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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?
Historical Lookback
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.