Farmers Harvest Enhanced Liquidity Package 5-Year review

What you give up for that protection is upside and access: the credit on any given strategy is limited by a cap, participation rate, or spread, and the money is under a surrender charge for 5 years.

Its S&P 500 Annual Point-to-Point Cap Rate account caps at 7.50% — one of 11 crediting accounts on the contract. The full menu, with every account's own cap, participation rate, or spread, is in the table below.

A fixed indexed annuity works by measuring an index's return over a set period and applying a crediting formula to decide how much of it you keep. A cap sets a ceiling on the credit; a participation rate credits a percentage of the index's gain; a spread subtracts a fixed amount before crediting the rest. None of it is direct market ownership, and none of these formulas can produce a negative credit — the worst a crediting period can do is pay zero. The guarantee behind all of it is a contractual obligation of Farmers Life Insurance Company, backed by the company's own reserves, not by the FDIC and not by any bank.

The contract also carries a declared fixed account paying 3.75%, for premium you would rather not tie to an index at all. Money can typically be moved between the fixed account and the index strategies at each contract anniversary; check the carrier's disclosure for the exact transfer window.

The contract allows 10% out each year without a surrender charge. Beyond that allowance, a withdrawal during the surrender period is reduced by the charge for that contract year — on top of whatever the index accounts did or didn't earn.

The surrender charge starts at 9% in year 1 and steps down to 5% in year 5; the full schedule is in the table below. Those percentages come off the amount you withdraw, which is why an early exit can return less than you put in even in a year the index accounts credited something.

This contract also carries a market value adjustment. On top of the surrender charge, an early withdrawal is adjusted up or down depending on how interest rates have moved since the contract was issued — if rates have risen, the adjustment works against you. It applies only to withdrawals above the free amount during the surrender period.

Of the 5 crediting accounts our rate data reports a strategy-fee figure for, 5 carry an explicit annual charge on top of what it credits — often the cost of a higher cap or an uncapped participation rate. Each account's own rate is in the table below rather than summarized here, because it varies account to account. Our rate data doesn't carry a fee figure at all for 6 other accounts on the menu — that is a gap in the data, not evidence those are free.

Our rate data does not carry a rider for this contract. That is a gap in the data, not proof the contract has none — waiver-type riders such as a nursing-home or terminal-illness benefit sit entirely outside what our rate data reports, so check the carrier's brochure or ask directly before assuming there isn't one. A strategy charge on an individual crediting account, where it exists, is a separate cost from a rider charge and is called out on its own on this page.

The real tradeoffs on a contract like this are the crediting caps and the surrender period, not a visible fee line. Gains come out as ordinary income rather than capital gains, and a withdrawal before age 59½ generally carries a 10% IRS penalty on top of the tax. Neither is a reason to avoid the product; both are reasons it suits money you have already decided not to touch.

This contract fits someone who wants a floor under retirement money and is willing to trade full market upside for it, and who can leave the premium alone for 5 years. It is not a substitute for direct market investing — the caps and participation limits mean a strong market year is only partly captured.

It does not fit an emergency fund, money that may be needed for a medical or housing event, or a buyer who expects to capture a bull market in full. Anyone under 59½ should weigh the tax penalty before treating this as a savings account.

Every guarantee in this contract is only as good as Farmers Life Insurance Company, which currently holds an A.M. Best financial strength rating of B++. An annuity is not FDIC insured; the backstop is the carrier's own balance sheet, with state guaranty association coverage behind it at limits that vary by state.

The contract is filed in 27 states, not including New York — New York files its own annuity products, so a New York resident is shopping a different and much smaller shelf.