Annuity Riders: Which Ones Are Suitable for You?

Annuities are a contract with an insurance company that provides a steady stream of income to the insured. Annuities are potentially for life. They can be an important part of retirement income planning for many individuals.

Insurance companies offer additional options when purchasing an annuity, known as annuity riders. While these riders can provide added benefits, they may come at an extra cost. Not all riders may be suitable for everyone. Let’s delve deeper into the types of annuity riders and evaluate their suitability for different scenarios.

Understanding annuity riders

An annuity rider is an optional feature or benefit that can be added to an annuity contract. These riders extend beyond the standard terms of the annuity. Here are the more common types of annuity riders:

• Lifetime Income Rider – This rider may guarantee a lifetime income stream, regardless of market performance or life expectancy. It may be suitable for individuals concerned about outliving their retirement savings.
• Cost of Living Adjustment (COLA) rider – A COLA rider adjusts annuity payouts to keep pace with inflation. These are for those concerned about their purchasing power in the future.
• Death Benefit rider – This rider provides a lump-sum payment to your beneficiaries upon your death. If you wish to leave a financial legacy, this rider may be a consideration.
• Long-term Care (LTC) rider – This rider enables individuals to access their annuity monies to cover LTC expenses. This rider may be appropriate for those concerned about potential healthcare costs in their later years.
• Return of Premium rider – This rider may guarantee that if the annuitant dies before receiving payouts equal to the initial premium, the remaining premium will be returned to beneficiaries. It may be a suitable choice for those who want to ensure their loved ones receive at least the amount invested in the annuity.

Selecting an annuity rider

Selecting an annuity rider is an important decision. It depends on one’s tailored financial situation, goals, and risk tolerance. Additionally, consider several factors such as your age, health, future income needs, inflation expectations, and desire to leave an inheritance.

In Conclusion

While annuity riders can provide added features, remember that they come at an additional cost. Therefore, work with a financial or insurance professional to help you weigh the potential benefits against the extra fees before making a decision.

SWG4647488-0725b Disclosure: This information is provided as general information and is not intended to be specific financial guidance. Before you make any decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives. An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Consult a tax advisor for specific information The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed.

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