How is this FIA faring this year? So far, so good. Through early August, the index returned 8.84%, partly on the strength of a sharp rally in gold, while the S&P 500 was barely positive.


An FIA with a Generous Index Participation Rate and Asset Flexibility May Be Your Best Bet in These Trying Times

Amid a pandemic and a severe recession, purchasing the right fixed indexed annuity (FIA) – an annuity offering exposure to the stock market while sidestepping losses in a down market – may be the smartest move you can make.

The stock market has been unusually strong in recent months, after a stunning sell-off in February and March. But there is skepticism about the durability of the rally given a recession expected to linger for some time. So, annuity buyers – generally a cautious lot – may happily settle for lower equity returns in FIAs – the price of admission – in exchange for protection against losses.

If this sounds like your cup of tea, especially because you are worried about another stock market selloff, the question then becomes which FIA to buy. One that warrants a hard look is EquiTrust MarketValue 10, an FIA whose range of options includes a so-called low-volatility index to mitigate risk.

Investors who opt for this index choice invest in the S&P MARC 5% Index, which invests in the S&P 500, commodities and U.S. Treasury notes and bonds. The so-called participation rate – the percentage gain in the index you pocket if it rises – is a generous 100%.

In addition to this, the S&P 500 MARC 5% index also offers a risk control mechanism that periodically increases stock market exposure by increasing the allocation to the index up to 150%. In addition, when the market is becoming volatile, the index temporarily lightens up on stocks and puts more into cash. The goal is to try to offer the best of both worlds – emphasizing stocks more heavily when the coast appears clear and de-emphasizing stocks when the market is overly volatile.

“The purpose of this annuity is to generate a good return while still enjoying a safe place to put your money,” says one annuity expert familiar with this product. “If you buy an annuity that beats the return of plain-vanilla fixed annuities by a few percentage points a year, you have done well. Regardless, your main concern is under performance risk.”

How is this FIA faring this year? So far, so good. Through early August, the index returned 8.84%, partly on the strength of a sharp rally in gold, while the S&P 500 was barely positive.

Among other index options in EquiTrust MarketValue 10 is the Barclays Focus 50 Index and the S&P 500, straight up. The former combines an investment in stocks and U.S. Treasury notes. The latter offers an investment in the S&P 500 with a 28% participation rate with no ceiling or a 100% participation rate with a 4.25% ceiling. (Rates have come down in a super low-rate environment, and today most FIAs are offering participation rates on the S&P 500 of only 20-30%.)

In most cases, investment in these and other indexes is credited one year, point-to-point – most popular among investors because they offer a more timely readout on how the annuity is faring. The minimum investment in EquiTrust MarketValue 10 is $10,000.

A guaranteed income rider is available for .95% a year and offers a 10% bonus on the annuity income base in the first year, as well as a home healthcare income doubler in the event of a lengthy illness.

This rider isn’t particularly completive compared to income riders in more income-oriented FIAs, but it still may make sense for folks with a strong conservative financial bias.


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