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 Jackson MarketProtector Fixed Indexed Annuity. Jackson MarketProtector Annuity is a deferred, fixed-indexed annuity that may be a good option if you are looking for the safety of principal, good indexing options, and an accelerated lifetime income rider. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
Product Description – Jackson MarketProtector Fixed Indexed Annuity
The Jackson MarketProtector 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 approaching retirement and aim to grow and protect their retirement savings. This plan is also suitable for people who are looking for guaranteed lifetime income or plan to leave a legacy for their loved ones, in addition to protecting and growing their retirement savings.
Let’s have a look at the high-level fine print of the Jackson MarketProtector Fixed Indexed Annuity, and then we will discuss each point in detail.
|Product Name||Issuing Company|
|Jackson MarketProtector||Jackson National Life Insurance Company|
|AM Best Rating||A (3rd of 13 ratings)|
|Withdrawal Charge / Indexed Option Period(s)||5, 7, and 10 years (10 years currently suspended)|
|Maximum Issue Age||85 Years (Qualified and Non-qualified)|
|Minimum Initial Purchase Amount||$25,000|
|Surrender Charge Schedule||Varies for different tenure policies|
|Crediting Period and Strategies||1-year point-to-point with participation rate, performance trigger, or caps, or 1-year fixed account interest rate|
|Plan Types||IRA, Roth IRA, Nonqualified Account, SEP IRA, SIMPLE IRA, 401(a), 403(b)|
|Indexes||S&P 500 and MSCI EAFE Index|
|Free Withdrawals||10% of the annuity’s Accumulated Value; per year.|
|Death Benefit||Upon the annuitant’s death, the beneficiary can either choose from (i) Accumulated Value (Lumpsum) or (ii) Guaranteed Minimum Surrender Value|
|Riders||One optional rider available:|
|IncomeAccelerator – Enhanced Lifetime Income Rider|
|Surrender Value||Greater of Accumulated/Account Value (less any withdrawal charges/MVA) and the Guaranteed Minimum Surrender Value|
The Jackson MarketProtector Fixed Indexed Annuity is almost identical for both policy tenures, except for the crediting period, surrender charge schedule, and indexing rates. For ease of discussion and better clarity, we will discuss the Jackson MarketProtector – 5 for the rest of the article.
How does the Jackson MarketProtector Fixed Indexed policy work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the Jackson MarketProtector Fixed Indexed Annuity with a minimum initial purchase amount of $25,000, 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 MarketProtector Fixed Indexed Annuity offers the annuitant to choose from one of the two indexes (S&P 500 Index and MSCI EAFE Index) to determine his earnings crediting formula. Both of these indexes have three strategies each. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 7 strategy options. 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. The S&P 500 Index was created in March 1957 and tracks 500 of the largest companies listed on the S&P across all sectors. The 10-year historical annual return, as shown by the S&P, stands at ~12.97%. It is very important to note that the MarketProtector Fixed Indexed Annuity offers the S&P 500 index with caps or participation rates in place, meaning that your interest-earning capacity is capped. These rates tend to change frequently; I will discuss more on the rates shortly.
MSCI EAFE Index
The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia, and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions and market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries. The 10-year historical annual return, as shown by the MSCI, stands at ~4.13%. It is very important to note that the MarketProtector Fixed Indexed Annuity comes with cap rates. performance-triggered options, or participation rates with spreads for these indexes, meaning that you will be credited only a part of the index return to your annuity. These rates tend to change frequently; I will discuss more on these rates 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 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 3.75%. You can view the latest fixed rates of this annuity here.
Rates and Costs associated with the Jackson MarketProtector 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 trusted advisor and/or on the company’s website. You can view the latest indexing rates of this annuity here.
The Jackson MarketProtector Fixed Indexed Annuity uses seven crediting strategies:
|Index Name||Point-to-Point Option with Cap||Performance-Triggered Index Option with Declared Rate||Point-to-Point Participation Rate with Spread||Fixed Account Interest Option|
|S&P 500 Index||Point-to-Point Option with Cap||Performance-Triggered Index Option with Declared Rate||Point-to-Point Participation Rate with Spread||Fixed Account Interest Option|
|MSCI EAFE Index||Point-to-Point Option with Cap||Performance-Triggered Index Option with Declared Rate||Point-to-Point Participation Rate with Spread||Fixed Account Interest Option|
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.
Performance-Trigered 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.
Point-to-Point Participation Rate with Spread
The amount of interest that the Company will credit is based on a declared participation rate and a spread on the selected index on an annual point-to-point basis. Once the index gain is determined (if any), it is multiplied by the participation rate, and then the spread amount is subtracted. The remaining amount is what is credited to the contract for that term. The Spread is a percentage that is deducted from the adjusted index return. Formula to calculate interest credit for strategies with participation rate with spread: (Participation Rate % X Index Return) – Spread Percentage
If you opt for a fixed 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 very low 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 3.75%.
These strategies can be mixed and matched with different indexes, tenures, and indexing options. For example, you can select the S&P 500 Index with a 1-year annual point-to-point with a cap rate, or the same with a 1-year point-to-point with performance-triggered index option, and so on. Let’s look at the Jackson MarketProtector Fixed Indexed Annuity rate chart to understand better the earnings crediting strategies. Note that these rates are updated as of December 2022.
From the above rate sheet, we know that there are 7 interest-crediting strategies; three S&P 500 strategies, three MSCI EAFE strategies, and one fixed rate strategy. You will notice Cap rates, performance-triggered options, and participation rates with spreads in place, limiting your maximum interest-earning potential.
