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 MassMutual American Landmark Fixed Indexed Annuity. MassMutual Landmark 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 income growth. This annuity offers some good indexing options, which have the ability to provide reasonably expected 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 MassMutual American Landmark Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Rates and Costs Associated with the MassMutual American Landmark Fixed Indexed Annuity
- What Makes This Product Stand Out?
- What I Don’t Like
- Company Details
Product Description - MassMutual American Landmark Fixed Indexed Annuity
The MassMutual American Landmark 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 tax-deferred growth and downside protection with a core focus on income growth.
Let’s have a look at the high-level fine print of the MassMutual American Landmark Fixed Indexed Annuity, and then we will discuss each point in detail.
|American Landmark 5
|Massachusetts Mutual Life Insurance Company (MassMutual)
|AM Best Rating
|A++ (1st of 13 ratings)
|Withdrawal Charge Period(s)
|Maximum Issue Age
|Minimum Initial Purchase Amount
|Surrender Charge Schedule
|9%, 8%, 7%, 6%, 5%, 0%
|Crediting Period and Strategies
|1-year point-to-point with participation rate, 1-year point-to-point with caps, or 1-year fixed with interest rate guaranteed
|IRA, Roth IRA, Nonqualified Account, SEP IRA, SIMPLE IRA, 401(a), etc.
|S&P 500 Index, S&P Risk Control Index, iShares U.S. Real Estate Index, and S&P U.S. Retiree Index
|10% of the annuity’s Accumulated Value per year
|Upon the annuitant’s death, the beneficiary will get greater of (i) Account Value or (ii) Surrender Value
|87.5% Guaranteed Minimum Surrender Value (GMSV) Nursing Home and Terminal Illness Waivers
|Account Value less any withdrawal charges/ MVA
How does the American Landmark Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 89) can purchase the American Landmark Fixed Indexed 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 MassMutual American Landmark 5 Fixed Indexed Annuity offers the annuitant to choose from one or more of the four indexes (S&P 500 Index, S&P Risk Control Index, iShares U.S. Real Estate Index, and S&P U.S. Retiree Index) to determine his earnings crediting formula. The S&P 500 index has two strategies each, and the S&P Risk Control Index, iShares U.S. Real Estate Index, and S&P U.S. Retiree Index have one strategy each. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 6 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. It is very important to note that, similar to most other annuities, the MassMutual American Landmark Fixed Indexed Annuity offers the S&P 500 index with caps, and spreads in place, meaning that your interest-earning capacity is capped. These rates tend to change frequently; I will discuss more on the rates shortly.
- iShares U.S. Real Estate: The iShares U.S. Real Estate Index, often represented through an Exchange-Traded Fund (ETF) like the iShares U.S. Real Estate ETF (IYR), is designed to track the performance of the U.S. real estate sector. It predominantly includes stocks of companies involved in real estate, particularly Real Estate Investment Trusts (REITs) and real estate management and development firms. This index offers investors diversified exposure to the real estate market, reflecting broader sector trends influenced by factors such as interest rates, economic conditions, and property values.
- S&P 500 Risk Control Index: The S&P 500 Risk Control Index is a strategic financial tool designed to measure the performance of the S&P 500 while maintaining a targeted level of risk. It does this by dynamically adjusting its exposure to the S&P 500 based on the volatility of the index. When volatility increases, the index reduces its exposure to the S&P 500 and increases its holdings in less volatile assets like cash or fixed income, and vice versa when volatility decreases. This approach aims to offer a more stable investment experience, especially appealing to risk-averse investors or those looking for a balance between growth and protection in volatile markets. 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.
- S&P U.S. Retiree Spending Index: The S&P U.S. Retiree Spending Index is a specialized financial index designed to cater to the investment needs of retirees. This index aims to reflect the spending patterns of retirees in the United States, thereby providing a more targeted investment strategy for this demographic. It is composed of sectors and companies that are likely to benefit from the spending habits of retirees, such as healthcare, consumer goods, and utilities. This focus on retiree spending patterns allows the index to potentially align more closely with the financial goals and risk profiles of retired individuals.
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 4.50%. It is noteworthy that the fixed rates offered by MassMutual are better when we compare them with other annuities. You can view the latest rates of this annuity here.
Rates and Costs associated with the MassMutual American Landmark Fixed Indexed 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, 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 MassMutual American Landmark 5 Fixed Index Annuity rate sheet (as of November 2023) to understand how the earnings are determined.
