Income Riders are attached benefits to deferred annuity policies like Fixed Index Annuities (FIAs) or Variable Annuities (VAs). You decide to attach an Income Rider at the time of application if you want a guaranteed lifetime income stream to turn on at a future date of your choice.
If you are thinking about purchasing the best and highest Income Rider contractual guarantee, then you need to use our proprietary Annuity Income Rider Calculator. There is not one Income Rider that is better than the other. The best Income Rider is the one that provides you with the highest contractual guarantee after quoting all carriers.
Below are some of the key benefits that Income Riders can contractually provide:
Income Riders are not an annuity product. It is an attached benefit to an annuity that provides a lifetime income stream that starts in the future. All types of annuities are issued by a life insurance company and that issuing insurer also guarantees that rider income payment.
Annuity contracts should be considered transfer-of-risk strategies. You are transferring the risk to the issuing annuity company. With Income Riders, you are transferring “longevity risk,” which is the fear of outliving your money. In essence, Income Riders are your own personal pension plan that provides a retirement income stream you can never outlive.
When you decide to attach an Income Rider to a policy, the sole focus should be on the contractual guarantee that the rider provides. The accumulation part of the indexed annuity or variable annuity is a non-event, and where the annual rider fees are deducted during the accumulation phase and for the life of the policy.
If you visually draw a line down a blank sheet of paper, the left-hand side of the ledger is the accumulation value. That would be the index option value for FIAs and the mutual funds (AKA separate accounts) for VAs. The right-hand side of the ledger is the Income Rider valuation and a completely separate calculation from the accumulation value. When you decide to turn on the income stream, you will choose the highest value of those 2 calculations. The vast majority of the time, the Income Rider value will be the highest because it’s designed that way so that the annuity company can hold onto the money while they pay the lifetime income stream.
It is very important to point out that Income Rider values are monopoly money and a phantom account. In other words, you cannot cash out the lump sum rider valuation. You cannot peel off the interest rate (i.e. roll-up fixed rate), and you cannot transfer the Income Rider amount to another one of your retirement plans. The majority of Income Riders can only be used to calculate your first lifetime income payment. There are some that offer confinement care benefits and death benefits, but most are for income.
When deciding to purchase an Income Rider, you need to look at the claims-paying ability of the issuing carrier. If you are shopping for and buying lifetime income, then you have to make sure that the annuity company can pay regardless of how long you live. In addition, you need to look at the surrender charges of the underlying deferred annuity that the Income Rider is attached to.
Before you purchase an Income Rider, you need to schedule a call with Stan The Annuity Man himself so you can fully understand the strategy to make an informed decision on your terms and on your time frame. There is no obligation or cost for this phone call, and you will not regret the brutally factual and truthful approach Stan The Annuity Man provides.