There are many types of Living Benefit riders available for an annuity.
One common example is the Income rider. While the primary benefit of an annuity is an income that one cannot outlive, some people want to maintain access to their principal instead of annuitizing their annuity policy.
An Income rider helps maintain one’s income for life, keeping their principal intact, without worrying about running out of money because interest rates are less than the total withdrawn from the annuity for retirement income.
For example, an Income rider that stipulates an annuitant can receive 6% of principal for life, while the annuity is only earning 4%. Any common sense person knows that if one withdraws more than they earn in interest payments, eventually their principal amount will erode and they could end up broke.
The annuitant who can receive a 6% withdrawal rate even after they have used up all of their principal does not have to worry about running out of money, and they still have access to their principal.
Another common example of a Living Benefit rider is a Long Term Care rider. What this rider does is multiple the value of the annuity if payments are made during a period of confinement in a Long Term Care facility, or if the annuitant is unable to perform several Activities of Daily Living.
The above example are hypothetical and do not represent any specific rider with any particular insurance company.
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