Is the benefit base money I can withdraw?
No. The benefit base is only used to calculate the income payments. The money you can actually withdraw is the account value, less any surrender charges.
Guaranteed income and annuities
What Is an Annuity Income Rider?
An income rider is an optional feature added to an annuity, often for an extra yearly fee. It promises that you can withdraw a set amount every year for the rest of your life, even if your account value later runs down to zero. The yearly amount is figured from a separate number called the benefit base and a payout percentage based on your age.
Written and reviewed by Dan Hopwood, Retirement Income Specialist · Retirement Income Knowledge Center · Last reviewed
Two different numbers: account value and benefit base
An annuity with an income rider tracks two values. The account value is your real money: what you could walk away with, minus any surrender charges. The benefit base is a separate figure used only to calculate your lifetime income. It is not cash you can withdraw in a lump sum.
Some riders grow the benefit base by a set rate each year before income starts. That growth affects the income amount, not your cash value.
How the income is figured
Illustrative income rider
- Benefit base when income starts
- $300,000
- Payout percentage at your age
- 5.5%
- Guaranteed yearly income for life
- $16,500
- About per month
- $1,375
Illustration only. Payout percentages, rider fees and rules differ by contract and by insurer. This is not a quote or a recommendation.
Things to check before relying on a rider
- The yearly rider fee and whether it is charged on the account value or the benefit base.
- Whether income can cover one life or two (single or joint).
- What happens if you take more than the allowed amount in a year, which can reduce future income.
- Whether any account value left at death passes to beneficiaries.
- The surrender period and any charges on withdrawals.
Why people use income riders
An income rider can turn part of your savings into a paycheck you cannot outlive while you keep some control over the account. The trade-off is cost and complexity. All guarantees depend on the financial strength and claims-paying ability of the issuing insurance company.
Account value vs. income base
| Account value | Income base | |
|---|---|---|
| What it is | Real money in the contract | A number used to figure rider payments |
| Can you withdraw it all? | Yes, minus any surrender charges | No |
| Used for | Withdrawals and death benefit | Lifetime withdrawal amount |
Illustrative; rider terms differ by contract.
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Common questions
What happens if my account value reaches zero?
If you stayed within the rider's withdrawal rules, the guaranteed income generally continues for life. The exact terms are in the contract.
Can I turn the income off and on?
Rules vary. Many riders let you choose when income starts, but once it starts, taking extra withdrawals can permanently lower future payments.
Does an income rider cost extra?
Usually yes. Many income riders charge an annual fee, often figured as a percentage of the benefit base and deducted from the account value. The fee, the payout rates and how the benefit base grows all vary by contract, so compare them in writing.
When can I start income from an income rider?
Each contract sets its own rules, often including a minimum age and sometimes a waiting period after purchase. Waiting longer to start commonly raises the payout percentage. The contract and illustration will show the options for your age.
What is a payout percentage on an income rider?
The payout percentage is the share of the benefit base paid each year as lifetime income. It is usually higher the older you are when income starts. For example, 5% of a $200,000 benefit base would be $10,000 a year.
Can an income rider cover both me and my spouse?
Many contracts offer a joint-life option that keeps paying while either spouse is alive. The payout percentage is usually lower than for a single life. Joint-life income is subject to the claims-paying ability of the issuing insurance company.
What happens to the death benefit if I take rider income?
Rider withdrawals usually reduce the account value, and the death benefit is often based on what remains of that value. If income runs long enough, there may be little or nothing left for beneficiaries. The contract explains how death benefits are figured.
How does the benefit base grow before I start income?
Many riders add a set roll-up rate to the benefit base each year you wait, for a limited number of years. That growth only counts toward the income calculation and is not cash you can withdraw. Rules vary by contract.
Authoritative sources
This page is educational and general in nature. RetirementLeverage™ and Retirement Planning Store, Inc. do not provide individualized investment, securities, tax, or legal advice; please consult a qualified tax professional or attorney about your own situation. Insurance products and services may not be available in every state, and any guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.