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Aug 8, 2019 by |

California and San Francisco Annuity Attorney: Understanding Income Riders


What are Income Riders?

Income riders are attachments to deferred annuities sold by agents as an income payout contractually guaranteed for the rest of your life and possibly your spouse’s life as well. The two most common types of income riders are known as “Guaranteed Lifetime Withdrawal Benefit” or “Guaranteed Minimum Income Benefit.”  Agents especially target seniors or those planning for retirement with the pitch that these riders offer peace of mind for a reliable, future income stream.  You need to understand more fully how these riders work. Income riders are complex and your agent or financial advisor may not be any more knowledgeable on how the product works than you are.  Fees and withdrawals can significantly diminish the benefit of these riders and, in certain cases, wipe the promised benefit out entirely.  If you are over age 60 and reside in California, the California annuity attorneys at Evans Law Firm can review your annuity contract, including income riders, other riders (like enhanced death benefits) and the policy’s surrender provisions, for free.  Call us today at (415)441-8669.

What are the Costs and Risks?

First, there’s usually a 1-1.25% annual fee for an income rider which on a 2% contract return already cuts your return on investment in half, from day one (in addition to the effect of the commission you paid out in year one). Second, there are several serious catches to how the rider operates:

  • You cannot peel off interest from an income rider like you can a CD or bond. Once you begin your income draw downs (“annuitize”), the income will always be paid to you in scheduled amounts, determined by the carrier’s actuarial tables. Those payments are scheduled at inception and do not change as you get older or your circumstances change.
  • Any complete surrender will never include the phantom amount of the income rider “fund.” Instead, you will pay a surrender charge, and any accruals in the separate rider account are forfeited entirely.
  • Your contributions toward the income rider sit in a separately calculated fund apart from the accumulated value of the over-all annuity. The “value” of this separate fund is never available for withdrawal. Rather, the rider offers a “guaranteed” income for life payable only on a schedule determined by the carrier.
  • Any partial surrender of accumulated value will reduce the base on which the income rider “growth” is calculated. You will also pay a surrender charge on any partial surrender. Consequently, partial surrenders have a built-in cost beyond the immediate surrender charge.
  • You cannot access the income rider calculation as a lump sum … ever! It will always be paid to you in the form of scheduled payments. Income percentage payouts are actuarially determined based on your age at the time you begin receiving the income. If you die before exhausting the rider fund, any remaining balance in that fund does not pass to your heirs.
  • You cannot transfer the income rider total to another annuity. If you surrender your contract, any accumulated growth in the income benefit account is lost.
  • Once you start taking income, the annual growth percentage stops.
  • You can only use the high percentage income rider amount for income (or confinement care in select policies).
  • The scheduled income amounts will be taxable to you as ordinary income.

Annuities are extremely complex and not for everybody. Endorsements and riders are even more complex. Fees and commissions destroy returns.  Annuities are illiquid investments and tie up your money for years and withdrawals for emergencies may incur surrender penalties and tax liabilities.  Always consult your tax advisor before purchasing an annuity or making any change or surrender of an existing policy.  If you are over age 60 and reside in California, we are able to review your annuity at no cost if you believe that you or a loved one were victims of annuity fraud or suffered a financial loss as a result of an income rider or other rider fees, and/or surrender penalties on an unsuitable annuity. 

Leading providers and distributors of life insurance and fixed, variable and fixed indexed deferred annuities in California are listed below. We are not in any way suggesting that any of these carriers or distributors has done anything wrong.  Rather, the list is provided solely as a reference for our readers.

AIG/American General Life Insurance Company

Allianz Life Insurance Company of North America

American Equity Investment Life Insurance Company

American General Life Insurance Company/AIG

American International Group, Inc. (AIG)

American National Life Insurance Company

Ameriprise Financial/RiverSource Life Insurance Company

Ameriprise Financial/Securities America, Inc.

Athene Annuity & Life Assurance Company

Athene Annuity and Life Company

Athene USA

Aviva Life Insurance Company

AXA Equitable Financial Services, LLC

AXA Equitable Life Insurance Company/AXA US

AXA Advisors, LLC

Bankers Life Insurance and Casualty Company

Berkshire Hathaway Group

Berkshire Hathaway Life Insurance Company of Nebraska

Brighthouse Financial, Inc./MetLife

Citigroup Global Markets, Inc.

Crump Life Insurance Services, Inc.

CUNA Mutual Group/CMFG Life Insurance Company

Delaware Life Insurance Company

EquiTrust Life Insurance Company

Fidelity & Guaranty Life Insurance Company

Forethought Life Insurance Company/Global Atlantic Financial Group

Genworth Financial, Inc.

Genworth Life and Annuity Insurance Company

Genworth Life Insurance Company

Global Atlantic Financial Group/Forethought Life Insurance Company

Guardian Life Insurance Company

Guggenheim Partners/Security Benefit Life Insurance Company

ING USA Annuity and Life Insurance Company

Jackson National Life Insurance Company

John Hancock Life Insurance Company

Lincoln Benefit Life Company

Lincoln Financial Group

Massachusetts Mutual Life Insurance Company

Merrill Lynch Life Agency Inc.

Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.

Minnesota Life Insurance Company

National Life Group

National Life Insurance Company/Equity Services, Inc.

National Western Life Insurance Company

Nationwide Life Insurance Company

New York Life Insurance Company

North American Company for Life and Health Insurance

Northwestern Mutual Investment Services, LLC

Northwestern Mutual Life Insurance Company

Northwestern Mutual Wealth Management Company

Oxford Life Insurance Company

Pacific Life Insurance Company

Principal Financial Group

Prudential Life Insurance Company

Raymond James Insurance Group

Reliance Standard Life Insurance Company/Tokio Marine Group

RiverSource Life Insurance Company/Ameriprise Financial

Securities America, Inc./Ameriprise Financial

Security Benefit Group, Inc.

Security Benefit Life Insurance Company/Guggenheim Partners

Security Investors, LLC

The Standard Life Insurance Company

Symetra Financial Corporation

Symetra Life Insurance Company

Transamerica Life Insurance Company

The United States Life Insurance Company in the City of New York

Unum Life Insurance Company of America

USAA Life Insurance Company

The Variable Annuity Life Insurance Company

Voya/Reliastar Life Insurance Company

Wells Fargo Advisors

Western & Southern Financial Group

The Western & Southern Life Insurance Company

 World Financial Group Insurance Agency, Inc.

Contact Us

If you or a loved one has suffered a loss on an income rider, policy surrender, or from other high fees and charges in California, contact Ingrid M. Evans and the other Evans Law Firm financial elder abuse and annuity attorneys at (415) 441-8669, or by email at <a href=””></a>. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a FINRA arbitration, jury trial or toward an equitable settlement.  We handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.

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