New Product Highlight

Giving Clients Peace Of Mind With A Next-Gen Benefit

The Standard’s newest fixed indexed annuity features legacy benefits

by Paul Garofoli, FLMI, RICP

Mr. Garofoli is regional vice president for individual annuities at The Standard. Visit www.standard.com.

An enhanced death benefit feature in a fixed indexed annuity might seem like an idle benefit to some, but to The Standard, securing your legacy is anything but idle.

The company recently introduced the Enhanced Choice Index Plus annuity featuring the Legacy Max enhanced death benefit rider. This innovative solution can meet the needs of current and prospective annuity owners who would like to create a growing legacy for their loved ones.

Reality Check

The benefits of fixed rate and fixed indexed annuities are well-known: tax deferral, competitive safe money interest crediting and the ability to generate guaranteed income through annuitization or triggering an income rider.

But here’s the reality of annuity ownership. Not everyone annuitizes. Not everyone “income-tizes.” But everyone dies.
If record-high annuity sales are any indication, annuity ownership is at an all-time high in 2023. According to LIMRA, fixed indexed annuities set a sales record for the fifth consecutive quarter, up 29% from the previous year’s results.

But many experts say that most annuity owners will die with their annuity partially or fully intact. That’s why annuity owners should start thinking about their “live on” money as a “leave on” legacy asset.

Next-Generation Rider

What are the legacy options for an annuity owner? A 1035 exchange into a life insurance plan isn’t possible. You may not want to take systematic withdrawals or annuitize and commit to putting those payments toward the premium for a life policy. And cashing out a tax-deferred annuity, paying the taxes and buying a single-premium life policy isn’t for everyone, either.

Here’s where The Standard’s ECI Plus annuity comes in. With its Legacy Max enhanced death benefit rider, it offers a way to keep the attributes of an annuity and create a growing legacy for beneficiaries. The next-generation rider builds on strengths found in the market and addresses weaknesses as well.

Most fixed indexed annuity death benefit riders operate similarly to income riders. A benefit base is credited in the form of a guaranteed growth factor or a performance factor. But instead of guaranteed income, the annuity owner gets a death benefit value that will be payable to a named beneficiary. All the features of the underlying annuity are preserved — with the added value of a death benefit that will grow over time.

Shortcomings and Solutions

The enhanced death benefit rider is designed to address several shortcomings:

The Legacy Max comes with a fee of 0.80% for clients ages 69 and younger at issue and 1.20% for clients ages 70 – 80 at issue. But in return, annuity owners receive a substantial benefit at a fair price. Some fixed indexed annuity death benefit riders come with a lower fee or no fee at all, but they may also include the limitations mentioned earlier.

Proprietary BofA Index

Consider this: When part of the death benefit value can be based on the indexed interest performance of the policy, it’s only as good as the underlying fixed indexed product design.

And that’s another reason ECI Plus stands out.

It features a number of index choices, including the proprietary BofA Global MegaTrends Index from BofA Securities. The BofA Global MegaTrends Index is designed to tap into global innovation and long-term growth trends, while using the latest technology to manage risk. It’s made up of four indices created by MSCI, concentrating on four future-focused themes — robotics, the digital economy, millennials and disruptive technology. The index applies Salt Financial’s truVol® risk control engine to target 7% annualized volatility.

One of the shortfalls of many performance-based benefits is that the terms of the index crediting change over time. This can dramatically affect credited performance. The Standard addresses this by offering five- and seven-year participation rate guarantees on all volatility-targeted indices, including the BofA Global MegaTrends Index.

And for those who like their index-linked strategy tried and true, ECI Plus also includes the S&P 500® Index with both cap and participation rate strategies. (Those terms, however, are not guaranteed.)

A Fit for Many Clients

Here are a few more ways the ECI Plus could meet the needs of your clients:

Qualified Fund Legacy Preservation

Many seniors eventually consider their qualified funds as legacy assets. But IRS required minimum distributions, or RMDs, can eventually erode those values. Even with the Setting Every Community Up for Retirement Enhancement, or SECURE, Act 2.0 extending the RMD age for qualified funds to age 73 in 2023 and eventually to age 75 by 2033, forced withdrawals can eventually reduce the “leave on” value of these accounts.

With the Legacy Max enhanced death benefit rider, RMD withdrawals will reduce the benefit base by the amount of the withdrawal and not proportionately. This can help preserve funds for estate planning. Over time, the total value of ownership of this type of annuity can be quite substantial.

Life Insurance Alternative

For basic protection, wealth preservation and ultimate wealth transfer, nothing beats traditional life insurance. But not everyone qualifies for a policy, even with today’s simplified and streamlined underwriting processes. And those who do might not want to be all in with that type of policy.

With the Legacy Max enhanced death benefit rider’s dual strategies, leveraging can rival that of a single-premium life policy over time. At worst, the 6% compounding rollup formula will double the value of a premium outlay for death benefit purposes in 12 years. This rule of 72 inevitably means $100,000 will be worth $200,000 in that period.

Lapsing Life Policy Rescue

Interest-sensitive life insurance can fall victim to extended low interest periods, market volatility and the changing cost of insurance. Then the policyholder is left with a Hobson’s choice — pay more premium into the policy or let it lapse.

But there’s another solution. The policyholder can do a 1035 exchange of that policy’s cash value into the ECI Plus annuity. The benefit-building capability of the annuity can then “stop the bleeding” and grow the death benefit base for beneficiaries over time.

The Standard has created a compelling consumer value proposition with the ECI Plus featuring the Legacy Max enhanced death benefit rider. Annuity owners can have peace of mind knowing they can leave a growing legacy to their beneficiaries. It’s anything but idle.