How Lifetime Income Benefits Work

Let’s say you decide to invest $300,000 in a variable annuity with an optional 5% lifetime income benefit rider. Once you sign the contract, the insurance company guarantees you $15,000 annually for the rest of your life even if the balance of your account falls to zero along the way.

The following three scenarios (referencing the same $300,000 annuity and 5% rider) demonstrate how powerful this annuity/rider combination can be in various markets.

Scenario 1: The market performs poorly in the years before your retirement…

Ten years after your initial investment, you decide to retire, but due to poor market conditions, the value of your annuity has dropped to $150,000. However, because of the minimum compounded growth rate of 5%, your withdrawal will be calculated from roughly $489,000 – 5% growth on $300,000 for the past 10 years. This would give you nearly $25,000 every year for the rest of your life, even if the market never recovers.

Scenario 2: The market performs well in the years before your retirement…

Five years after your initial investment, you decide to retire. Luckily, the market had a great few years and now your annuity is worth $600,000. That growth is much higher than the 5% annual minimum. You can now take 5% withdrawals on the benefit base of $600,000. This equates to $30,000 annually for the rest of your life, even if the account value falls to $0.

Scenario 3: The market performs unevenly in the years before your retirement…

Eight years after your initial investment, the account value has risen to $425,000, but the following year, the market crashes and does not recover by the time you’re ready to retire in year 12. Luckily, you selected a LIB rider that offers annual step-ups, and you stepped-up your account value to $425,000 during year eight. Even though when you’re ready to retire the account value has fallen to $235,000, your annual income is based on the step-up to $425,000. This equates to $21,000 annually for the rest of your life. Had you not elected a rider with a step-up feature, your annual income would be based on $235,000 – $12,000 annually for the rest of your life.

Share Button

Annuityfyi.com - Prefooter

Contact

Mailing Address:

1165 NE 105 St.
Miami Shores, FL 33138

Email:

support@annuityfyi.com

Phone:

(866) 223-2121

Follow Us On

Click for the BBB Business Review of this Annuities in Miami Shores FL

Copyright © AFYI Holdings Group, LLC, All Rights Reserved

Share On Facebook
Share On Twitter
Share On Linkedin
Share On Pinterest