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. 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 Prosperity Life Safe Solution Fixed Indexed Annuity. The Safe Solution Annuity 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 growth and the safety of the principal. This annuity offers straightforward indexing options, which have the ability to provide relatively better returns than similar annuities 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 Prosperity Life Safe Solution 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 Safe Solution Annuity 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.
Let’s have a look at the high-level fine print of Prosperity Life Safe Solution Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Safe Solution Annuity |
|---|---|
Issuing Company | Prosperity Life Insurance Group |
AM Best Rating | A- (4th of 13 ratings) |
Withdrawal Charge Period(s) | 5, 7, and 9 years |
Maximum Issue Age | 85 Years |
Minimum Initial Purchase Amount | $2,000 |
Crediting Period and Strategies |
|
Plan Types |
|
Indexes | S&P 500 Index |
Free Withdrawals | 10% of the annuity’s Accumulated Value per year |
Death Benefit | Upon the annuitant’s death, the beneficiary will get the Account Value without any surrender charges |
Free Benefits | Nursing Home Confinement and Terminal Illness Waivers |
Surrender Value | Account Value less any withdrawal charges/MVA |
Minimum Guaranteed Surrender Value | 87.5% of premium paid grown at 1% minus withdrawals and enhanced benefit fees |
RMD Friendly | Yes |
The features of the Prosperity Life Safe Solution Fixed Indexed Annuity remain consistent across all three term durations, with the only variations being the rates and the withdrawal charge schedule associated with each term.
Product Policy
How does the Prosperity Life Safe Solution Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the Prosperity Life Safe Solution Fixed Indexed Annuity with a minimum initial purchase amount of $2,000, and in return, they 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 “Account Value.” This bucket is your annuity account balance, and all your withdrawals take place from it.
The Prosperity Life Safe Solution Fixed Indexed Annuity offers the annuitant the ability to choose from one or more of the two strategies tied to the S&P 500 Index to determine their earnings crediting formula. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 3 strategy options.
The S&P 500 Index is a widely recognized benchmark that tracks the performance of 500 of the largest publicly traded companies in the United States. It is considered a key indicator of overall market health and economic performance. Comprising diverse industries, the index represents about 80% of the total U.S. stock market value, making it a popular choice for investors seeking broad market exposure. Its historical performance demonstrates a mix of growth and volatility, making it a standard option for fixed indexed annuities aiming to link returns to market performance.
It is very important to note that the Prosperity Life Safe Solution Fixed Indexed Annuity comes with cap rates and performance triggers for the S&P 500 Index, meaning that you will be credited only a part of the index return to your annuity. These rates change frequently; I will discuss more on these rates more shortly.
Note: In addition to allocating the funds in the following index, the annuitant also has the option to allocate funds at a fixed interest. The first-year fixed value rate for the 5-year withdrawal charge period at the time of writing this article was 4.50%. These rates are subject to change, so it is advisable to consult your trusted financial advisor for the most up-to-date information.
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 caps, triggers, and other rates that the company has in place that affect your earnings. These rates tend to change over time, and the updated rates can always be checked through your trusted financial advisor.
Let’s have a look at the Prosperity Life Safe Solution Fixed Indexed Annuity rate sheet (as of December 2024) to understand how the earnings are determined.
| S&P 500 Index | Rates |
|---|---|
1-Year Point-to-point with Cap Rate | 11.00% |
1-year Declared Rate | 7.00% |
1-year Fixed Rate | 4.50% |
From the above rate chart, you will notice that there are 3 interest crediting options (1 fixed and 2 indexed). Let’s have a look at different terms that are used by the company in the Prosperity Life Safe Solution Fixed Indexed Annuity chart rate:
- Point-to-point with Cap Rates: This refers to the rate at which your interest-earning capacity is capped. For example, if an index returns 13% but the contract’s cap rate is 10%, the annuitant will be eligible for an interest credit of 10% 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 Specified 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. The declared interest rate is set at contract issue and applies for the entire withdrawal charge period. If the change in the value of the index during one year is zero or positive, 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. In this case, the performance-triggered rate for the S&P 500 Index is 7.00%. It means that if the S&P 500 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 7.00% irrespective of the S&P 500 actual return.
- 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 are usually 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 first-year fixed rate on the 5-year withdrawal charge policy at the time of writing this article was 4.50%.
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.
