It’s Time You Learned The Truth About Fixed Index Annuities With Income Riders

In our book, Momma’s Secret Recipe For Retirement Success, we devoted a large section to help you understand fixed index annuities with income riders because a fixed index annuity with an income rider is the only financial instrument that can provide you and your spouse income guaranteed for as long as you both live, protection from stock market volatility and losses, an opportunity to participate in a portion of index gains, potential for future income increases, a low fee structure, the opportunity to pass all funds remaining in your account at death to your named beneficiaries, access to your funds for income purposes either immediately or within 12 months, and a legally binding and enforceable written contract regarding the promises made to you about your money.

TRANSLATION – a fixed index annuity with an income rider is the only financial instrument that:

  • Eliminates 100% of stock market volatility from your account.
  • Guarantees you won’t lose principal even if the stock market goes down by -10%, -25%, or -50% or more.
  • Credits you with a portion (not all) of the gains when the index your account is linked to goes up.
  • Will pay you and your spouse income for as long as you both live, even to age 120+.
  • Will pay you and your spouse income for life even if your account value goes to $0.
  • Provides 100% tax-deferred growth while deferring income.
  • Can provide guaranteed annual increases of 5% or more to your retirement income value.
  • Will never decrease the amount of your monthly income.
  • May actually provide the opportunity for future increases to your monthly income.
  • Can potentially decrease the total fees you are paying each year by up to 75% or more.
  • Will pay your beneficiaries 100% of all funds left in your account when you pass away.
  • Can provide you with the choice to receive income in as quick as 30 days or defer for many years.
  • Provides absolute certainty to your funds and income.
  • Puts all of your guarantees, promises, benefits, costs, and restrictions in writing.

Do you think these benefits could potentially enhance a retiree’s probability for success? Do you think they could help you? If you like what a fixed index annuity with an income rider can do for you, focus on the benefits, not the name. The name “annuity” really should mean something that could provide you with some potentially significant benefits, but because of so much misinformation, it’s almost a bad word.

If you like what an annuity can potentially do for you, but you just don’t like the word “annuity,” call it something else like a cupcake shop, because everyone likes cupcakes! Would you buy a cupcake shop if it guaranteed your assets against all principal losses due to stock market crashes, allowed you to participate in a portion of index gains and never lose the gains from future stock market crashes, and guaranteed your income for as long as you live even if your account value is $0? If you prefer, don’t call it a fixed index annuity with an income rider, call it a cupcake shop if it makes you feel better!

There are many benefits to fixed index annuities with income riders, but like all financial instruments, there are also disadvantages including but not limited to:

  • They are not liquid and shouldn’t be used as a short-term asset alternative.
  • You can’t put all of your money in this type of plan, you need to keep some assets liquid and should use some assets for growth.
  • The income rider can’t be taken out in a lump sum, it can only be used to provide you income guaranteed for as long as you and your spouse live, regardless of stock market volatility and losses.
  • They carry surrender charges if you try and withdraw all your money prior to a specific time period.
  • Penalty-free withdrawals are usually limited to 10% per year, and in many cases can’t be taken out until after 12 months.
  • Some plans will allow you to receive guaranteed lifetime income to start within 30 days, and some will allow you to receive guaranteed lifetime income starting after one (1) year or more, depending on the specific plan. The key is to make sure you pick the plan that matches your income needs.
  • Annual fees for the income rider typically range from 0% up to 2%, averaging about 1%.
  • There are caps (maximum amounts), spreads (everything above a certain level), and participation rates (percentages of the index) that will limit your returns.
  • You will not earn stock market rates of return; you will earn less.
  • Your funds will not be invested directly in the stock market.
  • Most plans pay a set guaranteed lifetime income amount once income starts while a few offer the potential for guaranteed lifetime increasing income options.
  • While all gains are tax-deferred until you access your account, any gains distributed will be taxed as ordinary income.
  • When the stock market goes down, you will not lose any money, but you will only receive a 0% return.
  • Your account value can go to $0 but your guaranteed lifetime income would continue as such, and income would continue for life.
  • Annuities are not exciting; you are not going to have an asset that screams to new highs with the stock market and then screams louder to new lows. They are built boring, protecting your principal and guaranteeing your income.
  • You may be made fun of by friends, co-workers, family members, and other advisors, because as the stock market has a +20% annual return every so often, you may have only received a hypothetical +10% annual return. It’s true, you may be laughed at! At this time, it is important to remember why you bought the annuity in the first place, it’s because when the stock market crashes -40% every seven (7) years on average since 1929, you won’t lose anything, you’ll receive a 0% annual return. (When this happens, no one will make fun of you, they may very well wish they had what you had.)
Peak Financial Freedom Group
2520 Douglas Boulevard, Suite 110
Roseville, CA 95661


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