Myth vs Math: "A 10% Bonus Is Free Money" — The Participation Rate Trade-Off

The Myth: "Sign today and get a 10% bonus on your money!" It sounds like free money. It's not. The Reality: Bonus products almost always have lower participation rates, lower caps, longer surrender periods, or higher fees. The bonus is funded by reduced crediting potential. CANNEX Comparison: 10% Bonus Product vs 0% Bonus Product Feature Bonus Product No-Bonus Product Premium $200,000 $200,000 Upfront Bonus 10% ($20,000) 0% ($0) Starting Value $220,000 $200,000 S&P 500 Cap Rate 6.00% 11.50% Surrender Period 10 years 7 years Income Rider Fee 1.40% 0.95% 10-Year Projection (assuming 8% average S&P return): Year Bonus Product No-Bonus Product Difference 0 $220,000 $200,000 +$20,000 3 $226,400 $223,500 +$2,900 5 $228,100 $241,800 -$13,700 7 $229,500 $262,300 -$32,800 10 $231,200 $289,400 -$58,200 The no-bonus product wins by $58,200 over 10 years. The 10% bonus gives you a $20K head start — but the lower cap rate (6% vs 11.5%) means you barely participate in market gains. By year 5, the no-bonus product has overtaken the bonus product, and the gap widens dramatically. Key Takeaway: Don't chase the shiny 10%. The $20K "bonus" costs you $58K in lost growth. Always compare the net outcome, not the headline number. Projections use simplified cap rate crediting. Actual results vary by product, index, and market conditions. Data from CANNEX product specifications.