Our Professional Opinion on the Security Benefit Foundations Annuity
Foundations is not our first choice for protected growth. Its 1% upfront bonus is real, but it is small compensation for caps and participation rates that can change while your money remains subject to surrender charges. We would compare an annuity that locks a competitive S&P 500 cap for the full surrender period before choosing Foundations.
We prefer the five-year version as a starting point. Committing for seven years is harder to justify when Security Benefit can change the indexed crediting terms after each term. We would choose the longer version only when the actual terms and your plans make two extra years worthwhile.
Security Benefit Life Insurance Company is an acceptable insurer under our standards. Its A− (Excellent) AM Best rating meets our minimum for recommending an annuity company.
The flexible deposits and choice of traditional indexes are useful. The features we dislike are no ordinary first-year free withdrawal, charges on a full early surrender, and health waivers that generally do not begin until after the third contract year. Do not buy it for the 1% bonus alone.
What We Like
- A real account bonus: The 1% bonus is added to eligible first-year deposits, not just to a separate income calculation.
- Traditional indexes: The S&P 500, Nasdaq-100, and Russell 2000 are among the available choices.
- Flexible deposits: You can add money, subject to the contract’s rules and minimums.
- Five- or seven-year commitment: You do not have to choose a 10- or 14-year surrender schedule.
- No annual base-contract fee: You are not charged an annual fee just to own the basic annuity. Early-exit charges can still apply.
What We Don’t Like
- Caps can change: An attractive first-year cap is not guaranteed for the five- or seven-year surrender period.
- The 1% bonus is small: Better crediting terms elsewhere could make up the difference.
- No ordinary first-year free withdrawal: This is a bad place for money you might need immediately.
- A full surrender loses the ordinary free allowance: A full early exit can be more expensive than taking a partial withdrawal.
- Health-waiver access generally starts late: Many owners must wait until after the third contract year, subject to state variations.
- The MVA adds another potential cost: It can reduce early proceeds in states where it applies.
Security Benefit Foundations Annuity Overview
Foundations is a flexible-premium fixed indexed annuity. You can place money in a fixed account or select available index-linked crediting strategies. You do not own the index, and a falling index does not directly subtract an index loss from your account.
You choose a five- or seven-year surrender period. You may add money after the initial deposit, subject to contract rules. Additional deposits generally follow the original surrender schedule instead of starting a new one. Foundations is not available for new sale in New York, and options vary by state and selling firm.
Key Features
- Initial deposit: Generally at least $25,000; subsequent deposits are generally at least $1,000.
- Issue ages: Generally up to age 85, subject to state rules.
- Bonus: 1% of eligible deposits received during the first contract year.
- Strategies: A fixed account and one- and two-year index options, including traditional S&P 500 strategies.
- Free withdrawals: Generally up to 10% of beginning-of-year account value after the first anniversary; the allowance does not apply to a full surrender or annuitization.
- Early-exit charges: Surrender charges and an MVA can apply; state variations matter.
- Death benefit: Generally the greater of account value or cash surrender value, subject to the contract’s rules.
- Health waivers: Nursing-home and terminal-illness access may be available after the applicable waiting period.
Is the 1% Bonus Worth It?
The premium bonus is credited to your actual account on eligible money received during the first contract year. For example, a $100,000 eligible deposit receives a $1,000 bonus. It is not an income-rider bonus that exists only on paper.
The bonus vests immediately under the applicable state rules, but that does not make the account free of surrender charges. We like the extra money; we would not let it distract us from the crediting terms or liquidity. If another annuity has stronger growth terms or more access, 1% is not enough by itself to make Foundations the winner.
How Foundations Credits Interest
The annuity offers annual and two-year strategies. We would start by comparing the traditional S&P 500 annual point-to-point option. The other choices include indexes that use volatility controls, spreads, and asset-allocation rules; a high participation rate on one of those indexes does not mean it will outperform the S&P 500.
A cap limits the gain used to calculate an interest credit. A trigger strategy instead credits a stated rate when its conditions are met. The fixed account pays a declared rate and has a contractual minimum; its current declared rate can change.
The cap, trigger, participation rate, or spread can change after the relevant crediting term. A rate that looks attractive on day one is not locked for the entire surrender period. Compare a product with a guaranteed cap for the full commitment before accepting that risk.
