Glenn - the "inflation" option is not usually attached to actual inflation. On most products, the income can increase when the index the policy is linked to increases. So if the index credited to the accumulation value is 2% the income will increase 2%. There isn't usually an additional fee for this option. Your initial income will be 20% - 30% lower than if the income didn't have an increasing option.
Stan, Do you have actual data from actual FIA's that were contracted over the past 10- 20 years in terms of actual value, that is, current cash-out value plus all cash distributions at any given time from inception to present day. Policy examples with both income rider and without. Do these not significantly "outperform" CD's.....
One of our podcast guests, Kerry Pechter, did an analysis and published his results in a 10/2021 article for Retirement Income Journal. You can read the article here: retirementincomejournal.com/article/2011-2020-fia-returns-were-modest-data-suggests/. He found the average return over 20 years is 3.23%. While CD rates have been low, when looking at "normal" CD rates of 3% - 4%, you can see FIAs return right around that amount.
Suggest Income Riders are better for older customers not content with their social security, pensions, dividend or rental income. My situation includes a desire to keep income "low" so I can do partial Roth conversions before 62 y/o maybe up to RMDs. I wanted an IRA savings preservation vehicle so my salesman pitched a North Am product offering riders for enhanced participation and/or enhanced liquidity. Of course, North Am has other FIA products that do offer an income rider. My primary reason for not buying riders is to keep expenses low but just as important I may want to annuitize with a different carrier maybe later with QLAC.
Yes - you can exchange a deferred annuity, which is what an FIA is, with a SPIA. Also, you can annuitize the FIA which depending on how old it is may give a higher payout than current new SPIA rates.
I was pitched a variable annuity a few yrs ago that supposedly had a death benefit that increased 7% a year as long as you kept it.. is that still an available rider..? Sounds like its better to get a 5-7 yr index annuity without the income rider.. then exchange it in 5-7 years for a immediate annuity.. saving the fee of the rider for the initial 5-7 yr period.
I don't sell variable annuities so I can speak to if that product is still available. If you aren't planning on using an income rider, then do not buy an income rider. The advantage of an income rider is you know exactly how much income it will generate in the future. You don't know that if you defer and then purchase a SPIA. You can have an idea based on today's rates, but you don't know exactly how much a SPIA will generate 5 - 7 years in the future. I hope this helps.
What’s the best thing to do with a fixed income annuity that has an income rider when it comes out of surrender? I don’t need the income now
For me to give you an answer about your specific situation, please feel free to book a call with us!
www.stantheannuityman.com/book-a-call/
Great video Stan
What causes the income to grow. Is it just the fact you are a year closer to life expectancy.
Exactly right! If you turn on income when you are older, there are less expected payments so the income would be greater. Thanks for watching!
How does an inflation addition to the income rider work? What is the cost of the inflation addition?
Glenn - the "inflation" option is not usually attached to actual inflation. On most products, the income can increase when the index the policy is linked to increases. So if the index credited to the accumulation value is 2% the income will increase 2%. There isn't usually an additional fee for this option. Your initial income will be 20% - 30% lower than if the income didn't have an increasing option.
Stan, Do you have actual data from actual FIA's that were contracted over the past 10- 20 years in terms of actual value, that is, current cash-out value plus all cash distributions at any given time from inception to present day. Policy examples with both income rider and without. Do these not significantly "outperform" CD's.....
One of our podcast guests, Kerry Pechter, did an analysis and published his results in a 10/2021 article for Retirement Income Journal. You can read the article here: retirementincomejournal.com/article/2011-2020-fia-returns-were-modest-data-suggests/. He found the average return over 20 years is 3.23%. While CD rates have been low, when looking at "normal" CD rates of 3% - 4%, you can see FIAs return right around that amount.
Thanks to Stan for writing "underneath me" and not beneath! 😇
Suggest Income Riders are better for older customers not content with their social security, pensions, dividend or rental income. My situation includes a desire to keep income "low" so I can do partial Roth conversions before 62 y/o maybe up to RMDs. I wanted an IRA savings preservation vehicle so my salesman pitched a North Am product offering riders for enhanced participation and/or enhanced liquidity. Of course, North Am has other FIA products that do offer an income rider. My primary reason for not buying riders is to keep expenses low but just as important I may want to annuitize with a different carrier maybe later with QLAC.
May FIAs without income riders attached be subsequently exchanged (partially or fully) for a SPIA to generate income at some future date as needed?
Yes - you can exchange a deferred annuity, which is what an FIA is, with a SPIA. Also, you can annuitize the FIA which depending on how old it is may give a higher payout than current new SPIA rates.
I was pitched a variable annuity a few yrs ago that supposedly had a death benefit that increased 7% a year as long as you kept it.. is that still an available rider..?
Sounds like its better to get a 5-7 yr index annuity without the income rider.. then exchange it in 5-7 years for a immediate annuity.. saving the fee of the rider for the
initial 5-7 yr period.
I don't sell variable annuities so I can speak to if that product is still available. If you aren't planning on using an income rider, then do not buy an income rider. The advantage of an income rider is you know exactly how much income it will generate in the future. You don't know that if you defer and then purchase a SPIA. You can have an idea based on today's rates, but you don't know exactly how much a SPIA will generate 5 - 7 years in the future. I hope this helps.
Go team donut!