Based on the index constituents, past performance, and volatility, I believe that S&P 500 1-year point-to-point with Cap strategy or Performance-Trigerred Index Option with Declared Rate has the highest return potential (as of December 2022). You should not go with the MSCI EAFE Index in the present market scenario, and avoid choosing the Point-to-Point Participation Rate with Spread strategy for any of the indexes as this strategy limits your interest crediting opportunity with two restrictions at once, participation rate and spreads.
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 Jackson MarketProtector – 5 Fixed Indexed Annuity.
|Completed Contract Years||1||2||3||4||5||6+|
|Surrender Charge %||9%||8%||7%||7%||6%||0%|
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 Jackson, you may visit their fixed indexed annuities product page here 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. Contract/Administrative Charge The Jackson MarketProtector Annuity levies no annual contract or administrative fees.
In an insurance policy, riders are an additional provision that can be added to enhance the benefits of the base policy. The Jackson MarketProtector Annuity comes with an optional income accelerator benefit, enabling annuitants to have an accelerated lifetime income stream.
When you purchase the IncomeAccelerator rider, you get an option to get a guaranteed income every year for the rest of your life.
When you sign up for this paid rider, a Lifetime Annual Income Payment (LAIP) percentage is established. This is the percentage of your contract value that you can withdraw each year. Your age when you elect IncomeAccelerator also determines your Annual Deferral Credit percentage. Annual Deferral Credits are an additional amount that combines with the LAIP % each year that you defer income payments. Once you have started taking your Lifetime Annual Income Payment, you also have the potential for annual step-ups, which automatically lock in gains for the life of the contract.
Depending on your retirement needs, you can choose to take income now or wait to take income later. The longer you wait, the greater your LAIP percentage. The below table shows the LAIP % and Deferral Credits at different age range.
When you add IncomeAccelerator to your MarketProtector suite contract, your Lifetime Annual Income Payment (LAIP) can grow in two ways: (1) your contract value may increase based on index performance, and (2) an Annual Deferral Credit is added to your LAIP percentage every year that you wait to take income. Your LAIP is based on the greater of contract value or premiums paid less withdrawals. In years with index gains, your contract value will increase. In years with index losses, your contract value is protected.
In its prospectus, the company has demonstrated the following example for the IncomeAcclerator Rider:
The example above shows an initial premium of $100,000 and how your LAIP could grow over a 7-year period on MarketProtector. This hypothetical illustration uses historical return data for the S&P 500® and the Annual Reset Point-to-Point Cap crediting method. It assumes a 65-year-old with a starting LAIP percentage of 5.75% and Annual Deferral Credit of 0.30%. After seven years, a LAIP percentage of 7.85% on a contract value of $107,290 would provide an $8,422 Lifetime Annual Income Payment.
Rider Charge: At the time of writing this article, the rider charges were 1.1% of the accumulated value for single life and 1.25% for joint life. The total annual charges are calculated based on the Accumulation Value after interest is credited on the indexed option anniversary. Jackson reserves the right to prospectively increase the charge on each fifth indexed option anniversary up to 0.20%, subject to a maximum annual charge of 2.20% (2.50% for joint life options). If the charge percentage is increased, a notice will be sent to the owner prior to the indexed option anniversary.
The MarketProtector also comes with an Extended Care and Terminal Illness Waiver. This no-fee benefit is automatically included for owners providing them with Extended care and Terminal Illness benefit.
Extended Care 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 apply 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 apply 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 Jackson MarketProtector Annuity offers some features that not many fixed-indexed annuities offer. The ones that I like the most are:
- The plan offers well-known indexes with established histories
- No annual contract, mortality & expense, or administrative fees
- Free enhanced extended care and terminal illness waiver
- Higher Caps and Declared Rates
Caps on the equity indexing strategies is a bummer! However, the good thing with the Jackson MarketProtector Fixed Indexed Annuity is that it provides higher caps, even for many popular indexes like the S&P 500. Similarly, it also provides higher declared rates for performance-triggered index options than many of its competitors.
- Multiple Payout Options
Life Only, Life with Period Certain, Joint and Survivor Life, Period Certain, Single Life or Joint Life with Cash Refund, and Single Life or Joint Life with Installment Refund.
What I don’t like
This product is generally good on all fronts for people looking for both growth and lifetime income; 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:
- A limited number of riders to choose from: Only one optional rider
- High Initial Payment: $25k vs. $10k on other popular plans
- Higher rider charge for enhanced income rider compared to competitors.
Also, Jackson calculates the lifetime withdrawal based on accumulated value, while some popular competitors calculate lifetime withdrawals based on a separate income base that grows faster than the accumulated value.
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.
Jackson National Life Insurance Company
Jackson National Life Insurance Company has been in the business since 1961. It is one of the largest providers of fixed and fixed indexed annuities in the US for many years and has been regularly in the top ten Fixed Indexed Annuity Sales.
It is rated as follows by the rating agencies:
|Moody’s Investors Service||A2|
Jackson National Life Insurance Company has managed to maintain decent ratings for many years. It is considered to be strong and stable financially. As of year-end 2021, some of the other financial highlights for Jackson National Life Insurance Company include its:
- $19.8 billion in total sales / direct written premium
- $10.4 billion of shareholder’s equity
- $2.4 billion in net operating income
- $359.5 billion in total assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with Jackson National Life Insurance Company
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 and have the ability to provide a guaranteed income during the retirement years. This not only helps you to mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in your retirement.
The Jackson MarketProtector annuity helps you grow your savings with much less risk. Through its higher cap and performance-triggered declared rate, and optional riders, it offers principal protection and the opportunity to participate risk-free in the market index, providing a stream of guaranteed income. Although a notable downside is that the optional rider cost is slightly on the higher side when compared to other annuities that offer a similar rider.
If you are considering buying a Fixed Indexed Annuity that works best for both income growth and market protection, the Jackson National MarketProtector FIA is a decent product to look after.