The Accumulator Series is a group of variable annuities as the name suggests offered by Axa Equitable. There are 4 different annuities choices within the Accumulator Series with each having slight difference between them, but basically they all share common elements which according to the AXA promotional brochure are:
“The Accumulator® variable annuity is a long-term retirement product that allows you the ability to invest for growth potential on a tax-deferred basis. In the most basic terms, annuities are contracts between you and an insurance company to accumulate funds and then to provide lifetime payments. There are contract limitations and fees and charges associated with Accumulator®, which include, but are not limited to, operations, distribution, withdrawal and administrative expense and charges for optional benefits.
Accumulator® provides for guaranteed benefits through optional riders available for an additional fee; the Guaranteed Minimum Income Benefit (GMIB) can protect retirement income, and the Guaranteed Minimum Death Benefits (GMDB) which provide the ability to preserve the value of your death benefit for your legacy. A variety of equity portfolios allows you to participate in the market.”
The four choices in the Accumulator Series offered by Axa Equitable are:
If you are not familiar with the term, an annuity is just a contract or agreement between a person (like you) and an insurance company. Commonly people who research (and may ultimately end up investing in) annuities are looking to grow their money, and for the lifetime income stream option that many annuities offer.
The lifetime income stream is called a living benefit because you get the benefit while you are living. Keep in mind that the lifetime income stream is a separate feature from the growing your money feature. Though many (most) fixed index and variable annuities offer both features, the two features are distinct and separate and having one does not guarantee that an annuity has the other. The Accumulator Series offered by Axa Equitable does offer lifetime income streams options but you have to elect this option and pay for this feature, it’s not free. The cost of the lifetime income stream option for the Accumulator Series can be as high as 2.50% annually and can only be elected when the annuity is first issued.
What Is a Variable Annuity?
A variable annuity is a contract between a person (like you) and an insurance company. It’s a generally designed as a long-term investment for retirement purposes. The person opening the variable annuity account places money in professionally managed investment portfolios, where potential growth can accumulate in a tax-deferred manner. When the person who opened the variable annuity account retires, the monies that potentially accumulated in the variable annuity can be used to generate a stream of regular income payments that are guaranteed for as long as they live. Additionally some variable annuities may provide a guaranteed death benefit for the persons beneficiaries.
How Does a Variable Annuity Differ From a Fixed Index Annuity?
Although the financial goals and objectives for people interested in annuities are usually quite similar, the way different types of annuities help people achieve those goals and objectives can be completely different. Fixed index annuities can provide a guaranteed income stream for life. Variable annuities can also provide a guaranteed income stream for life. Additionally fixed index annuities can grow your money. Well variable annuities can grow your money too. What’s the difference?
First off, generally speaking variable annuities have higher fees than fixed index annuities. Also, variable annuities usually have a more complex structure than fixed index annuities making them difficult to determine exactly what fees are charged, what penalties might be incurred for lump sum withdrawals and how gains are credited. For example the Accumulator Series offered by Axa Equitable prospectus is 376 pages long, add in the Investment Sub-Account prospectuses each with hundreds of pages of their own and you easily reach a thousand pages of reading material just to make an informed investment decision.
In addition, with fixed index annuities your money is never at risk due to market downturns. So what this means is that if the market goes up your money can go up, but if the market goes down your money won’t follow the market down.
With variable annuities your money is at risk of being lost, your money will follow the market down. Worst case? Your money is all gone. Is that a probable or like scenario? No, but be aware of potential. However just like with the fixed index annuity your money can follow the market upwards.
Why would anyone choose a variable annuity over a fixed index annuity? The fixed index annuity does not have the potential market downside losses that the variable has. Why would anyone risk their money to market downturns if they didn’t have to?Drum roll please and the answer is: Risk vs Reward. The typical variable annuity offers a lot more upside potential than the typical fixed index annuity, so consequently it can potentially offer more lifetime income.
Fees, penalties and fine print. And the Accumulator Series offered by Axa Equitable variable annuities have lots of them. Are you ready?
Fees: The minimum annual fees and expenses in the Accumulator Series are 1.81% and the maximum annual fees and expenses go all the way up to 2.86%. There also are annual separate Investment Management fees that range from .71% to 1.46%. Add the two fee categories together and you could potentially reach 4.32% in annual fees that you are charged even if you suffered a market loss for that year.
Penalties: The early withdrawal penalties period(surrender penalty) is a fee that you can be subject to upon early withdrawal of money from your account. Axa Equitable call their surrender penalty the Contingent Withdrawal Charge (CWC) and on at least one of the choices it can be as long as 9 years and the amount can be as high as 8% in the first year. This product is designed for the long term and lump sum withdrawals in the first few years can be very expensive.
Fine Print: The 376 page prospectus for the Accumulator Series offered by Axa Equitable variable annuities can be found here.
Commissions: The maximum commissions paid on this product are 8.5%.
You may be able to tell from the review that I am not a big fan of variable annuities, but I did try to be as fair minded as possible. My take on variable annuities, is if you want uncapped growth and you are willing to take the downside risks of the market, then research opening a brokerage account and invest in the positions/funds directly. This way you are going to save on all the variable annuity related fees and you can access your money without having to worry about penalties.
If you are still considering a variable annuity and want to be sure it is right for you than make sure you get the annuity tested. We can do that for you here at AnnuityInvestigator and we can help you determine if the returns that your agent or advisor is illustrating for you are realistic. We can also answer additional questions and give you some ideas about strategies that mirror the upside potential of variable annuities but don’t have the downsides of variable annuities (high fees, withdrawal penalties, no downside protection).
For Your Consideration
This is an independent product review, not a recommendation to buy or sell an annuity. This review is not endorsed by any insurance company and I do not receive any compensation for this review. This review is meant to be an independent analysis to provide the reader with information and concepts to help them make informed decisions. Before purchasing any investment product be sure to do your own due diligence and consult a properly licensed professional should you have specific questions as they relate to your individual circumstances. All names, marks, and materials used for this review are property of their respective owners.