Flex Accumulator review

In exchange, every crediting strategy on the contract caps, participates in, or spreads the index return rather than paying it in full, and the premium is committed for 10 years.

Its S&P 500 1-Year Annual Point-to-Point w/Cap account caps at 9.25% — one of 13 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 Fidelity & Guaranty Life, 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 12% in year 1 and steps down to 3% in year 10; 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 8 other accounts on the menu — that is a gap in the data, not evidence those are free.

The contract carries 2 riders (Flex Accumulator Enhanced Death Benefit Rider, Flex Accumulator Enhanced Death Benefit Rider Age 70+), and our rate data does not carry a charge for them. That is a gap in the data rather than evidence there is no charge, so ask the carrier for the rider's fee schedule in writing before you treat it as costless.

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.

The buyer this suits already wants downside protection more than upside, and is comfortable getting a share of an index's gain in exchange for never taking its losses for 10 years. Protection is the product being sold; full market participation is not.

It is the wrong contract for anyone who might need the principal early, for a buyer who wants uncapped market exposure, and for money that is already an emergency reserve. Under age 59½, the 10% IRS penalty on early withdrawals is an additional reason to look at this as long-term money.

Every guarantee in this contract is only as good as Fidelity & Guaranty Life, which currently holds an A.M. Best financial strength rating of A. 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 50 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.