Annuity Riders for Market Volatility: The Low-down on Protected Income Value (PIV) Riders


Are you concerned about market volatility and the potential impact it could have on your retirement income? If so, you may want to consider adding an annuity rider to your investment portfolio. An annuity rider is an optional feature that can be added to an annuity contract to provide additional protection and benefits. In this article, we will explore the Protected Income Value (PIV) rider, a popular annuity rider designed to protect your retirement income from market volatility.

Defining the PIV Rider

The PIV rider is a type of annuity rider that is designed to provide a guaranteed income stream regardless of market performance. A PIV rider shields your retirement income from market declines, ensuring peace of mind and financial stability. The rider works by setting a “protected income value” for your annuity. This value represents the minimum income you will receive from your annuity, regardless of market performance.

Many insurance companies that offer annuity products also offer Protected Income Value (PIV) riders. Some of the well-known insurance companies that provide PIV riders are Allianz, Nationwide, Lincoln Financial Group, AIG, Jackson National, and Pacific Life.

It’s important to note that the availability of PIV riders may vary by state and by the specific annuity product offered by the insurance company.

How do PIV Riders Work?

PIV riders work by creating a separate account within the annuity contract, which is used to calculate the guaranteed minimum income. Different annuity companies may offer different terms for PIV riders. An example PIV rider’s value is based on a percentage of the initial investment or a guaranteed rate of return, typically ranging from 4% to 6%. For example, if an individual invests $100,000 in an annuity with a PIV rider that guarantees a 5% rate of return, the PIV rider’s value would be $5,000.

Upon retirement, annuitants may opt for higher income between a guaranteed minimum and investment-generated income from their annuity.

If the investments perform well and generate income that exceeds the guaranteed minimum, the annuitant will receive the higher amount.

Allianz’s annuities are popular for offering the Protected Income Value riders in many of their plans. One of their popular plan offering the PIV rider is the Allianz 222 Fixed Indexed Annuity. You can check our unbiased review of the Allianz 222 plan here.

Benefits of PIV Riders

There are several benefits to adding a Protected Income Value (PIV) rider to an annuity contract, including:

  • Protection against market volatility: PIV riders can provide protection against market volatility, as the guaranteed minimum income is not affected by fluctuations in the stock market or other investments.
  • Guaranteed income: The PIV rider provides a minimum level of guaranteed income in retirement, regardless of underlying investments’ performances. This can provide peace of mind for individuals concerned about market volatility and the risk of outliving their savings.
  • Flexibility: The annuitant can choose to receive the greater of the guaranteed minimum income or the actual income generated by the underlying investments, providing flexibility to choose the income stream based on the higher of the above.
  • Tax-deferred growth: The PIV rider, like annuity contracts, provides tax-deferred growth on the investment. This means the annuitant does not pay taxes on the earnings until they begin receiving income from the annuity.
  • Predictable income stream: The PIV rider provides a predictable income stream in retirement. This can help individuals plan and budget for their expenses.
  • Inflation protection: Some PIV riders offer inflation protection. This means the guaranteed minimum income will increase over time to keep pace with inflation. This can help individuals maintain their standard of living in retirement and protect against purchasing power erosion over time.
  • Diversification: PIV riders can provide diversification within a retirement portfolio. Individuals can create a guaranteed income source, not linked to other investments’ performance like stocks or bonds, by adding an annuity with a PIV rider.
  • Long-term financial stability: The PIV rider can help ensure long-term financial stability, as the guaranteed minimum income provides a source of income that will continue throughout one’s lifetime.

