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Is An Annuity Income Rider A Good Deal?

Is an annuity income rider a  good deal?  Annuity income riders are available on both fixed and variable annuities.  Although most people do not understand them very well, income riders are not that complicated.  Although companies have different bells and whistles on them, income riders are all very similar regardless of the company offering them.

The basic concept of an income rider is that they are a product investors use to create a future income stream.  Investors can determine their income down to the dollar at any future date.  This makes them very predictable.  An example is the best way to describe an income rider.

(Example)-

A person decides they would like to have a future income stream to supplement their retirement income they receive from Social Security and a pension.  They decide they have $250,000 that they can dedicate to future income.

The investor puts $250,000 into an income rider.  The income rider will show them exactly how much lifetime income they will be able to take in the future.  They can choose to start collecting income in any year they would like.   Although, once they start collecting income, the amount they receive every month will never increase.   The income will payout for life but their initial investment will erode over time.  When the $250,000 runs out they will still have the income payment however.

The positives of an income rider are the following…..

• Can predict future income right down to the exact dollar in any given year.
• This income has a guaranteed payment. The longer you wait to turn it on the more it will pay out for life.
• Market conditions have absolutely no effect on the deferred income increase on the rider.
• You will still have access to the lump sum investment even after you start to receive income payments.

The negatives of an income rider are…..

• Once you start to take payments your account will never increase.
• There is an annual fee for the income rider which your provider deducts from the account value (The $250,000 in the example) of the investment.
• The account value will steadily decrease  for every year the income rider pays you.

Income riders can be very useful if they are used for the right purposes (Generating future guaranteed income).  They can also be a terrible investment if used for the wrong reasons.  Many will argue that a larger future income stream can be created using other methods but they can not do it on a 100% guaranteed basis like an income rider can.

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There are multiple types of annuities that produce income.  The three main types are a Single Premium Immediate Annuity (SPIA), Fixed indexed annuity with income rider and  a deferred income annuity (sometimes called a longevity annuity).  They key is to know the strength of each product and the best time/situation to use it. Read more

The term “Life Annuity” is rather generic and can have multiple meanings but it is almost always used when describing lifetime income from an annuity product.   This post provides detail on the most common uses of the term and provide detail on how a lifetime income annuity works.

First meaning of the term “Life Annuity” = Annuity with a lifetime income rider: There are a number of companies that offer income riders that can be added to their annuity products.  The income rider is a way to guarantee a lifetime income stream off of you investment for life.  The riders usually provide for a substantial bonus on your money up front (approx. 2% to 10% depending on product)  and will increase every year at a set compound interest rate (Going rate is 4% to 8% per year).  Money in the product is guaranteed to increase at the specified rate for up to a specific number of years.  Many companies cap the growth and 10, 15 or 20 years.

The point of the income rider is that it allows the investor to calculate exactly how much income they will be able to draw in future years.  Once they decide to turn income on, it will pay out for the rest of their lives or if they have a spouse, it will pay out until both pass away.  Income riders have become hugely popular in the last 10 years due to the perceived unpredictability of the stock market.   Income riders can usually be added to fixed, fixed indexed or Variable annuities.   The purchaser should know that the income rider guarantees the income only.  It does not guarantee growth of the actual lump sum investment.

The second meaning of the term “Life Annuity” is usually associated with a Deferred Annuity or sometimes called “Longevity Insurance”.  This is also an annuity but it functions in a different manner.  The Deferred Annuity takes a lump sum payment and pays out a guaranteed future in come at a predetermined future date.   The insured will usually not have access to the money prior to the payout starting which makes the Deferred Annuity less flexible than an income rider product.

The bottom line with lifetime income products is to find the companies that will pay out the most guaranteed future income.  It is very easy to compare these products if you compare them fairly.  For example.  A 55 year old female wants to use $250,000 to create future lifetime income when she turns 65.  She needs to find the company that will pay out the most to her per month in 10 years.  Companies will try to say add “bells and whistles” to products to keep people from making this most simple of comparisons but if income is true need, there is no reason to look at anything else.
WANT TO LEARN MORE ABOUT FIA’s? REGISTER FOR OUR WEBINAR “CHOOSING THE RIGHT ANNUITY” CLICK HERE

Life Annuity Connecticut

In this post, we will explain some things about; Life Annuity Connecticut.

The term “Life Annuity” is rather generic and can have multiple meanings but it is almost always used when describing lifetime income from an annuity product.   This post provides detail on the most common uses of the term and provide detail on how a lifetime income annuity works.

First meaning of the term “Life Annuity:

Annuity with a lifetime income rider: There are a number of companies that offer income riders that can be added to their annuity products.  The income rider is a way to guarantee a lifetime income stream off of you investment for life.  The riders usually provide for a substantial bonus on your money up front (approx. 2% to 10% depending on product)  and will increase every year at a set compound interest rate (Going rate is 4% to 8% per year).  Money in the product is guaranteed to increase at the specified rate for up to a specific number of years.  Many companies cap the growth and 10, 15 or 20 years.