From the above rate chart, you will notice that there are 6 interest crediting options (1 fixed and 5 indexed). Let’s have a look at different terms that are used by the company in the MassMutual American Landmark 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: It means at what rate your interest-earning capacity is capped. For example, if an index returned 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.
- Declared Strategy Interest Rate: If you opt for a declared strategy / 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 4.50%.
Note that the five-year cap lock strategy has a five-year term. The cap is locked in for the entire five-year term. This strategy may only be selected during the first contract year. All other strategies have a one-year term. You can change your strategy allocations at the end of each one- or five-year term. Funds held in the five-year strategy will automatically reallocate to the S&P 500® 1-year strategy unless you elect otherwise.
Amongst these indices, I would prefer the strategies with the S&P 500 and the iShares U.S. Real Estate Index because of the proven historical track record and performances of these indexes. I will discuss more on these strategies in the next section of this review.
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 MassMutual American Landmark Fixed Indexed Annuity.
|Completed Contract Years
|Surrender Charge %
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 the MassMutual American Landmark Fixed Indexed Annuity is in line with all the other annuity issuers.
The MassMutual American Landmark Fixed Indexed Annuity levies no annual contract or administrative fees
The MassMutual American Landmark 5 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 dive deep into the complex methodologies the riders often come up with. However, as with most annuities, the MassMutual American Landmark has free in-built nursing home and terminal illness waivers.
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 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.
Besides the Extended Care Waiver and the Terminal Illness Waiver, the company also offers a Guaranteed Minimum Surrender Value (GMAV) provision.
Guaranteed Minimum Surrender Value (GMSV) - The Guaranteed Minimum Surrender Value (GMSV) provision ensures that the account value of your annuity will be no less than 87.5% of the initial premium, adjusted for any withdrawals, upon reaching the 5-year milestone.
Suppose you invest an initial premium of $100,000 in an annuity product that offers a GMSV feature. Over the course of 5 years, you make withdrawals totaling $20,000.
Initial Premium: $100,000
Total Withdrawals: $20,000
Net Account Value (Initial Premium - Withdrawals): $80,000
The GMSV feature guarantees that your account value will be at least 87.5% of the initial premium, less any withdrawals, at the 5th anniversary.
87.5% of Initial Premium = 0.875 * $100,000 = $87,500
Adjusted for Withdrawals: $87,500 - $20,000 = $67,500
Therefore, at the end of the 5-year period, the GMSV ensures that your account value will not be less than $67,500, regardless of market conditions or investment performance.
What makes this product stand out?
The MassMutual American Landmark Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are
- The plan offers the S&P Index with multiple crediting methodologies.
- Decent Cap and Participation Rates
- Free GMSV Provision
- No annual contract, mortality & expense, or administrative fees
- Free Extended Care and Terminal Illness Waiver Benefit: This no-fee rider is automatically included for owners under age 65 and includes both an Extended Care and Terminal Illness Benefit.
- Multiple Payout Options: Lumpsum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
What I Don’t Like
This product is a decent product for people looking for growth and safety; 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
- Although the annuity offers good strategies on the S&P 500 Index, I don’t like the other three indexes that the company offers for the interest crediting strategy. The other three indexes that the company offers have a volatility control mechanism that limits the overall return of the index.
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.
MassMutual Life Insurance Company
MassMutual Ascend Life Insurance Company has been in the business since 1951. It has been 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
MassMutual Life Insurance Company has managed to maintain decent ratings for many years. It is considered to be strong and stable financially. In 2022, the company paid out nearly $7 billion in claims. As of year-end 2022, some of the other financial highlights for MassMutual Ascend Life Insurance Company include its:
- $39 billion in US sales / direct written premium
- $34 billion of adjusted capital
- $1.9 billion in policy owner dividends
- $322 billion in life company assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with MassMutual 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 MassMutual American Landmark is one such annuity that helps you grow your savings with much less risk. Through its higher caps and performance-trigger rates, It offers faster growth with principal protection. The product’s plain vanilla nature (with no optional paid riders) might also appeal to people who don’t like to deep-dive into the complex methodologies often associated with the riders. If you are considering buying a Fixed Indexed Annuity that works best for accumulation, the MassMutual American Landmark 5 FIA may be a decent 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.