Limitations of PIV Riders

While Protected Income Value (PIV) riders can provide several benefits, there are also limitations to consider. Here are a few limitations of PIV riders:

  • Fees and charges: PIV riders typically come with fees and charges, which can erode the overall value of the investment. Adding a PIV rider to your annuity contract can increase the cost of the annuity. It’s essential to carefully review the costs associated with the rider ensuring they are in line with the potential benefits. However, the benefits of the rider may outweigh the additional costs, especially for individuals who are concerned about market volatility.
  • Lower potential gains: While the guaranteed minimum income provided by the PIV rider can provide peace of mind, it may be lower than the actual income generated by the underlying investments. This means that individuals may miss out on potential gains in favor of the security of a guaranteed income.
  • Complexity: It can be difficult to comprehend a PIV rider’s complete pros and cons since annuity contracts and riders are intricate financial products. A qualified financial advisor is necessary to comprehend rider complexities, suitability, and retirement planning goals for an individual’s financial situation.
  • Insolvency Risk: Insurance companies issue annuities, and there is a risk of insolvency of the issuing company. Although state guarantee associations back annuities, coverage amount differs per state, and there is still a potential loss risk.

Factors to Consider While Opting for PIV Riders

When considering a Protected Income Value (PIV) rider, there are several factors to keep in mind. 

Terms – It is important to consider the terms of the PIV rider. For example, some riders may have a minimum holding period before the PIV activates. Others may have limitations on the frequency or amount of withdrawals you can make from the annuity. Understanding the terms of the rider is critical to maximizing its benefits and avoiding any unexpected limitations or fees.

Risk-return tradeoff – Insurance companies usually provide PIV riders as an add-on feature for variable annuities. This means that the underlying investments can have a significant impact on the income stream generated by the annuity. Prioritize matching the annuity’s investment options with personal risk tolerance and investment objectives to make an informed decision.

Costs – PIV riders often come with additional fees and charges, which can impact the overall value of the annuity. It’s vital to make sure the rider costs are reasonable and proportional to their potential benefits by closely reviewing them.

Solvency – Additionally, it is important to consider the financial strength and stability of the insurance company offering the rider. Insurers’ financial stability and credit rating, which may be affected by financial difficulties, determine your retirement income safety. It is important to research the insurer’s financial strength and credit rating before purchasing an annuity with a PIV rider.

Tax implications – Lastly, the tax implications of annuities with PIV riders can be complex. A competent financial advisor can clarify the rider’s tax implications and ensure complete understanding.

Guide on Tax Implications of PIV Riders

The tax implications of a Protected Income Value (PIV) rider can be complex. They depend on several factors, including the type of annuity product, the rider terms, and the annuitant’s individual tax situation. Here are some general tax considerations related to PIV riders:

  • Tax-deferred growth: Like all annuities, annuities with PIV riders offer tax-deferred growth. It means that taxes are not levied on investment gains until their withdrawal. Individuals in a high tax bracket during their working years but anticipate a lower bracket during retirement can benefit significantly.
  • Taxation of income: Tax officials usually tax the income generated by a PIV rider as ordinary income when you receive it. If the annuity rider is a qualified PIV rider, such as 401(k), the income may be taxed as ordinary income when it is withdrawn. On the contrary, in non-qualified annuities, the portion of the withdrawal that represents the return of the annuity owner’s investment (principal) will not be subject to taxes.
  • Required Minimum Distributions (RMDs): If an annuity with a PIV rider is held in a qualified retirement account, such as 401(k), the annuitant must take annual RMDs at age 72. They determine the RMD based on the annuitant’s life expectancy and the annuity’s value, which is then subject to ordinary income tax. However, there are no RMD requirements for non-qualified PIV riders.
  • Surrender charges: If the annuitant withdraws money from the annuity with a PIV rider before the age of 59 ½, they may be subject to surrender charges and a 10% early withdrawal penalty, in addition to any applicable income taxes.
  • Estate Taxes: For estate tax purposes, the annuity value with a PIV rider may be part of the annuitant’s estate, leading to extra taxes for their heirs.

Tax laws and regulations can be complex and subject to change. You should consult a financial advisor to comprehend the PIV rider’s tax impact and establish an apt plan for personal conditions.


In conclusion, the PIV rider is a powerful tool for protecting your retirement income from market volatility. The rider provides a guaranteed income stream, regardless of market performance, and can be added to a variety of annuity products. Assess the rider’s costs/terms and the insurer’s strength to ensure it aligns with your goals before making a decision. With careful consideration and research, the PIV rider can be a valuable addition to your retirement investment portfolio.


Please enter your comment!
Please enter your name here