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.

 

Key Points

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• Future income guarantees are contractual

 

• Can be used in Traditional IRAs, Roth IRAs, non-IRAs

 

• Can be structured for single or joint life payments

 

• Some Riders offer confinement care benefits

 

• Some Riders can also be used as a death benefit

 

• Guaranteed roll-up rates during the deferral period

 

• Rider fee comes out of the accumulation value

 

• Income can be stopped and started

 

An Attached Benefit

 

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 FIA's and the mutual funds (AKA separate accounts) for VA's. 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. Income Riders are a guaranteed future pension payment.

 

Coverage Summary

 

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.

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