GLWB Annuity Income Rider
Maryland Annuity Resource offer Annuities in Maryland, Washington D.C. and Virginia. Annuities have optional income riders that can attached to your annuity and credit interest to your income account. It is important to understand each feature of annuity income riders and how they are used. You have a wealth of options and a goal in mind that is achievable using the right annuity income rider.
Fixed Indexed Annuities have optional Income Riders that can attach to your annuity and provide guaranteed lifetime income in lieu of annuitization. Annuitization is when your annuity contract is up and you have payout options to consider. Guaranteed Lifetime Withdrawal Benefits are another option.
Income Riders usually have age restrictions but most of my carriers will allow an income rider with a fixed indexed annuity if you are over age 40. These are great tools to use to maximize income from your investment. You can elect to take income on a monthly basis, quarterly basis, or yearly basis. Income from qualified fixed indexed annuities will be taxed as ordinary income, while income from a non qualified fixed indexed annuity will be taxed on a LIFO basis. The last in first out basis means that you will receive the last money put in first included with principal first then working your way to the earnings.
The key to income riders are the time you have elected for your annuity itself. You can build substantial income using income riders but it does take time. We suggest 8-14 years or more from retirement when using an income rider. If you elect to choose an income rider to your annuity, you would however be able to turn on income usually one year after contract acceptance for more extreme circumstances.
Income Riders do come with a cost and this cost for this benefit is very minimal compared to the benefits. Some carriers have initial costs and lifetime guaranteed minimal costs not to exceed a certain percentage. Currently the cost for these income riders is between .4 and .85 basis points each year at contract anniversary. Be careful when choosing to know all of the options and features of your income rider.
There are features of a fixed indexed annuity income rider and they are known as Bonus Credits. The bonus credits are the actual percentage of credit that gets applied to the GLWB account. This bonus is only added to the GMWB value, not to the contract accumulation value. The Bonus credits compound annually allowing for greater growth potential. If by chance, you take a withdrawal during any contract year, no bonus will be applied that year. However, if the withdrawal is a minimum required distribution, the bonus will still be applied but only in that instance. Each carrier is different so please check your options.
Each bonus credit option has a different cost or charge to the accumulation value and those charges will still apply after you elect to receive income. Some carriers have roll ups or step ups and these occur when certain contract features are met. If your contracts accumulation value exceeds your GLWB account value, then the difference is then credited to the GMWB account. The GMWB account is the guaranteed minimum withdrawal benefit amount and that is what all illustrations will show.
The GMWB illustrations will only show what the minimum benefit will be. There is no crystal ball showing what your fixed account or indexed account will reap, but rest assured however that if these do exceed the rider account, then it is credited and cannot go down.
The GMWB account will be reduced only if you withdrawal funds from your account with a 10% withdrawal feature. If you used this feature of your annuity, the same percentage of withdrawal is also taken from the rider value as well. Any withdrawals in excess of the 10% feature will most likely incur surrender charges and or taxes on those distributions.
Income riders are not for everyone but they are a very useful tool to create an income stream for you and your spouse. You are paying for this benefit and its features so think long and hard before making any withdrawal from your annuity, unless it is when you turn on your income stream. Any additional premiums to the annuity, and bonuses do also get credited to the rider value so make sure the carrier you choose has this option as well.
See the page Fixed Indexed Annuities for more information about Income Rider options.