Annuity Income Rider Roll-up Rates Are Not Yield

Hi there. Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is a good one and important because people make mistakes when they purchase annuities. They believe something that's true, that's being told to them, that's really not. Annuity agents or advisors are either not detailed enough, don't really know, or play semantics, word games, when they talk about Income Riders. And the topic of this little soliloquy is Income Riders are not actual yield. We're going to get to the details of this. Hang in there with me because this is very important, especially if you're looking at an Income Rider type solution.

Now, if you go to my site, I've written a book on Income Riders. You can download it for free by clicking on this link. I've also done a ton of videos on Income Riders, just the basics, but here are the basics of an Income Rider. An Income Rider rides on top of a deferred policy. Typically, that policy is either Variable Annuity or Index Annuity, Fixed Index Annuity. We don't sell Variable Annuities. Nothing against them. The reason is the Income Riders attached to Fixed Index Annuities are typically providing a higher contractual guarantee.

You can go to The Annuity Man and run a quote. We have the best calculators in the world for Income Riders. You can run a quote, either lump sum or reverse engineered, for that Income Rider guarantee, whether you need income to start one year, two years, three years, all the way out to 10, 15 years, whatever.

‌The 2 Questions

‌I always ask two questions: What do you want the money to contractually do? And when do you want those contractual guarantees to start? And if you say, "I need lifetime income. I need to start in the future," whatever that future date is, two years, three years, four years, seven years, then an Income Rider will be quoted along with a couple of other products. We're talking about income riders.

‌The Pitch

‌When I say Income Rider percentage growth is not yield, here's the sales pitch. "Mr. Jones, you can buy this Indexed Annuity that will get market returns with no downside." That's false. That's a CD product, so that's the first falsity you'll hear. "Market upside with no downside, sir. Look at what would have happened if you had owned it 10 years ago." Wrong. But this side, the Income Rider side, is monopoly money. It's a phantom account that can only be used to calculate the first income payment when you turn on the lifetime income stream.

On the Income Rider side, that income amount will grow while you're waiting to turn on the income stream, and it will have a percentage, which could be 7, 8, 10, or 12%. Before you get excited, run to the refrigerator and grab two beers instead of one; that's not yield. That's not Jimmy Carter's yield. You can't peel off the interest from Income Riders. You can't cash in that amount from Income Riders. You can't transfer that amount from Income Riders. And the state guaranty funds don't back up the amount of Income Riders, only the accumulation value. It's a phantom account that you can use for lifetime income. It doesn't make it bad, as long as you understand what it is.

But every single week, we get calls and calls. "Well, I looked at your MYGA feed..." And MYGAs are the annuity industry version of a CD. "I looked at your MYGAs and those percentages, but this guy locally could get me 9, 10, 12%." That guy locally lied to you. What he was talking about was an Income Rider. An Income Rider, again, is a phantom account used to calculate your first income stream. There's nothing wrong with it at all because if you said, "Stan, I need lifetime income and need to start it in seven years," Income Riders will tell you to the penny what that lifetime income stream's going to be.

‌The Upfront Bonus

‌The other thing I'd like to warn you about is when people say, "Well, in addition to that 12% growth on that income rider, you're going to get a 22 or 25 or 30% upfront bonus." Please don't be that stupid and gullible to think that a for-profit business life insurance company issuing an annuity is giving away free money. The upfront bonus is candy for the stupid. Please don't be stupid. And if you are that stupid, don't go to Vegas and sit at the table because they're going to take advantage of you. Upfront bonuses are not real; they are just part of the overall contractual guarantee, which is a hundred pennies on the dollar.

‌It's Just Different

‌Income Rider percentages are not yield like yield on treasuries, CDs, bonds, or Multi-Year Guarantee Annuities, the annuity industry version of a CD. That's yield. Yield means you can take the interest out and not touch the principal. Yield means it can grow and grow and grow, and at the end, you can take all the money, including the interest rate growth. That's yield. Income Riders, not yield, because you can't cash it in, you can't peel off the interest, and you can't transfer it. That doesn't make it bad. It makes it different, and you must understand how Income Riders work.

I encourage you to go to The Annuity Man and do a deep dive at your leisure. Spend as much time as you want watching my Income Rider videos, reading my Income Rider owner's manuals, going to my Income Rider calculator and running quotes to your heart's content. We're quoting all carriers for the best Income Rider guarantee. I will tell you this: they are attached to Index Annuities, but the quote you will get is the contractually guaranteed Income Rider. We won't talk about caps, spreads, participation rates, etc. We're only going to show the contractual guarantees of the policy, the contractually guaranteed lifetime income that Income Riders provide. So, when shopping for Income Riders, you're shopping for lifetime Income Riders.

They're not called yield riders. They're not called interest riders. They're called Income Riders because they're for income only. Don't be bamboozled by the high percentage this person is showing you. In fact, a lot of times, the high percentage they're showing you? That specific Income Rider isn't competitive. It's all a bunch of shiny things. Don't be distracted by an agent's sales pitch. Look at the contractual number, period. Pretty basic.

My name is Stan The Annuity Man. That's the truth about Income Riders and the fact that Income Riders are not yield. I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.