I assure you that most annuity agents and advisors will not disclose this information because they simply don’t know.
1. If you are electing to have a Lifetime Income Rider with your annuity, and you wish to take a pre-lifetime income withdrawal, you will not receive the “step up” or “roll up” interest rate credit for that year. You have been guaranteed locked in interest rate for your initial deposit to grow as long as you don’t touch it, the “roll up” rate. But many company brochures are not clear on the fact that you can not touch the money if you want to receive the roll up interest rate for that year. If you withdrawal your allowed 5% or 10% you will not pay penalties, but with most companies you will not receive any “step up” interest credit for that year.
Note: If you need income while your annuity is growing, consider splitting some of your funds into an immediate annuity that will pay you while your deferred annuity is left untouched and can grow freely without any risk of interrupting its due credits.
2. If you are receiving an initial premium bonus with your annuity, make sure that it is 100% vested in a short time period. Many annuity providers will give out initial premium bonuses, as high as 10-14% of the amount initially deposited in the annuity. Yet, these bonuses may have vesting periods as long as fifteen years. That means on a single annuitant scenario, if the owner of the annuity dies in year five of the annuity’s life, the beneficiary will not receive all of the bonus nor the growth that should have been earned on the bonus over the five years. It becomes prorated. Many companies will specify in their brochure whether the bonus is 100% vested in year one, and in death.
I will continue to write these helpful tips for all of you who are considering which annuity type is right for you. I hope you can use my agency and my website as helpful tools in order to make the most informed decision.
If you have any questions regarding these topics please feel free to call me today.
