In any type of financial situation, it is nice to know what you can anticipate. Granted, there is no way to control what happens in the stock market or whether interest rates rise or fall. But there are some strategies that may be used to take more control of your savings and investments.
For instance, if you own or plan to purchase an annuity, you may be able to add additional benefits or guarantees by way of “riders”. There is a wide array of riders that could be added, depending on the annuity, such as guaranteed income or a return of premium. But the tradeoff here is these riders oftentimes require an added expense.
That being said, are annuity riders really worth the additional premium cost?
The answer to that is, it depends.
Types of Annuity Riders
There are many different types of annuity riders available today – and as more variations of these financial vehicles come to market, the choices will likely expand even further. Some of the most common riders that may be added to annuities, though, include:
- Death Benefit Rider
- Guaranteed Withdrawal Benefit
- Lifetime Income Benefit Rider
- Impaired Risk Rider
- Cost of Living
- Refund/Return of Premium
- Long-Term Care Rider
Death Benefit Rider
While many annuities already offer a death benefit, in some cases, you may be able to add a rider that increases, or “steps up” the amount of the benefit over time so that the beneficiary(ies) may receive more.
Guaranteed Withdrawal Benefit
The guaranteed withdrawal benefit annuity rider provides you with a way to make immediate withdrawals without having to annuitize or convert the annuity over into an income stream in order to access funds.
Lifetime Income Rider
Oftentimes offered with variable annuities, the lifetime income benefit rider guarantees that you will receive regular income payments that will continue for the remainder of your lifetime, regardless of how long that may be – even if the balance in the account becomes fully depleted.
Impaired Risk Rider
If you contract a serious health condition that could shorten your life, then an impaired risk annuity rider could provide you with a higher amount of income over a presumably shorter period of time. There are certain conditions that you must be diagnosed with in order to qualify for such payouts. These can include:
- Heart disease
- High blood pressure/hypertension
Cost of Living Adjustment (COLA)
Annuities can provide you with an ongoing income in retirement. In most cases, though, the dollar amount of that income will remain the same throughout the payout period. Because many people are living longer lives today, though, going this route could decrease purchasing power over time. This is where a cost of living adjustment, or COLA, can be beneficial.
This annuity rider can provide for increases in the payments. These increases are oftentimes based on certain parameters, such as the Consumer Price Index (CPI), which is a common measure of inflation in the economy.
Refund/Return of Premium
Through a refund or return of premium rider, the insurance company will return funds to one or more named beneficiaries in the annuity contract if the annuity owner passes away before all of the principal has been paid out.
Long-Term Care Rider
With a long-term care rider, an annuity will provide you with the income that is noted in the contract. However, should you require long-term care services, the annuity will also pay out a certain dollar amount of benefit for a pre-set period of time.
Should You Consider Adding a Rider to an Annuity?
Because everyone’s needs and objectives are different, there isn’t just one single annuity or annuity rider that will be right for all investors and retirees across the board. That is why it is recommended that you talk with an annuity specialist before you make any long-term commitment.
At Annuity Gator, our mission is to educate consumers and financial professionals alike on how annuities work, as well as whether or not an annuity – and associated riders – are right in certain circumstances.
If you would like to set up a no-cost, no-obligation chat with an annuity expert, either over the phone or online/virtually, feel free to call us toll-free at (888) 440-2468 or send us an email via our secure online contact form. We look forward to assisting you.