Increasing Your Income Benefits

If you had a pension to help support you throughout your retirement years, would you prefer a steady, constant dollar, or a flexible income? If you don’t have a pension or you need to supplement your pension, annuities may be the right bridge for your retirement income planning. Many annuities have optional riders that give you choices like this.

When comparing annuities with the optional lifetime income benefits, consider the duration you expect to live off the income generated. Perhaps you have other streams of income to supplement a higher, constant dollar amount from your annuity. If you feel your annuity is providing a bulk of your income, you may be drawn to increasing options within your annuity.

The increasing options available through these riders vary. One insurance company offers a lifetime income annuity that ties your income payments to the annual Consumer Price Index (CPI). Each year, the insurance company looks to see the change on the CPI and your payment can move by that indicator proportionately. Another increasing option can be found directly on an index, such as the S&P500. For example, your income payment moves with the index on your contract anniversary. Should your annuity realize a 4% increase that year, your payment will also increase by 4%. The best part is, if the index is down that year, your payment will not change, it has been “locked in”.

If the uncertainty of the CPI or an index gives you pause, and you prefer predictable income adjustments, there is also an annuity for that. The insurance company can determine your income payment with a guaranteed percentage increase each year, generally about 3%. It is important to explore these options and speak to your insurance advisor to determine if an income increasing benefit is right for you.