Athene AccuMax 7 – a super-simple growth FIA with no bells and whistles that offers a 50% participation rate in the S&P 500 over seven years, if you invest at least $100,000.
This Growth FIA May Be the Answer for Folks Who Don’t Like Declining Index Participation Rates
It’s easy to see why the concept of a fixed-indexed annuity with an emphasis on growth appeals to many prospective annuity buyers: benefit from a rising stock market without fear of losses in a bad year. But if you happen to be shopping around for a growth FIA these days, you may find yourself in a quandary.
The downside of a growth FIA has always been that the no-loss guarantee comes with a catch – you take a haircut on how much of a gain in the market you actually pocket. It has always been substantial but still readily acceptable to FIA aficionados, typically 35% to 45% of the performance of the S&P 500 index.
This means, obviously, that if the S&P 500 rises, say, a healthy 10% in a given year, you may not even pocket 4%. This is only marginally better than what you can earn a year, guaranteed, in a plain-vanilla fixed annuity. And that begs the question of whether investing in a growth FIA these days is worthwhile.
What is an FIA fan to do?
The answer may be an investment in a an unusually competitive growth FIA – Athene AccuMax 7 – one that now offers an 85% participation rate in the S&P 500 over seven years, if you invest at least $100,000. This is up from 50% in the recent past and, in the words of one annuity broker, “the most compelling index participation rate increase I’ve seen on the S&P 500.”
This means that if the stock market sell-off is anywhere near approaching the bottom, Athene AccuMax investors will be able to make a respectable return. And as is always the case with FIAs in a down year for the market, they would be guarded against losses.
Athene AccuMax 7’s seven-year interest crediting period – in contrast to a one or two-year crediting period on most FIAs – is also a plus in that the 85% participation rate is locked in for the life of the contract. This means Accumax contract holders don’t have to worry about the participation rate being cut – a common practice. You can’t say that about other growth FIAs.
“This is a contract that will never change, and people like that,” says an annuity professional familiar with the product.
AccuMax contract holders also have the option of investing in the HSBC AI Powered Multi-Asset Index.
The former is an AI-managed global low-volatility index. It pays a whopping 280% of the index over seven years for investors who fork over at least $100,000 – more than double what it was offering in the relatively recent past.
Pros and cons of the 7-Year period.
AccuMax is not without any drawbacks, at least in the eyes of some FIA proponents. The biggest, by far, is its seven-year point-to-point crediting method. “Some people like to see how they’re doing every year”, says one annuity expert. “FIA investors are mostly CD and fixed annuity buyers accustomed to seeing their interest credited regularly. That doesn’t happen with this product.”
Moreover, this isn’t merely a matter of buying an FIA with no performance observation points along the way. AccuMax, like most FIAs, gives investors the option of withdrawing 10% annually without penalty. In the case of AccuMax, however, that money has to come out of principal, not interest earned along the way. There is no interest along the way.
So if by chance the S&P 500 winds up with a flat performance over the seven-year period, the withdrawal is never recouped. However, having no interest credited over the seven-year period can be advantageous for Required Minimum Distribution (RMD) planning since the Account Value does not change for the 7-year period. Prior-year contract values determine RMDs in IRAs, so if the Account Value remains constant, the RMDs will not increase due to growth until after the seven-year period.
The bottom line.
Select AccuMax investors might want to couple an investment in this annuity with an income annuity, which boasts a lifetime income rider for an annual fee. This could be the best of both worlds in that it offers more protected growth potential than you can find elsewhere, plus a guaranteed income stream. If you have a conservative bent, how can you do better than that?
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