Wondering what ‘annuity rider’ means? Let’s dive straight into the meaning, the different types, and how they work.
What Are Annuity Riders?
Annuity sales continue to grow in the United States and a lot of the credit for this increased consumer popularity lies within annuity riders.
Annuity riders are additional provisions offering benefits and protections not already included in a standard contract. There are different types of annuity riders you can add depending on what the end goal of the contract is but the benefits and protections most commonly affect both the investment and the investor.
Riders are available on all types of annuities including, but not limited to:
- Immediate annuities
- Indexed annuities
- Deferred annuities
- Fixed or Multi-year Guaranteed Annuities (MYGAs)
Types of Annuity Riders
Generally, annuity riders fall into one of two categories: living benefits and death benefits.
Living Benefit Riders
As the name implies, living benefits provide additional benefits to the annuity contract owner while they are alive. This type of rider will yield a financial benefit of some kind for the annuity purchaser.
There are a few specific riders in this category you should be aware of:
Guaranteed Lifetime Income Benefit (LIB):
This rider allows you to take a lifetime of income from your annuity without losing control of your retirement assets.
Retirement Income Choice
Guaranteed Minimum Withdrawal Benefit Rider (GMWB):
Oftentimes, this specific rider is paired with variable and fixed index annuities. This rider allows the owner to withdraw a percentage of their annual contribution amount while guaranteeing that your payments will never dip lower than a certain level regardless of how the market performs.
Guaranteed Minimum Income Benefit (GMIB):
This rider provides a guaranteed minimum level of annuity/income payments for a specified period regardless of the volatility of the market.
Guaranteed Account Value Benefit (GAV):
Added to a variable annuity this rider guarantees your initial premium amount as a lump sum regardless of market performance, allows your account value to appreciate with market upside and allows you to withdraw 100% of your account value at the end of a certain time period
Cost of Living/Inflation Rider:
A cost of living rider helps offset the effects of inflation on your income payments. By adding one to your annuity contract, you can ensure that your income payments will increase over time at a rate equal to or greater than the inflation rate. This way, you can keep up with the rising costs of living and maintain your purchasing power well into retirement.
Death Benefit Riders
Death benefit riders afford financial benefits to someone other than you after you pass away. Essentially these types of riders ensure you leave something behind after you pass.
This provision guarantees, at a minimum, that upon your death the total amount of your premiums are paid to your beneficiaries.
Contact AnnuityFYI using the form below to determine which annuity rider may be right for you!