Income Rider
An income rider is a broad category of optional features on deferred annuities that guarantee a future income stream beyond what the contract's base structure provides. The most common income rider today is the GLWB. Older income riders include the Guaranteed Minimum Income Benefit (GMIB) and Guaranteed Minimum Withdrawal Benefit (GMWB). Income riders carry an annual charge (typically 0.85% to 1.50%) and add a layer of complexity to the contract — particularly around the distinction between the "actual account value" and the "benefit base" that drives rider calculations.
A 58-year-old purchases a fixed indexed annuity with an income rider. The rider charges 1.05% per year. The benefit base grows at 7% simple interest for up to 10 years or until income begins. At age 65 (after 7 years), the benefit base has grown to a calculation based on premium × (1 + 7% × 7) = premium × 1.49. The withdrawal percentage at age 65 is 5%. The lifetime annual withdrawal is 5% × benefit base. The actual contract account value (which determines the death benefit and any surrender value) is separate from the benefit base.
Why it matters
Income riders allow consumers to get the principal protection of an indexed or variable annuity AND a guaranteed lifetime income, in a single contract. The complexity is in tracking the benefit base vs. the account value: they grow at different rates, are used for different purposes, and the consumer must understand which number applies to which decision.
How to evaluate
Read the rider supplement (separate document from the main contract). Key parameters: roll-up rate, roll-up period, withdrawal percentage by age band, rider charge, step-up provisions (do annual high-water marks reset the benefit base?), and the "spousal continuation" rules if the consumer is married.
In the contract
Look for the rider supplement document. The base contract references the rider but the detailed rules are in the supplement. Key fields: "income benefit base," "lifetime withdrawal amount," "rider charge," and "annual step-up."
Related terms
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