Best Annuity Income Riders
Annuity income riders add additional lifetime income guarantees to fixed index annuities for a fee. Annuity riders are popular in part because they are very customizable and provide flexibility; however, selecting the best annuity for your specific goals can prove difficult.
The best annuity income rider for you will be determined by your individual goals and objectives, but generally speaking, the 20 income riders listed below are the best.
The below income payments assume a 60-year-old buys an income rider and begins lifetime payments at age 65.
Top 20 Income Riders
| INCOME RIDER | A.M. BEST | ANNUAL FEE | INCOME |
|---|---|---|---|
| Ameritas Flexmark MyFit Income Rider with Booster | A | 1.05% annually | $6,802 |
| Protective Level Income 15 (Defer bonus) | A+ | 1.2% annually | $6,683 |
| Protective Level Income Rider | A+ | 1% annually | $6,650 |
| Nationwide Nationwide High Point 365 w/Bonus | A+ | 1.1% annually | $6,480 |
| American National Lifetime Income Rider | A | 1% annually | $6,371 |
| NWL Income Outlook Plus 5 NH | A | 1.5% annually | $6,318 |
| Transamerica Income Plus | A | 1.15% annually | $6,390 |
| NWL Income Outlook Plus 5 Rider | A | 1.5% annually | $6,318 |
| Symetra Signature Plus GLWB Rider | A | 1.25% annually | $6,311 |
| Symetra Signature GLWB Rider | A | 1.1% annually | $6,311 |
| Global Atlantic Guaranteed Income Builder Benefit | A | 1% annually | $6,300 |
| Allianz Index Advantage Income Benefit - Level | A+ | 0.7% annually | $6,250 |
| AIG Lifetime Income Max | A | 1% annually | $6,161 |
| NWL Income Outlook NH | A | 1% annually | $6,030 |
| Nationwide New Heights 10 High Point 365 | A+ | 0.95% annually | $5,928 |
| Athene Ascent Pro 10 Income Rider - Level | A | 1% annually | $5,913 |
| AIG Lifetime Income Plus Flex | A | 1.1% annually | $5,805 |
| Midland Summit Income Strategy Level | A+ | 1.05% annually | $5,871 |
| Athene Ascent Pro 7 Income Rider - Level | A | 1% annually | $5,840 |
| AIG Power Series Lifetime Income Plus Flex | A | 1% annually | $5,794 |
| Securian Financial Achiever Lifetime Income Rider | 1.15% annually | $5,740 |
Disclosure: These numbers were effective at the time this was written, November 28, 2020, and are not a guarantee nor an offer for sale. We have compiled this list for educational purposes and highly recommend that you consult a tax, legal, and/ or legal consultant prior to purchasing an annuity or making any major financial decision. My Annuity Store, Inc., or any of its advisors, does not provide tax or legal advice. There were higher payouts available at certain insurance companies; however, we have excluded an insurer who did not hold an A.M. Best Rating of at least an A.
2 types of Income Riders for Annuities
1. Guaranteed Lifetime Income Riders
2. Performance-Based Income RIders
You may hear an annuity income rider referred to as any of the names below:
- Guaranteed Lifetime Withdrawal Benefit Riders (GLWB)
- Guaranteed Minimum Income Benefit Riders (GMIB)
- Lifetime income riders
- Guaranteed Lifetime Income Benefit Riders
- Lifetime Withdrawal Benefits
- Lifetime Income Benefit Riders (LIBR)
1. Guaranteed Annuity Income Riders
When you purchase a guaranteed income rider your annual income amount is guaranteed and known at the time of purchasing the annuity. You will know exactly what your annual payments will be at each age; the longer you wait the higher your payments will be.
An annuity with an added income rider has two separate values:
- an account value and
- a benefit base value (income value).
It is important to know that the (benefit base) income value is never available as cash, it is only used to calculate your guaranteed lifetime income amount.
