TruStage MaxProtect Fixed Annuity Review

The features of the TruStage MaxProtect Multi-Year Guaranteed Annuity (MYGA) remain consistent across all three-term durations, with the only variations being the interest rates and the withdrawal charge schedule associated with each term.

Product Policy

How does the TruStage MaxProtect MYGA policy work?

The TruStage MaxProtect MYGA is structured to provide fixed, predictable growth over a chosen period, making it a suitable option for investors looking for security and stability. This annuity offers three term options: 3, 5, and 7 years, with a unique interest rate assigned to each term. These rates ensure that the policyholder knows exactly how much their investment will grow over the selected period.

Let’s have a look at the TruStage MaxProtect MYGA Annuity rate sheet (for the $10k-$99k band with MVA as of November 2024) to understand how the earnings are determined.

3-Year Term: 4.45%
5-Year Term: 4.40%
7-Year Term: 4.55%

The TruStage MaxProtect Fixed Annuity offers three distinct rate structures to cater to varying investor needs and preferences. These rates are structured based on the type of guarantee or feature selected and the premium band:

With Market Value Adjustment (MVA): This rate tier generally provides the highest interest rates among the three options. It is available for contract terms of 3, 5, and 7 years, with rates varying by premium band. For instance, for a 7-year term, rates range from 4.55% (for $10K–$99K) to 4.85% (for $100K+). The MVA feature allows the insurer to adjust the surrender value of the contract based on market conditions, which may lead to either a higher or lower payout if funds are withdrawn early.

Book Value: This option provides slightly lower rates compared to the MVA tier but does not include any market value adjustment. For conservative investors seeking predictability, this could be an appealing choice. Rates for a 5-year term range from 4.30% (for $10K–$99K) to 4.60% (for $100K+), ensuring steady growth without market volatility adjustments.

Return of Premium Guarantee: This tier offers the most flexibility, as it ensures that the annuitant can withdraw the full premium amount without penalties. However, the tradeoff is a lower interest rate compared to the other two options. For example, for a 7-year term, the rates range from 4.15% (for $10K–$99K) to 4.45% (for $100K+), providing a balance between growth potential and liquidity.

The MYGA’s interest rate is locked according to the rate structure at the start of the contract and remains fixed for the entire term. At the end of the selected period, the policyholder has several options: they can withdraw the accumulated funds, renew for another term (with rates based on prevailing conditions), or roll the funds into another financial vehicle.

Key Mechanics of the TruStage MaxProtect MYGA Policy

Interest Rate Lock: Once the policyholder selects a term, the corresponding interest rate is guaranteed for the duration of that term, providing clear expectations for growth.
Principal Protection: As a fixed annuity, the TruStage MaxProtect MYGA guarantees the protection of the principal, meaning that the initial investment is secure and unaffected by market volatility.
Withdrawal Charge Schedule: The policy includes a withdrawal charge schedule, which varies according to the selected term. If the policyholder needs to access their funds before the term ends, they may incur a penalty. The TruStage MaxProtect MYGA allows a penalty-free withdrawal of 10% of the account value each year.

To understand how the TruStage MaxProtect MYGA works, let’s look at a hypothetical example:

Suppose an investor, Mary, is 60 years old and is planning to retire soon. She wants a low-risk investment to grow her funds predictably over time. After researching her options, Mary decided to invest $100,000 in the TruStage MaxProtect MYGA with a 7-year term, which offers a fixed interest rate of 4.85% for that period.

1. Interest Accumulation

With her $100,000 initial investment, Mary can calculate her future value at the end of the 5-year term using the 4.85% annual interest rate:

Year 1: $100,000 * (1 + 4.85%) = $104,850
Year 2: $104,850 * (1 + 4.85%) ≈ $109,935
Year 3: $109,935 * (1 + 4.85%) ≈ $115,267
Year 4: $115,267 * (1 + 4.85%) ≈ $120,858
Year 5: $120,858 * (1 + 4.85%) ≈ $126,719
Year 6: $126,719 * (1 + 4.85%) ≈ $132,865
Year 7: $132,865 * (1 + 4.85%) ≈ $139,309

After seven years, her investment would grow to approximately $139,309, thanks to the fixed annual interest rate of 4.85%.

2. Principal Protection

Because the TruStage MaxProtect MYGA is a fixed annuity, Mary’s initial $100,000 is fully protected from market losses. Regardless of what happens in the stock or bond markets, her principal remains secure, and she continues to earn the 4.85% fixed rate annually.

3. Withdrawal Options at the End of the Term

At the end of the 7-year term, Mary has several choices:

Withdraw the Full Amount: Mary can withdraw the full $139,309 without any surrender charges, giving her access to her accumulated funds.
Renew for Another Term: Mary can choose to renew her MYGA for another term with TruStage, though the new interest rate will depend on the prevailing rates at that time.
Roll Over to Another Financial Product: Mary can transfer her funds into another investment or retirement product, if she desires.

Riders

The TruStage MaxProtect MYGA comes with two riders at no additional cost, providing policyholders with flexibility and support during critical life events.

