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So why pay a Rate Buy-Up fee on an index annuity? The short answer is...for the higher cap and participation rates.
But, is the higher potential gain worth the additional fee?
In years that the S&P 500 Index produces positive results, the results are typically strong. Capturing a larger portion of the Index growth helps accumulation-focused clients.
Consider the MarketMax Index Annuity’s 12% cap rate on the S&P 500 Point-to-Point Cap fee-based account, and this historical review. Based on annual Point-to-Point returns for each issue date since 1/1/80 and through 6/1/22, the following statistics apply:
- 78.6% of the time, the S&P 500 Index achieved a positive return
- 16.9% average S&P 500 Index return when the index return was positive
- 49.3% of the time, S&P 500 Index returns would’ve met or exceeded a 12% cap rate (before fees)
Overcoming the Bear-Market Blues
Some clients may be concerned about further market declines this year and the annual fee dipping into accumulation value.
Here’s a Solution: Allocate a portion to the 1-Year Fixed Rate Account to cover the annual fee.
At the current rate of 4.0% on the 1-Year Fixed Rate Account, allocating 20% of the total premium will cover the 1% fee for the other 80% directed to rate buy-up index accounts. This is not a long-term strategy, but may help clients get off the sidelines and put their money to work.
MarketMax Index Annuity
Impressive cap and participation rates are available in exchange for the 1% annual fee on the allocations to Rate Buy-Up Accounts, plus EquiTrust has a strong commitment to renewal rate integrity.