withdrawal base, annually. We will discuss it in detail in the next section.
Riders
The Global Atlantic Income 150+ SE Fixed Indexed Annuity comes with a compulsory Guaranteed Lifetime Withdrawal Benefit rider for an additional fee, that enables you to access predictable lifetime income withdrawals that you cannot outlive.
Rider Cost: An annual cost of 1.20% of the withdrawal base at the end of each contract year.
The GLWB riders offer the annuitant to establish a withdrawal base, which grows predictably over the years through several increases prior to activating your guaranteed income.
In this financial contract, an individual starts with an initial purchase amount that establishes their "Withdrawal Base." On the first day of the contract, this Withdrawal Base is boosted by 20%, effectively increasing the value immediately.
For example, an initial purchase amount of $100,000 would lead to a Withdrawal Base of $120,000 on day one. Subsequently, for the next four years, there are additional annual boosts of 7.5% based on the original purchase amount, provided there are no withdrawals. In monetary terms, this means an additional $7,500 would be credited to the Withdrawal Base each year for four years, resulting in an additional credit of $30,000. The total additional credit, including the $20,000 initial credit, becomes $50,000.
At any point, the contract also allows for the activation of guaranteed lifetime income. Upon activation, the Withdrawal Base ceases to grow, and no more income boosts are credited. However, the contract value itself can still grow.
Additionally, there's a provision for a significant income boost if the individual defers activating their guaranteed income for at least 10 years from their purchase date. On the first day of the 10th year, a special boost is credited, equivalent to 150% of all the interest credits earned during the first nine years (adjusted for any withdrawals). For instance, if $50,000 is earned in interest credits over those years, an income boost of $75,000 would be credited, taking the Withdrawal Base to a total of $225,000l.
After this 10-year mark, the income boost potential is fully utilized, although the contract value may continue to appreciate.
Your lifetime income payment depends on your withdrawal base at the time you start lifetime income withdrawals. Thus, the later you start your lifetime income withdrawals, the more your lifetime income withdrawal amount.
To calculate the Lifetime Income payments, the following formula is used:
Withdrawal Base at the time of first withdrawal * GLWB Lifetime Payout Factor
The lifetime income withdrawal percentage is based on how late you begin your lifetime income withdrawals and whether you opt for single-life or joint withdrawals. The later you begin your lifetime payments, the more annual payments you get. At the time of writing this article, the following Lifetime Income Withdrawal Percentage was applicable:
For calculating joint life withdrawals, subtract 0.5% from the Single Life withdrawal percentage to determine the Joint Life withdrawal percentage. Joint payouts are based on the Attained Age of the younger life. And you don’t have to pick single or joint life until you start your income.
Important: Do note that Lifetime Income Withdrawals may be reduced or may stop if you take Excess Withdrawals from your contract. If Excess Withdrawals, Withdrawal Charges, or Market Value Adjustments (MVAs) reduce the contract’s Accumulated Value to zero, your Lifetime Income Withdrawal Payments will stop, and the rider will terminate. If you do not make excess withdrawals, your Lifetime Income will continue for the rest of your life, even if your annuity’s accumulated value becomes zero.
Also, as with most annuities, the Global Atlantic Income 150+ SE FIA 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 100% 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.
What makes this product stand out?
The Global Atlantic Income 150+ SE Fixed Indexed Annuity offers some features that not many fixed-indexed annuities offer. The ones that I like the most are:
- The plan offers the S&P Index with multiple crediting methodologies
- There are plenty of good index options to choose from
- 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 65 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.
What I don’t like
This product is generally good for people looking to buy a simple fixed-indexed annuity and are looking for lifetime withdrawals; still, there are some features that could add more value for the annuitant. Some of the features that I don’t like about the policy are:
- Rider cost is calculated as a percent of the withdrawal base (but deducted from account value), which is always higher than the account value, thus translating to a higher cost.
- Significantly lower caps and participation rate than other Global Atlantic annuities like ForeAccumulation II FIA.
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.
Forethought Life Insurance Company
Forethought Life Insurance Company has been in business since 1980. It is a direct subsidiary of Global Atlantic Financial Group, which is one of the largest providers of fixed and fixed-indexed annuities in the US, serving more than two million policyholders through its retirement and life insurance products. It has been regularly in the top ten Fixed Indexed Annuity Sales. It offers annuities for individuals through a network of banks, broker-dealers, and insurance agencies, as well as life insurance for individuals. Global Atlantic is also a leader in the institutional channel, providing customized reinsurance solutions to its life and annuity company clients. It offers capabilities across the block, flow, and pension risk transfer reinsurance to meet its client’s needs.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A (3rd of 13 ratings) |
S&P | A- (7th of 13 ratings) |
Fitch Ratings | A (6th of 13 ratings) |
Moody's Investors Service | A2 (6th of 13 ratings) |
Global Atlantic Financial Group has managed to maintain decent ratings for many years. It is considered to be strong and stable financially. In February 2021, Global Atlantic became a majority-owned subsidiary of the KKR public company, operating as a standalone business. KKR is a leading global investment firm that manages multiple alternative asset classes, including private equity, credit, and real assets, with strategic partners that manage hedge funds. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business.
Going by the operating history and the partnership with KKR & Co., we can safely gauge that you can trust your savings with Forethought Life Insurance/Global Atlantic Group.
Conclusion
With the advancements in healthcare and technology, the average American today lives 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 Global Atlantic Income 150+ SE annuity is a straightforward product that helps you grow your savings with much less risk. Through its GWLB rider, it offers the annuitant enhanced lifetime withdrawals besides the principal protection and the opportunity to participate risk-free in the market index.
If you are considering buying a Fixed Indexed Annuity for lifetime withdrawals that you can’t outlive, the Global Atlantic Income 150 SE+ FIA may be a decent product to look after.
If you are considering buying a Global Atlantic Fixed Indexed Annuity that works for accumulation, you might consider checking out Global Atlantic ForeAccumulation II FIA.
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. Delve deeper into our extensive reviews.