Terminal Illness Waiver: After the first contract anniversary, if the contract owner is diagnosed with a terminal illness and is not expected to live more than 6 months, any applicable Market Value Adjustment (MVA) and surrender charges will be waived on withdrawals. The terminal illness must be diagnosed by a qualified physician after the contract’s issue date, and proof of the diagnosis must be provided to TruStage.
Nursing Home Confinement Waiver: After the first contract anniversary, if the contract owner requires nursing home confinement, any applicable MVA and surrender charges will be waived on withdrawals. To qualify, the confinement must last at least 90 consecutive days or include no more than a 6-month break if spread over multiple periods. The confinement must be prescribed by a qualified physician as medically necessary, and proof must be provided to the company during confinement or within 90 days afterward.

Surrender/Early Withdrawal Charge

Each year, you are allowed a 10% free withdrawal of your contract value, excluding any non-vested premium bonuses, 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 TruStage MaxProtect MYGA.

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 TruStage MaxProtect Simple Annuity MYGA levies no annual contract or administrative fees.

Benefits vs. Disadvantages of MYGA Compared to a Traditional Fixed Annuity

MYGAs and traditional fixed annuities both cater to conservative investors but with slightly different structures. MYGAs are ideal for those who want a predictable rate over a fixed term and are comfortable with the limited liquidity during that period. In contrast, traditional fixed annuities may offer a bit more flexibility in terms of rate adjustments or income options but typically lack the defined multi-year guarantee MYGAs provide. Here’s a breakdown:

Benefits of MYGA

Guaranteed Interest Rates for Specific Terms
MYGA: MYGAs provide a guaranteed interest rate over a fixed term, such as 3, 4, 5, 6, or 7 years, allowing investors to lock in predictable returns for a specified period.
Traditional Fixed Annuity: Traditional fixed annuities also offer guaranteed interest, but these rates are often set for a shorter duration (e.g., one year) and may reset annually based on prevailing rates.
Benefit: MYGAs offer more stability over a multi-year horizon, protecting against interest rate fluctuations, which is particularly beneficial in a low or falling interest rate environment.
Flexibility with Term Lengths
MYGA: MYGAs provide the flexibility to choose from different terms (e.g., 3, 5, 7, 10 years), depending on the investor's needs and market outlook.
Traditional Fixed Annuity: Traditional fixed annuities do not typically offer fixed terms with guaranteed rates over multi-year periods.
Benefit: MYGAs allow investors to align their investments with specific time horizons, such as short-term goals or bridge periods before retirement.

Disadvantages of MYGA

Interest Rate Risk Over the Long-Term
MYGA: While MYGAs lock in rates for a specific term, they may be less advantageous if interest rates rise significantly during the term, as policyholders are bound to the initial rate until maturity.
Traditional Fixed Annuity: Traditional fixed annuities may offer rate adjustments periodically, which could benefit policyholders in a rising interest rate environment.
Disadvantage: MYGAs might not benefit from increasing rates mid-term, whereas traditional fixed annuities may adjust rates periodically, providing some adaptability to market changes.
Lower Growth Potential Compared to Market-Linked Annuities
MYGA: MYGAs have a fixed interest rate and are not linked to market performance, limiting the growth potential.
Traditional Fixed Annuity: Similarly, traditional fixed annuities are also fixed, but they may sometimes offer interest rate adjustments that allow for slightly higher yields over time.
Disadvantage: Both MYGAs and traditional fixed annuities limit growth potential compared to market-linked annuities or other investment options, which may not be ideal for younger investors with higher risk tolerance.

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.

CMFG Life Insurance Company

CMFG Life Insurance Company, operating under the brand name TruStage Financial Group (formerly known as CUNA Mutual Group), is a mutual insurance company that provides financial services to cooperatives, credit unions, their members, and other customers worldwide. Founded in 1935 as the CUNA Mutual Insurance Society, the company has grown to serve over 30 million consumers through its lending, retirement, and wealth management products. TruStage Financial Group offers a broad range of insurance and investment products, including commercial and personal insurance, lending services, wealth management, and retirement solutions. Its insurance arm, TruStage, provides various products such as whole and term life insurance, accidental death and dismemberment insurance, auto insurance, property insurance, and annuities. Headquartered in Madison, Wisconsin, the company employs nearly 3,700 people across multiple locations in the United States and internationally.

It is rated as follows by the rating agencies:

Going by the ratings, it is considered to be strong and stable financially. As of December 2023, some of the financial highlights for CMFG Life Insurance Company include its:

$45 billion in Assets
$2.9 billion in policyholder surplus
$42.1 billion in liabilities
$5.43 billion in total sales
$140 million in net income

Going by the operating history, financial numbers, and ratings, we can safely gauge that you can trust your savings with the CMFG Life Insurance Company.

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 TruStage MaxProtect Fixed Annuity offers a versatile solution for individuals seeking stability, flexibility, and growth potential in their financial planning. With its three distinct rate options—Market Value Adjustment, Book Value, and Return of Premium Guarantee—it caters to a range of investor preferences, whether prioritizing higher returns, predictability, or liquidity. While the MVA tier offers the highest growth potential, the Return of Premium Guarantee ensures peace of mind for those valuing flexibility.

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. Dive deeper into our extensive reviews.