- 4,921
likely reading the disclaimers that the lifetime income rider can shrink & go away completely if you also were exceeding the annual income amount guaranteed (IE: emptying the funds faster than rider permitted)
Annuity vocabulary question.
- Thread starter LostDollar
- Start date
likely reading the disclaimers that the lifetime income rider can shrink & go away completely if you also were exceeding the annual income amount guaranteed (IE: emptying the funds faster than rider permitted)
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- #12
- 7,005
Is this like fast food, the company can't afford to pay the employees enough so there is an automated tip request at checkout? (If you pay by credit card.)
- Thread starter
- #13
- 7,005
(Admittedly my concern is something that would benefit from agent explanation, however Tahoe Ray, in another thread has indicated that the size of my planned annuity purchase, when accompanied by the general buyer characteristics I have, will likely make it quite challenging to find an agent. So my followon question in the post above.)
North American Company Income Pay Pro
Document 35405Z Rev 1-23
Page 17
GLWB rider termination
The Income Pay Pro GLWB rider will terminate:
9 scenarios for termination are then listed.
This is one:
My purchase details would be using Roth funds for the purchase and then expecting a joint payout period of 30-40 years. Wife will inherit the annuity. (another agent discussion issue: It would be my hope that this would not be an ownership change that would void the GLWB rider).
It seems to me that a payout of 5-6 percent (a normal payment based on the life of the youngest joint annuitant) for 35 years would definitely exhaust the GLWB value of the annuity contract.
I am less certain about the accumulation value, but it seems like with a combination of GLWB fees for 35 years and RMD's for 20 or more years, it would have at least some chance of going to zero. If annuities do illustrations like life insurance, a very conservative illustration accompanied by agent comments might address that concern.
- 4,921
RMDs will not be in addition to GLWB.(plus, Roth won't have RMD anyway for you or your spouse).
GLWB will be an amount set at time of issue that will permit you to annually take that amount or less & be guaranteed that you can always receive that amount. I personally don't see a scenario where you could cause the GLWB to go to zero unless you take more than GLWB, causing it to be exhausted.
I am speaking generically as I don't sell or write North American
I do believe the GLWB rider costs about 1-1.25% per year, but if you are looking for guaranteed lifetime income, it might be well worth it
GLWB will be an amount set at time of issue that will permit you to annually take that amount or less & be guaranteed that you can always receive that amount. I personally don't see a scenario where you could cause the GLWB to go to zero unless you take more than GLWB, causing it to be exhausted.
I am speaking generically as I don't sell or write North American
I do believe the GLWB rider costs about 1-1.25% per year, but if you are looking for guaranteed lifetime income, it might be well worth it
- Thread starter
- #15
- 7,005
I get brain freeze trying to read and understand FIA and Income Riders. It was obvious to me from the very first when I was looking at Oxford Multi Select and their GLWB rider, I was going to have to have agent help to find and clarify issues for any income riders beyond that product.
I will concede I mis-spoke when I said the LPA would decline each year.
However, I do not see how the contract's GLWB value can avoid going to zero. If it does, that would leave the GLWB rider at risk, depending on what happens with the Contract's accumulation value.
As nearly as I can understand, without talking to NAC customer service or an agent, the GLWB value will increase by a GLWB increase percent for up to 10 years. I don't see any indications of GLWB value increase after that.
According to the flyer, my joint lifetime payment percentage for an increasing LPA would be 5%+ after ten years, based on the age of the youngest annuitant. 5% times 35 years would be 175%. So it seems to me, if we in fact got payments over a 35 year period, we would get over 175% of the GLWB value that existed 10 years after the contract purchase. If my understanding of the mechanics is correct, I don't know how the GLWB value can not go to zero. A level LPA would be 6% plus which I think goes to the same result even faster.
For the contract accumulation value, I realize the thing I was missing in my thought process was the annual interest credits. If RMD's are not a consideration, then I think the question would be: Will the annual LPA's and Rider charge be more or less than annual interest credits? I don't know how to get a sense of that without some kind of product illustration using a specific LPA activation age and a conservative interest crediting amount along with the annual rider charge.
BTW, from the 2023 NAC product comparison flyer I looked at says the charge is 1.15% I just flowed with that because I remembered You, or Tahoe Ray, or scagent saying once that a higher charge sometimes accompanied higher benefits and I see this contract doing a good job of meeting my needs as long as the income rider does not go away.
- 4,921
If you put in 20k & let's say that the GLWB is 5%( $1000). This means as long as you take $1000 or less every year, the GLWB will still be $1000. But if you call in & take an extra $10k out & keep taking $1k each year, it will go to 0 because you emptied the money & exceeded the lifetime income annual amount
- Thread starter
- #17
- 7,005
If one holds an annuity with a lifetime income rider that has a "play money rider value" of $20K when lifetime income starts, there is no increase in the "play money rider value" after the initial rollup period, LPA's are subtracted from the "play money rider value", lifetime income to the rider holder is $1K a year, and it gets paid out for 35 years, won't the "play money rider value" drop to zero?
- Thread starter
- #18
- 7,005
I'm reading this again, and I think I am connecting with what you are trying to tell me.
I have been focused on the "GLWB value" dropping to zero. I think you are telling me as long as we take out only the LPA the carrier computes when the rider is activated, the rider can't be dropped regardless of whether or not cash account and "play money" account values go to zero?
Sorry I'm so dense and I appreciate you working to make me see what you are saying.
- 17,053
Have you ever heard of a life insurance policy that paid out a death benefit that was more than the person who died had paid in with premiums?
Annuities do the same thing in reverse. They pay you more out (if you live long enough) than the cash in the annuity has accumulated to. The guaranteed income stream is not dependent on their being cash left in the annuity.
- 4,921
If I understand the LPA reserve correctly, for those years that you do not take your guaranteed lifetime payment amount or take less than the amount, it goes into an LPA reserve that you can later take as a lump sum. IE: you get to defer annual guaranteed minimum income until a later date
