Income Riders

Income riders, also called Guaranteed Lifetime Withdrawal Benefits (GLWBs), are optional add-ons to deferred annuities that guarantee lifetime income while maintaining access to your account value. How Income Riders Work An income rider creates a separate "income base" that determines your guaranteed withdrawals. This income base often grows at a guaranteed rate during the deferral period. Income Base: The value used to calculate guaranteed withdrawals Account Value: The actual cash value you can access Withdrawal Percentage: The rate applied to income base for annual withdrawals Income Base Growth During the deferral period, the income base typically grows through: Roll-up Rate: Guaranteed annual increase (e.g., 7% simple or compound) Step-up: Locks in higher value if account value exceeds income base Premium Bonus: Initial boost to income base (e.g., 10% bonus) Withdrawal Percentages The percentage of your income base you can withdraw annually, typically based on age: Age 60-64: 4.0-4.5% Age 65-69: 5.0-5.5% Age 70-74: 5.5-6.0% Age 75+: 6.0-7.0% Lifetime Guarantee Even if your account value drops to zero due to withdrawals or market losses, the insurance company guarantees your income payments continue for life. Rider Costs Income riders typically cost 0.75% to 1.25% annually, charged against the account value or income base. Compare costs carefully as they significantly impact long-term performance. Key Differences from SPIAs Maintain access to account value (with potential surrender charges) Flexibility on when to start income Death benefit passes to beneficiaries Generally lower income than equivalent SPIA