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An Equitable Buffered Annuity Is Just What the Doctor Ordered


By , with Annuity FYI

With the market lacking stability, an equitable buffered annuity gives annuity buyers more chances to make a return on their investment.

Imagine if you could make money in the stock market in an annuity when the market goes down, as well as up. This would be especially attractive these days, with the market struggling amid high inflation and corresponding increases in interest rates and looming fears of a recession.

Wishful thinking, right? Wrong.

There is an annuity that makes this possible, and it has a super-high financial strength rating of A+ from. A.M. Best. The name of this buffered annuity is Equitable Structured Capital Strategies Plus. It has been around for several years but recently added more investment options, making it yet more attractive.

All other buffered annuities offer some downside protection. So if you buy one of these annuities and sign on for a 10% buffer and the stock market declines, say, 9%, you lose nothing. It’s the same with the Equitable annuity, but in this example you would not only not lose money but also make money – in this case, 9%.

“There are no investors these days unaware of the losses we have been seeing in the stock market,” says an annuity professional familiar with this product. “This annuity gives annuity buyers more chances to make a return on their investment. You can benefit in an up market, a down market and a flat market.”

This is a unique advantage in the annuity world. Another type of annuity – fixed indexed annuities (FIAs) – is far better known and much more popular because you cannot lose money in a FIA — period. There is no second guessing about a path to  follow with so-called buffers and other financial minutiae. But you cannot actually make money in a down market in a FIA. Moreover, the upside potential of a FIA is compromised because you collect only a piece of the action on the upside. This is the price you pay for no downside.

You can still lose money in the Equitable product and other buffered annuities, of course. Consider the example cited above, with some changes. If you have a 10% buffer and the stock market declines, say, 15%, not 9%, you lose 5% that year. Essentially, the red ink is subsidized, but it doesn’t disappear altogether. The stock market over a reasonable period of time has risen more than it falls. If you believe this will continue, a good buffered annuity may be the best deal you can get in the annuity world – and, again, the Equitable product is better still.

If you opt for the 10% or 15% buffer on the Equitable annuity – the most protection you can get if you want all of the aforementioned benefits – the return you would receive in a down market is the same you would receive if the market went up, not down, the same amount – up to the buffer cap. So if the market declined, say, 14%, in a down market and you had a 15% buffer, you would enjoy a gain of 14%. Instead, if the S&P 500 declined, say, 20%, and you had a 15% buffer, you would lose 5%.

Another substantial attraction of Equitable Structured Capital Strategies Plus is that it more pays more on the upside than its buffered annuity competitors. For example. if you select the one-year crediting option in this six-year product on the S&P 500 index option, you can collect up to an 18% market gain — the so-called cap rate – if the market rises that much or  more. This is the most upside you can get in a buffered annuity without paying an additional fee.

It may be difficult to swallow in these tough times, but it’s meaningful to note that the stock market over time has indeed risen far more than it has fallen. Reflecting the fact that an investment in this Equitable annuity requires a six-year contract, Equitable has researched the returns of the S&P 500 over a six-year period on a rolling monthly basis between January 1980 and December 2021. In all this time, there were losses of more than 10% only 11 times. By contrast, there were gains over six year rolling periods 389 times.

For the most conservative buyers of Equitable Structured Capital Strategies Plus, the best option might be to adopt the six year crediting option for the S&P 500 and sign on to the 10% buffer. The historical research shows there is a 95% chance that you will receive at least a 60% return over the six years. This is impressive for an investor who wants to reap a solid return with extremely low risk.

The minimum investment in the Equitable annuity is $25,000.

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