Printable checklist for your desk
Print this checklist and ask every question of any income rider you are shown.
Download the PDF (large print)The short version. A lifetime income rider is an optional feature added to an annuity, usually for an extra charge. It promises a stream of withdrawals you cannot outlive, as long as you follow the rules in the contract. The number the guarantee is based on can differ from the account value you see on your statement, so ask for both in writing. [1, 2]
What the feature is
The SEC describes a guaranteed lifetime withdrawal benefit as one that lets you take withdrawals each year for life, even if the contract value drops to zero. In its example the yearly amount is a percentage of purchase payments. The NAIC says riders are usually offered at extra cost, especially on fixed indexed annuities, and that the common version guarantees income payments you cannot outlive while money left in the annuity continues to earn interest. [1, 2]
The other kinds of "living benefits"
| Feature | What the SEC says it does |
|---|---|
| Guaranteed lifetime withdrawal benefit | Allows withdrawals for life, even if the contract value falls to zero. [1] |
| Guaranteed minimum income benefit | Sets a floor for income payments if you choose to annuitize. The SEC example applies 5% annual interest to initial payments. [1] |
| Guaranteed minimum accumulation benefit | Ensures the contract value reaches a stated minimum, such as 120% of payments after ten years. [1] |
These descriptions come from the SEC's guidance on variable annuities. Riders on fixed and indexed annuities have the same general purpose but their terms are written by each company.
What regulators say to watch for
- You pay for each benefit. The SEC says optional features carry additional fees on top of the base contract fee, and a step-up feature carries a charge that reduces your account value. [1, 3]
- Withdrawals can shrink the guarantee. Benefits may be significantly reduced if you take withdrawals over a certain amount, or before a certain age. [1]
- There can be investment restrictions. Some riders limit where your money can be invested. [1]
- The guarantee is only as good as the company. Annuity guarantees depend on the issuer's ability to pay. See our safety guide. [4]
- Charges for riders are separate from other costs. Texas notes that annuity fees overall can be as much as 2% of an annuity's value, so ask for every charge in dollars. [5]
Two numbers, not one
Regulators we reviewed do not publish a standard definition of "benefit base" or "income base," and rollup or step-up rules are written by each company. In practice, many contracts keep a separate figure that the income payment is calculated from. That figure can be higher or lower than the account value, and it usually cannot be taken out as a lump sum. Because the definitions are contract-specific, ask for both numbers in writing, and ask how each one changes over time.
Questions to ask about any income rider
- What does the rider cost each year, in dollars, and is the charge taken from the account value?
- Which number is my income calculated from, and how is it different from my account value?
- At what age can I start income, and what percentage applies at that age?
- What happens to the income if I take out more than the allowed amount in a year?
- Does the income stop, continue, or change when my spouse or I die?
- Can the company change the rider charge or the terms after I buy?
- Would a simpler income annuity, with no account value to track, meet the same goal?
Frequently asked questions
What is a lifetime income rider?
An optional annuity feature, usually at extra cost, that guarantees withdrawals you cannot outlive. The SEC describes a lifetime withdrawal benefit as allowing withdrawals for life even if the contract value falls to zero.
Can withdrawals reduce the guarantee?
Yes. The SEC says benefits may be significantly reduced if you take withdrawals over a certain amount or before a certain age.
Is the income based on my account value?
Not necessarily. Many contracts calculate income from a separate figure that can differ from the account value. Regulators do not publish a standard definition, so ask for both numbers in writing.
Sources and review notes
About this guide. This is general education, not tax, legal, or investment advice, and it is not a recommendation to buy or not buy any product. Nazim Lokhandwala is a licensed insurance professional who offers fixed and indexed annuity products. He does not offer variable annuities or registered index-linked annuities. This guide covers every type so you can compare, and an annuity is not the right choice for everyone. Annuity guarantees depend on the claims-paying ability of the issuing insurer. Product features, rates, and rules vary by company and by state, so read your contract and ask the seller to explain anything that is unclear.