Index Annuities that Grow at 7.2% for 20 Years?

[MartinJ]

How do these index annuities that grow at 7.2% for 20 years work once you get to the 20 year mark? What kind of percentage do you get for income payments from that point on? 4%? 5%? 6%? And what if anything is left for beneficiaries if you die after 20 years?

 

[DHK]

Got a product link? I'd love to know which annuity you're talking about specifically.

Generally, the payout % will be based on age, and I would assume that the income base would not increase... ever, once income begins.

So, yeah, there won't be much of anything left if the client has plenty of longevity.

If that's a concern for the client... either "buy income and invest the difference", or buy life insurance. Life insurance is would be the better bet.

 

[pfg1]

Gotta be an income rider. Aviva used to have one that was 7.2% exactly.
The income payout is based on the annuitants age, and what rates the contract states.
So if the annuity was $100k, @ 7.2 it would double every 10yrs. Then it would be $400k income acct value in 20yrs, paid out in lifetime income at whatever the rate is according to age.

 

[MartinJ]

So after 20 years if you're 65 years old or 75 years old at that point, what kind of percentage of the income base would be typical? 4%? 5%? 6%?
By the way it was a radio commercial that referenced this annuity. It was vague on the details.

 

[DHK]

As a general rule, 5% at age 65, and it increases .1% per year... for single lifetime payout. It would be 6% at age 75.

Reduce by 1% per year for joint-life payout.