Guaranteed Income Streams

  • Guaranteed Withdrawal Benefits and Lifetime Income Riders

  • Guaranteed Retirement Income Without Giving Up Access To Your Principal


There are plenty of ways to create retirement income, but only a few of them come with guarantees.

Many of the guaranteed withdrawal benefit riders and lifetime income riders offered in some of the recent annuity contracts are quite appealing because they do just that; they guarantee lifetime income.

There are some really great products out there, but as with any investment, do your homework first. When looking for an annuity that offers a guaranteed withdrawal benefit rider or lifetime income rider, here’s what to look for

Understand the terms of the rider.

Lifetime income riders may be referred to using several different terms, and a lifetime income rider is not the same as a guaranteed minimum withdrawal benefit. The concept behind a Lifetime Income Rider is simple. If you purchase a Lifetime Income Rider with your annuity, the insurance company guarantees a regular monthly, quarterly, or annual payment for your lifetime, even if your account balance goes to zero. For example, suppose you invest $100,000 in an annuity with a 5 percent lifetime withdrawal benefit rider. The insurance company guarantees that you can withdraw $5,000 per year for the rest of your life, even if your account balance is zero. In such a case, the insurance company uses its own money to pay you, until you die. A Lifetime Income Rider assures you that you will never outlive your assets. As such, Lifetime Income Riders are most suited for investors who plan on a lengthy retirement (say, thirty years or more), and the peace of mind of regular, guaranteed income.

Additional Cost of Riders

Riders are extra features on your annuity policy that provide you with additional guarantees or death benefits. Depending on the extent of the benefit, riders can cost .25 – 1.00% of the policy value per year.

No Annuitization Required

You want to find a guaranteed minimum withdrawal rider or lifetime income rider that does not require you to annuitize your contract in order to exercise the rider. What does that mean? It means you can withdraw a guaranteed amount each year (5% for example), but if you needed to, you could still access your remaining principal (although doing so may reduce the amount of guaranteed income you could withdraw). It also means upon your death, any remaining funds are still available to pass along to heirs.

An annual step up that locks in your income base.

This feature means your future income can only go up, not down. How does it work? Each year on your contract anniversary, the annuity company takes a look at your account value. If it is higher than it was the year before, the new amount becomes your income base upon which the guaranteed withdrawal benefit or lifetime income rider is calculated. If the contract value is less than it was the year before, your income base remains as it was, so your income base cannot go down; only up.

An insurance company that has quality ratings.

A guarantee is only as good as the company that issues it. Historically, insurance company guarantees have been something you can rely on. To be safe be sure to buy from companies that have quality ratings. For an additional layer of safety some people prefer to choose two or three quality insurance companies that offer policies with the features described above, and spread their money across