What Is an Income Rider? Lifetime Income Explained

The Basics

An income rider is an optional feature you can add to a fixed index annuity. It creates a separate 'income account' that grows at a guaranteed rate (typically 5-8% per year) during a deferral period. When you're ready, you can 'turn on' lifetime income based on this account value.

The key word is 'guaranteed.' Regardless of what the stock market does, your income account grows at the stated rate, and once you start receiving income, it's guaranteed for life — even if your actual account balance goes to zero.

How Much Income Can You Expect?

The income you receive depends on your age when you start and your income account value. Typical payout rates range from 4.5% to 6.5% of the income account value. For example, if your income account has grown to $300,000 and your payout rate is 5.5%, you'd receive $16,500/year ($1,375/month) for life.

What Do Income Riders Cost?

Most income riders carry an annual fee of 0.75% to 1.25% of the income account value. This fee is deducted from your actual account value, not the income account. It's important to understand that the income account is a calculation — not actual money you can withdraw as a lump sum.

Who Benefits Most?

Income riders are ideal for people who are 5-10 years from needing income. The longer you defer, the more your income account grows, and the higher your eventual guaranteed income. They're one of the most popular products we recommend to pre-retirees in their late 50s and early 60s.