My Allocation Recommendation: Among these indexes, I recommend allocating your contributions as follows: 40% to the S&P 500 point-to-point with cap, 40% to the S&P 500 performance-triggered strategy, and 20% to the fixed account value. This allocation strategy balances growth potential and risk mitigation. The higher cap rate on the point-to-point strategy offers the potential for strong returns in a rising market, while the performance-triggered option ensures you receive a return even if the index performance is modest. The fixed account allocation provides stability, safeguarding a portion of your investment against potential market downturns.
Free Withdrawal and Surrender/Early Withdrawal Charges
Each year, you are allowed a 10% free withdrawal of your contract value without incurring charges, fees, or penalties.
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 Prosperity Life Safe Solution Fixed Indexed Annuity:
| Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10+ |
|---|---|---|---|---|---|---|---|---|---|---|
9-Year Plan | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0% |
7-Year Plan | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 0% | ||
5-Year Plan | 9% | 8% | 7% | 6% | 5% | 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.
The surrender charge of the Prosperity Life Safe Solution Fixed Indexed Annuity is in line with all the other annuity issuers.
Contract/Administrative Charge
The Prosperity Life Safe Solution Fixed Indexed Annuity does not impose any annual contract or administrative fees.
Riders
The Prosperity Life Safe Solution Fixed Indexed Annuity 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, it's worth noting that many annuities in the market include features such as free nursing home waivers or confinement waivers, which allow penalty-free withdrawals in the event of long-term care needs or hospitalization. These features are absent in this annuity, which may be a consideration for annuitants who are concerned about potential healthcare or confinement costs during retirement.
What Makes This Product Stand Out?
The Prosperity Life Safe Solution 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 limited but powerful crediting strategies
- Higher Caps, Performance-Triggered, and Fixed Rates: The Prosperity Life Safe Solution Fixed Indexed Annuity provides higher caps, even for a very popular index like the S&P 500.
- No annual contract, mortality & expense, or administrative fees
- Multiple Payout Options: Lump-sum 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 on all fronts for people looking for a simple product that works best for growth. However, there are a few limitations worth noting:
- Lack of Nursing Home and Terminal Illness Waivers: Many competing annuity products include waivers for nursing home confinement or terminal illness, enabling policyholders to access funds without penalties in such circumstances. Unfortunately, the Prosperity Life Safe Solution Fixed Indexed Annuity does not provide these waivers.
- No Optional Riders Available: The policy does not offer optional riders, which could enhance flexibility and customization for policyholders.
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.
Prosperity Life Insurance Group
Prosperity Life Insurance Group, established in 2009, is a prominent insurance organization offering a diverse range of life insurance, annuities, and supplemental health products. The group operates through its principal subsidiaries: SBLI USA Life Insurance Company, Inc. (SBLI USA), S.USA Life Insurance Company, Inc. (S.USA), and Shenandoah Life Insurance Company, each with a rich history exceeding 50 years in the insurance industry.
In 2019, Prosperity Life underwent a significant transition when Elliott Management Corporation acquired a majority ownership stake. This acquisition strengthened the company's financial strength and expanded its market presence. The company offers a comprehensive suite of insurance and annuities products tailored to meet diverse customer needs, including:
Permanent Life Insurance: Provides lifelong coverage with cash value accumulation, featuring products like Final Expense Whole Life, Universal Life, and Senior Life.
Term Life Insurance: Offers coverage for specific periods, including products such as Family Freedom Term, PrimeTerm to 100, and Simple Issue Term.
Universal Life Insurance: Includes Fixed Universal Life and Indexed Universal Life, catering to varying risk appetites and financial goals.
Fixed Annuities: Includes Multi-Year Guaranteed Annuity (MYGA) products like Select Choice and Select Choice Plus single premium annuities.
Fixed Indexed Annuities: Safe Solution single premium fixed indexed annuity offers fixed and indexed annuity options.
Through its subsidiaries, Prosperity Life serves over 300,000 policyholders across the United States. It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A- |
Kroll Rating | A- |
S&P Global | A- |
Going by the operating history and ratings, we can safely gauge that you can trust your savings with Prosperity Life Insurance 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 retirement corpus that can grow safely and steadily and have the ability to provide a fixed stream of 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 Prosperity Life Safe Solution Fixed Indexed Annuity is one such annuity that helps you grow your retirement account 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 is purely growth-oriented, the Prosperity Life Safe Solution Fixed Indexed Annuity 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. Delve deeper into our extensive reviews.