Understanding Annuities

What are annuities? Annuities are explained as a financial product sold by financial institutions that are designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years. There are several different types of annuities including, variable, fixed, hybrid and more. Learn more about the different annuities and the definition of each annuity from our annuity experts and financial professionals.

What is an Annuity “Rider”?

An annuity rider is an extra feature that can be added on to an annuity. There are various types of riders that can be added on a basic annuity to meet different criteria or to customize the annuity for the needs of the annuity holder. Riders can carry restrictions, and an annuity holder may add just one or multiple riders to their annuity purchase.  Below are some basic “rider” benefit options:

• Minimum Income Benefit Rider
  This guarantees a minimum amount of future payout – regardless of how the underlying market performs. It is designed so that the annuity holder will have a base amount of lifetime income, no matter what happens with the investments inside of the account. Typically, however, the annuitant must hold the annuity for at least several years before being allowed to exercise this particular rider.
• Minimum Accumulation Benefit Rider
  This ensures that the holder of the annuity will keep the value of his or her annuity deposits — plus an additional minimum amount of growth — regardless of underlying market performance. This means that after a certain number of years, the annuity’s income account will be equal to at least a certain minimum percentage of the amount that the annuity holder deposited.
• Guaranteed Minimum Withdrawal Benefit
  This guarantees the return of the annuity holder’s deposited amount via a series of fixed withdrawals, meaning that the withdrawals will be guaranteed until all of the principal has been returned, no matter what happens in terms of performance in the underlying market.
• Guaranteed Lifetime Withdrawal Benefit
  This guarantees that a certain percentage of the annuity’s account value can be withdrawn each year for as long as the annuity holder and their spouse lives. The percentage will vary, and it is dependent on the age of the annuitant when he or she starts to take their withdrawals.

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