As I have discussed over last two years, Income riders charges are up, payout factors down and most products produce less than a 1% IRR at average life expectancy.
Income riders are falling even harder than I expected.
According to LIMRA:
“One of the factors driving VA sales declines has been a drop in sales of products with guaranteed living benefit riders,” noted Giesing in a statement. “LIMRA Secure Retirement Institute is expecting sales of variable annuities with a GLB rider to be around $50 billion in 2016. This is a decrease of nearly $20 billion from last year and a drop of over 50 percent from just 5 years ago.”
It’s only a matter of time before the reality of income rider payouts hits the FIA world and the public stops buying secondary account features at a high cost to their heirs and a 50% chance of earning less than 1% over the life of their annuity due to high fees and charges.
What can you do now? Gain insight, so you can make an informed decision.
Income Under Management™ which uses a mathematically sound process to calculate systematic withdrawals and provide a SPIA estimate at a later age in the event a client wishes to purchase a guaranteed income stream at that point. The net effect results in an average increase of $100,000 in saved fees for not choosing an income rider and focusing on a low or no-fee accumulation product with a strong participation rate.
After AnnuityCheck™ updated SPIA rates for the month, a 65-year-old male would need $3,218 less to generate a $20,000 guaranteed income at age 83. $151,103 vs. $154,321 before the 1/4 % rate hike.
Are all income riders evil? Absolutely not, but without knowing the numbers and the odds, you are in the dark.