Why We Prefer Annual Crediting
We generally prefer annual point-to-point crediting over a two-year strategy. Over ten years, annual terms give you ten chances for a credit; two-year terms give you five. More opportunities do not guarantee better performance, but an annual gain can be credited before a later decline.
A two-year index could rise in its first year and fall back before the term ends, producing no credit for the full period. Foundations does not permit transfers out of a two-year index account before its term ends, and withdrawals or deductions can affect the full interest credit. A bigger headline participation rate is not enough reason by itself to accept that tradeoff.
Withdrawals and Surrender Charges
There is no ordinary free withdrawal during the first contract year. After the first anniversary, you can generally take up to 10% of the beginning-of-year account value each year without a surrender charge or MVA.
The detail that stinks: the ordinary allowance does not apply to a full surrender or annuitization during the surrender period. A full exit can therefore cost more than a partial withdrawal. Ask for the actual cash surrender value before making a decision.
The standard surrender charge schedules are below. Connecticut and Delaware use different schedules, and other contract terms vary by state.
| Contract year | Foundations 5 | Foundations 7 |
|---|---|---|
| 1 | 9% | 9% |
| 2 | 8% | 8% |
| 3 | 7% | 7% |
| 4 | 6% | 6% |
| 5 | 5% | 5% |
| 6 | 0% | 4% |
| 7 | 0% | 3% |
| 8+ | 0% | 0% |
On qualifying contracts, Security Benefit currently processes required minimum distributions without surrender charges or an MVA. This is company practice rather than a contractual guarantee and does not apply to distributions from inherited IRA accounts. Confirm the rules before relying on it.
Market Value Adjustment
An applicable market value adjustment can increase or decrease early-withdrawal proceeds in addition to the surrender charge. It may also apply to annuitization and in certain death and joint-ownership situations. The MVA does not apply in several states, including California, so check the terms for your contract.
The guaranteed minimum cash surrender value is a separate floor calculation. It is generally based on 87.5% of purchase payments, reduced for withdrawals and applicable premium taxes, plus interest at the guaranteed minimum rate. It does not mean you can always exit early with your full deposit and bonus.
Nursing Home and Terminal Illness Waivers
Qualifying nursing-home confinement or terminal illness can allow withdrawals with charges waived under the waiver rules. In most states, access starts after the third contract year. Pennsylvania and Texas allow it after the first year, while Connecticut has different rules beginning in the first year. State rules determine which charges can be waived.
The nursing-home waiver is unavailable in California and Massachusetts; the terminal-illness waiver is unavailable in California and New Jersey. These waivers provide access to your own account, not a separate pool of long-term care insurance. Keep an emergency fund outside the annuity.
Death Benefit and Your Spouse
Before annuity payments begin, the beneficiary generally receives the greater of the account value or cash surrender value. Withdrawals reduce the money left for family. Ask how the contract treats a death involving joint ownership, because an MVA or surrender charge can apply in certain circumstances.
If your spouse is your beneficiary, confirm whether the contract permits spousal continuation and how ownership and beneficiary designations affect that choice. Do not assume a spouse can continue the contract without confirming the applicable policy.
What We Would Compare Instead
For accumulation, compare Foundations with a MYGA for a similar period. A MYGA guarantees an actual interest rate; Foundations offers index-linked potential but can credit zero in an unfavorable term. If the guaranteed result meets your goal, we would not give up that certainty just for a 1% bonus.
We would also compare other fixed indexed annuities, particularly a competitive annual S&P 500 strategy whose cap is locked for the surrender period. Compare the actual caps, deposit, term, access, and insurer strength—not an illustration that assumes every future year is favorable.
If the goal is a guaranteed paycheck for life, Foundations would not be our starting point. Compare a guaranteed lifetime withdrawal benefit using the same deposit, ages, income start date, and covered lives.
Our Final Verdict on Foundations
We would not buy Foundations for its 1% bonus. The traditional index choices and flexible deposits are useful, but renewable crediting terms, no ordinary first-year withdrawal, and a full-surrender restriction are serious tradeoffs.
Start with the five-year version if you are comparing Foundations. Then compare a locked-cap indexed annuity and a MYGA from financially strong insurers. We would choose Foundations only when its complete terms beat those alternatives for your actual goals—not because the bonus makes the sales illustration look better.
Contact The Annuity Expert for free annuity quotes. We can compare Foundations with other accumulation and lifetime-income options using your deposit, timeline, and access needs.
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