Income Rider Start-Age Ladder

Which rider has the larger check at which start age, and what waiting gives up.

An income rider's yearly check is the benefit base times the payout percentage at the start age. A bigger base can still pay a smaller check, and the order can flip with the start age. Type the roll-up and payout percentages from the specifications pages of two riders. The ladder shows the base and yearly check at each start age, where the larger check switches contracts, and how long waiting takes to make up the checks given up.

The basics

For Joint life, use the age the rider's percentage table reads.

Life option

Joint life takes the points typed under each contract off the percentages you type. If your rider prints joint percentages, keep Single life and type those.

Your two contracts

Contract names X and Y are just labels.

Contract X

Use the roll-up period printed on the rider's specifications page.

Leave blank if none.

Used only with Joint life.

Contract Y

Use the roll-up period printed on the rider's specifications page.

Leave blank if none.

Used only with Joint life.

Payout percentage at each start age

Copy them from each rider's specifications page. Leave a row blank to skip it.

Start age
Contract X payout %
Contract Y payout %

Base and yearly check by start age

Benefit base and yearly check at each start age, by contract. In each cell the lines are the base, the payout percentage and the yearly check, then the check as a share of the premium.
Start ageContract XContract Y

Yearly check by start age

  • Contract X (solid line, circles)
  • Contract Y (dashed line, squares)
Percentage needed to match the higher check

    What waiting gives up, and when the larger check makes it up

    A payback age is the age at which the larger yearly check has made up the checks given up. It does not price a check that continues for life, and it is not a reason to wait or not to wait.

    Assumes level checks. Ignores interest and taxes.

    Hypothetical arithmetic on numbers you type. Not a quote, an illustration, a projection or advice.

    It leaves out step-ups, multipliers, fees, excess withdrawals, taxes, required distributions, percentages that rise after income starts, and what a rider pays once the account value reaches zero.

    It does not say which contract to choose, and it holds no rates. The tool's own code does not send your numbers anywhere. Copy link puts them in the link, so share it only if you mean to.

    This page works only from the numbers you type. Check each figure against the carrier's current materials. For several deferral lengths, see the Deferral Snapshot in the Annuities Genius rider calculator (how to use it).

    Summary for your file

    Cite or embed this page

    How the numbers are built
    • Benefit base = premium x (1 + bonus) x growth, rounded to the nearest dollar. The bonus applies to the base only.
    • Growth: simple = 1 + rate x years. Compound = (1 + rate)^years. None = 1. Years = start age minus purchase age, stopping at the roll-up years you enter.
    • Yearly check = base x payout percentage, rounded to the nearest dollar. Joint life uses the typed percentage minus the joint reduction.
    • Checks given up = earlier check x years waited. Extra a year = later check minus earlier check. Years to make up = checks given up divided by extra a year.
    • Percentage needed = the higher check divided by the other contract's base.

    Roll-up is added once a year: simple roll-up on the starting base, compound roll-up on the base reached so far. It stops when income starts or when the roll-up years you entered run out. Halves round up. Checks are level, with no interest and no taxes.

    This page leaves out step-ups, multipliers, fees, excess withdrawals, taxes, required distributions, percentages that rise after income starts, and what a rider pays once the account value reaches zero.

    Formulas follow the guide Guaranteed Lifetime Withdrawal Benefit: The Math Shown. The list below says which rules come from a source and which are assumptions.

    Where the rules come from

    • The yearly check is the base times a percentage, and a bonus is one of the ways a base can rise: see the Interstate Insurance Product Regulation Commission (IIPRC) standard for guaranteed living benefits (PDF). Applying a bonus to the base only is a hypothetical design used for contract Y.
    • Simple roll-up adds the rate times the starting amount each year. Rider form A, filed with the SEC, has the roll-up wording, including no roll-up in a year with a withdrawal and the stop at the end of the roll-up period. Rider form B, also filed with the SEC, has the simple-interest wording.
    • Compound roll-up, and joint life as the typed percentage minus a few points, are conventions chosen for the guide's hypothetical contracts. The guide quotes no rider form for them. Where your rider prints joint percentages, use Single life and type those.
    • Rounding halves up, the payback years, the percentage needed and the share of premium are this page's own arithmetic on the numbers typed, the same as in the guide.

    Worked example

    Start ageContract XContract Y
    62$232,000 base, $9,280 check$242,550 base, $10,187 check higher
    65$280,000 base, $12,880 check$280,782 base, $13,478 check higher
    67$312,000 base, $15,600 check$309,562 base, $16,097 check higher
    70$360,000 base, $20,160 check higher$358,357 base, $19,710 check
    72$360,000 base, $21,240 check higher$358,357 base, $20,426 check

    Hypothetical contracts X and Y, premium $200,000, client 60 at purchase, single life, roll-up capped at 10 years. At 67, X has the higher base and the smaller check. Waiting from 67 to 70 gives up $46,800 of checks in X. The yearly check is then $4,560 larger, which makes up the $46,800 in 10.3 years, around age 80.

    Questions

    What does this page calculate?

    It works out the benefit base and the yearly check at each start age from the roll-up and payout percentages you type. It also shows how long the larger check from waiting takes to make up the checks you give up.

    Does it use real product rates?

    No. It holds no rates, no carrier names and no product data. The percentages it opens with are hypothetical.

    Why can a bigger base pay a smaller check?

    The check is the base times the payout percentage. A contract with a lower percentage can pay less even with a bigger base.