Understanding Income Riders
Income Riders Flood Annuities Market
A flood of new income riders on annuities partially explains a recent boom in sales. Annuity sales hit a record $203 billion last year. Before you climb abroad this fast-moving train, make sure you understand what annuities are, what income riders are, and whether the combination really fits your retirement plan. Always bear in mind two hard and fast rules: (1) things which sound too good to be true usually are and (2) annuities, like any kind of insurance, produce a very substantial upfront commission for the salesperson. Even with a decent return, it will take a long time to recoup that expense. We at Evans Law Firm represent clients who have lost money due to income riders, surrender charges or other fees associated with an unsuitable annuity. If you have suffered such a financial loss, call the Santa Clara County and California financial elder abuse and annuities lawyers today at Evans Law Firm, Inc. (415) 441-8669 and we can review your annuity, income rider, and surrender provisions.
What are Income Riders?
Income Riders are attachments to deferred annuities that create a separately calculated fund apart from the accumulated value part of an annuity. The accumulated value begins as the amount of premiums paid and grows at a fixed rate on fixed accounts or a variable rate on variable annuities. The income rider “value” is a separate fund, the principal of which is never available for withdrawal. Instead, the rider offers a “guaranteed” income for life payable only on a schedule determined by the carrier. The sales pitch is that a higher guaranteed income will be available to the policyholder beginning at a future date and continuing for life. An agent, for example, may try to sell you on an 6-7% income guarantee rider for a contract where the contract rate is only 2%. How can that be? Well, the answer is it really can’t be as you find out when you get into the details.
First, there’s a whopping 1% annual fee for the 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). The fee also diminishes the purported “guaranteed” return under the income rider. Second, there are several very serious catches to how the rider works:
- You cannot peel off interest from an income rider like you can a CD or bond. Once you begin your income draw downs, the income will always be paid to you in “scheduled” amounts, determined by the carrier’s actuarial tables.
- Any complete surrender will never include the phantom amount of the income rider “fund.” Instead, you will pay a steep surrender charge.
- Any partial surrender of accumulated value will reduce the base on which the income rider “growth” is calculated.
- You will also pay a steep surrender charge on any partial surrender.
- 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.
- 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.
Some of the major annuity and life insurance providers in California are:
Allianz Life Insurance Company of North America
Allstate Life Insurance Company
American General Life Insurance Company
American National Insurance Company
Athene Annuity and Life Company
AXA Equitable Life Insurance Company
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Forethought Life Insurance Company
Genworth 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
Life Insurance Company of the SouthWest/National Life Group
MassMutual/Massachusetts Life Insurance Company
MetLife/Metropolitan Life Insurance Company
Midland National Life Insurance Company
Mutual of Omaha Life Insurance Company
National Life Group/Life Insurance Company of the SouthWest
New York Life Insurance Company
Pacific Life Insurance Company
Principal Life Insurance Company
Prudential Life Insurance Company
Security Benefit Life Insurance Company/Guggenheim Partners
Symetra Life Insurance Company
Transamerica Life Insurance Company
Voya/Reliastar Life Insurance Company
If you or a loved one has suffered a loss on an income rider, policy surrender, or from other high fees and charges in Santa Clara County or any California county, contact Ingrid Evans and the other Evans Law Firm financial elder abuse and annuity attorneys at (415) 441-8669, or by email at <a href=”mailto:firstname.lastname@example.org”>email@example.com</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<br>