Annuities serve as insurance products tailored to guarantee a consistent income stream primarily for retirees. By incorporating an annuity rider into your annuity contract, you can amplify its benefits. Various categories of annuity riders exist, catering to diverse financial needs. Familiarizing yourself with these options empowers you to make informed decisions when purchasing an annuity.
If you require assistance in navigating annuity purchases and determining suitable riders, please contact a financial advisor at RoseMark Advisors, proudly serving the AMAC community.
Understanding Annuities:
An annuity represents a form of insurance contract wherein you contribute a premium. This payment may occur in a lump sum or through installments. Subsequently, the annuity provider commits to disbursing funds to you, commencing at a specified future date.
Immediate annuities promptly dispense funds within approximately a year of acquisition. Conversely, deferred annuities distribute payments in later years. For instance, you might procure a deferred annuity at age 55, with payouts commencing upon reaching 65.
An annuity encompasses an accumulation phase, during which your investment has the opportunity to grow, and a draw phase, wherein periodic payments ensue.
Understanding Annuity Riders:
An annuity rider supplements your annuity by furnishing additional benefits and safeguards beyond the standard agreement. These riders vary depending on your preferences and requirements, with each addition incrementally impacting the overall cost of the annuity.
Generally, annuity riders fall into two categories: living benefits and death benefits.
Living benefit riders furnish advantages throughout your lifetime, provided the annuity contract remains active. Conversely, death benefit riders extend financial benefits to designated beneficiaries upon your demise.
Common Types of Annuity Riders: When contemplating annuities, it’s essential to discern your objectives and desired outcomes. While annuities can entail substantial costs, opting for riders can enhance their value proposition. Here are prevalent annuity riders:
- Guaranteed Minimum Withdrawal Benefit Rider: This rider lets you withdraw the principal incrementally each year, based on a certain percentage
- Commuted Payout Rider: This allows you to withdraw lump-sums in the beginning years of your annuity up to a certain percentage.
- Guaranteed Minimum Income Benefit Rider: This ensures that you receive a minimum amount from your annuity for life.
- Guaranteed Minimum Accumulation Benefit: This rider guarantees the minimum amount of value your annuity accumulates. This can be a good option if you’re looking for protection against market changes.
- Guaranteed Lifetime Withdrawal Benefit Rider: This ensures that you can receive an annual income for the remainder of your life without having to convert any payments to an immediate annuity.
- Enhanced Earnings Benefit Rider: This rider helps minimize the taxes being paid on your annuity and offsets federal income tax on your payable earnings after you pass away.
Apart from these, riders tailored to specific life or financial circumstances exist, such as:
- Long-Term Care Rider: This rider increases your monthly annuity payments to help cover added costs of long-term care as it can be expensive if you don’t have long term care insurance or are not eligible for Medicaid.
- Disability/Unemployment Riders: These can temporarily increase your annuity payout amount for a set period if you’re unable to work because of a disability.
- Impaired Risk Rider: This rider is designed for someone with a health condition that’s likely to decrease their life span – it offers higher annuity payments to offset the shorter time frame for which those payments would be received.
- Terminal Illness Rider: This rider waives any surrender charges if you have a terminal illness that will cause a drastic shortened life expectancy.
- Cost Of Living/Inflation Rider: This allows your annuity payments to keep up with inflation, increasing the value of your annuity to a preset cap.
- Return Of Premium Riders: These return any remaining principal to your beneficiaries if you pass away before the full value has been paid out.
- Death Benefit Riders: These riders protect beneficiaries against a decline in the annuity’s value.
Incorporating one or more annuity riders can customize and improve the utility of your annuity contract. Assessing your needs and financial capabilities enables you to determine the necessity and selection of riders.
Retirement Planning Tips:
Annuities can offer you a guaranteed income when you retire or if you have certain disabilities, but it’s important that you research annuity companies thoroughly before purchasing, focusing on their financial stability and credit ratings.
Get in touch with a financial advisor to ascertain the suitability of annuities and potential rider options that will best fit your needs.
Our team at RoseMark Advisors will work alongside you to understand your financial goals and determine the path to get you there. Click below to request a call or dial 888-550-2622.