The point of the income rider is that it allows the investor to calculate exactly how much income they will be able to draw in future years.

Once they decide to turn income on, it will pay out for the rest of their lives or if they have a spouse, it will pay out until both pass away.  Income riders have become hugely popular in the last 10 years due to the perceived unpredictability of the stock market.   Income riders can usually be added to fixed, fixed indexed or Variable annuities.   The purchaser should know that the income rider guarantees the income only.  It does not guarantee growth of the actual lump sum investment.

The second meaning of the term “Life Annuity”:

is usually associated with a Deferred Annuity or sometimes called “Longevity Insurance”.  This is also an annuity but it functions in a different manner.  The Deferred Annuity takes a lump sum payment and pays out a guaranteed future in come at a predetermined future date.   The insured will usually not have access to the money prior to the payout starting which makes the Deferred Annuity less flexible than an income rider product.

The bottom line with lifetime income products:

Find the companies that will pay out the most guaranteed future income.  It is very easy to compare these products if you compare them fairly.  For example.  A 55 year old female wants to use $250,000 to create future lifetime income when she turns 65.  She needs to find the company that will pay out the most to her per month in 10 years.  Companies will try to say add “bells and whistles” to products to keep people from making this most simple of comparisons but if income is true need, there is no reason to look at anything else.

How Crowe and Associates can help you pick the correct annuity:

Crowe and Associates is based in Brookfield, Connecticut. The agency is independent and able to work with any annuity company as a result. We are A rated with the BBB and help clients find the right annuity type and company to meet their needs. Once we determine the type of annuity needed, we will then shop to see which company is providing the best rates and terms. Feel free to request a quote through this site or call our office at 203-567-6235. You will be contact by someone from Crowe and Associates only. We DO NOT sell your information to other brokers or companies.

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There are more people than ever looking to use a lump sum of money to create a guaranteed future income stream.  Fixed Indexed annuities are usually the most predictable way to do this and they also offer the highest future guaranteed life payouts.

As a result, there are a number of companies offering these types of products and there are even more people selling them.  This includes brokers, insurance agents, CPA’s and CFP’s.  The fact that they put their clients in anything other than the Security Benefit Secure Income Annuity is disturbing.  Why do I say that?  The reason is that the Security Benefit product has the highest guaranteed payout.   Simply put, they pay a higher income payment than any other company. There is not a trick to the comparison. Its very simple, if you give a company an amount of money, how much will they pay you as an income stream at a future date?  Security Benefit always wins. Read more

There are more people than ever looking to use a lump sum of money to create a guaranteed future income stream.  Fixed Indexed annuites are usually the most predictible way to do this and they also offer the highest future guaranteed life payouts.

As a result, there are a number of companies offering these types of products and there are even more people selling them.  This includes brokers, insurance agents, CPA’s and CFP’s.  The fact that they put their clients in anything other than the Securit Benefit Secure Income Annuity is disturbing.  Why do I say that?  The reason is that the Security Benefit product has the highest guaranteed payout.   Simply put, they pay a higher income payment than any other company. There is not a trick to the comparison. Its very simple, if you give a company an amount of money, how much will they pay you as an income stream at a future date?  Security Benefit always wins.

If a client is using a different company to create future income, they are not getting the best payout available. Most often this is because the client or the advisor they use are not familiar with Security Benefit. Other times, it relates to the fact that the advisor is not contracted to sell the product.

A Security Benefit illustration is attached. Security Benefit SIA example 100K 59 yr old This is an illustration for a 59 year old male, investing $100,000 and turing on income at age 65. The guaranteed  payout is $8,914  per year for life.  Challenge your broker, financial planner or insurance agent to find a higher payout. I promise you they will not fine one.

* Be aware that Security Benefit has two similarly named products. The Secure Income Annuity has the highest payout.   The Total Value Annuity does not pay out as well but is very unique in its own right but for different reasons.   For more information on the Total Value Annuity click here.

Call Edward Crowe with questions or concerns at 203-796-5403 or by email at Edward@Croweandassociates.com

Numerous companies are using income riders to provide future guaranteed income payouts to investors.  They use income roll up guarantees and bonuses to entice potential customers.   With all of the bells and whistles now available, it is easy to lose sight of the most important feature of all which is simply finding which company will pay out the most in any given year.   Here is a sample breakdown using the companies currently offering the highest future payouts.  For this example, we used a 55 year old male, investing $100,000 and looking for possible income in year 1, 5 or 10.

Guaranteed Annuity Income Payout Grid

Please feel free to call Edward Crowe at 203-796-5403 or email at  Edward@croweandassociates.com  if you would like to see a quote from a different company or any other variations such as age or amount.