Calculating Guaranteed Annuity Income Rider Payments
Income rider payments are determined by a handful of variables listed below:
- Age when you purchase the annuity
- Age when you begin income
- Type of income rider you purchase (guaranteed or performance-based)
- The type of annuity payout you select (joint, single, COLA, etc.)
- Interest rate environment
There are two components that determine what your guaranteed lifetime annual income will be:
- Roll-up rate: The amount your benefit base is guaranteed to increase each year you defer turning on income.
- Payout Percent: The percentage of your benefit base you will receive as annual lifetime income payments.
Annuity Income Rider Calculation:
Benefit Base x Payout Percent = Annual Income Payments
Example
Income rider roll-up:10% simple
Payout Percent at 65: 5%
A $100,000 investment by a 60-year-old today would have a benefit base of $150,000 in 5 years at their attained age of 65.
Using the assumptions above should income be turned on at age 6I5 the annual income amount would be $7,500 ($150,000 x 5%).
Performance-Based Income Riders
When you purchase a performance-based annuity income annuity rider you will not know exactly what your guaranteed lifetime annual income will be.
These types of income riders still have two separate account values; however, the benefit base value is not guaranteed to grow by a set percentage each year. Instead, the benefit base is given a stated enhancement.
Performance-based income riders will credit an additional amount to your benefit base in the years in which you earn interest.
For example, a performance-based rider may credit your income base with 150% of the interest you earn each year. In the years in which your account value does not earn any interest, your benefit base would not increase.
The main advantage of a performance-based income rider is the potential for your payments to increase before and after you begin taking income.
If your $100,000 annuity earned $10,000 in the first year and the income rider had a 50% benefit base enhancement your account value would be $110,000 after year 1 and your benefit base would be $115,000.
Allianz Annuities have industry-leading performance-based income riders.
Are income Riders a Good Deal?
Annuity income riders are not an investment they are a type of insurance product. When you purchase a lifetime income rider you are buying income insurance; that is, insurance that you can not outlive your money.
I would not recommend anyone add an income rider to their annuity contract unless they are confident, they’ll utilize its income benefit.
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Income Rider Terms to Know
Joint Life vs Single Life
When purchasing a guaranteed lifetime income benefit rider, you have the option of guaranteed income payments for as long as you are alive or for as long as either you or your spouse are alive.
As you may expect, the guaranteed income amount is less for joint lives. Some guaranteed income riders reduce the payout percent by 50 basis points for joint life while others reduce it by a full percent.
Because of this, the income rider that is best for a 67-year-old beginning income at age 70 may not be the best for a 67-year-old couple beginning income at age 70.
Increasing Income Options:
Some income riders allow you to get pay increases after you turn on your income. Selecting the increasing income option usually means your payout percent is reduced by a stated amount resulting in a lower initial annual income.
Each year you have an opportunity for a pay increase based on how your account value performed the previous year.
One common way you will see this being done is if your account value is credited 5% your income also increases by 5 percent.
Long-Term Care Enhancements:
Long Term Care Enhancements have become much more popular over the past 2 years. An income rider with this feature will double your annual income amount should you be confined to a nursing home facility.
Some insurance companies will also allow the LTC Enhancement to be used for in-home health care should the owner not be able to complete 2 out of the 6 activities of daily living.
Pros and Cons of Income Riders
Pros
- You transfer longevity risk to the insurance company.
- Peace of mind knowing you cannot outlive your money.
- Potential to invest the remainder of the portfolio more aggressively because the sequence of returns risk is less important when you aren’t taking withdrawals.
- More flexibility than the other lifetime income option, annuitization, which is irrevocable in most cases.
- Death Benefits may be passed to an heir if you have a remaining account value at death.
The Financial Industry Regulatory Authority (FINRA) created a “Your Guide to Annuities: An Introduction” for consumers that we would recommend reading if you are considering adding an annuity to your retirement portfolio.
