American Equity lifetime income benefit rider is designed for the company’s equity-indexed annuities. With a lifetime income benefit rider, fixed indexed annuities can offer a tax-deferred growth, flexible payout options, and a guaranteed income for life.
Lifetime Income Benefit Rider (LIBR) from American Equity
Statistics suggest that Americans are now living longer, which means retirement periods are becoming longer. The LIBR rider helps annuity buyers enjoy their retirement (however long) without having to worry about restrictions that are common with most annuity products. Effectively, the rider allows a guaranteed income stream through the rest of your life. Even better, the guaranteed minimum that you’ll receive monthly, quarterly, semi-annually or year is pre-determined by weighing the following simple factors.
- Your age – your age at the time when you start taking income.
- Your payout – whether you need the income for as long as you or your spouse live.
- Your timing – how long you wait till you start receiving income. The longer the wait, the higher the payouts.
Benefits of the Lifetime Income Benefit Rider from American Equity
- Offers income that you possibly can’t outlive.
- Provides a steady stream throughout your retirement.
- Allows spousal income benefits.
Lifetime Income Benefit Rider Options
The LIBR rider from American Equity has a total of 6 different rider options. At the bare minimum, each of these options guarantees a revenue stream for as long as you need it. Your retirement plan and lifestyle goals determine which option best works for your particular case.
The 6 LIBR options are classified into 3 different categories
- Guaranteed Income – this comprises of the first 3 LIBR options, each of which offers a guaranteed IAV rate.
- Wellbeing Benefit – this comprises the 4th and 5th LIBR options. These wellbeing benefit options are designed to ease part of the financial burden related to significant health issues. They are calculated similar to the Guaranteed Income options. If you’re unable to perform at least 2 of the 6 ADLs (Activities of Daily Living), you can double the income you receive for up to 5 years. It’s important to note though that the wellbeing benefit is not driven by confinement to a nursing home, so you can receive care at home. There are extra conditions to this benefit (e.g. a 2-year wait period).
- Indexing Income – this comprises the 6th LIBR option (Indexed income option). The IAV is calculated based on the actual rate-of-return of your Contract in the previous anniversary, which is multiplied by a set IAV multiplier to establish your IAV credit for each year.
Glossary of terms
- Contract Value – this is the value of your funds in the base account.
- Income Account Value (IAV) – this is the value used to determine the amount of income that you receive under this American Equity’s LIB rider. It’s not an accessible value, but rather a measuring tool only for purposes of the rider.
- IAV Multiplier – this is a factor that’s declared annually and used to calculate your IAV credit for the 6th LIBR option (Indexed income option).
- IAV Period – the duration of time during which your IAV is credit the IAV rate.
- IAV Rate – annual interest rate applied to your Income Account Value (IAV).
- IAV Credit – amount credited to the Contract Value based on the performance of the index allocated chosen.
- Lifetime Income Benefit (LIB) – amount of income that you receive once you choose to take payments. It’s calculated based on your IAV, your age, and gender.
- Reset – for most options, the IAV value can be reset once in the course of the contract.
- Rider Fee – this is the fee charged for the lifetime income benefit rider.
American Equity Lifetime Income Benefit Rider Options
| Guaranteed Income | Wellbeing Benefit | Indexing Income | ||||
| Option 1 | Option 2 | Option 3 | Option 4 | Option 5 | Option 6 | |
| Issue Age | All Ages | 50+ | 50+ | 50+ | 50+ | 50+ |
| IAV Rate | 3.0% compounding | 5.5% compounding | 6.0 compounding | 5.5% Compounding | 6.0% Compounding | IAV Multiplier set at issue, guaranteed for first Contract year |
| IAV Period | 20 years | 20 years | 10 years | 20 years | 10 years | Until the LIB payments are elected |
| IAV Reset | Years 5 – 10 | Years 5 – 10 | Years 5 – 10 | Years 5-10 | Years 2-5 | N/A |
| Fee | None | 0.75% of the Contract Value paid annually | 0.90 of the Contract Value paid annually |
0.85% of the Contract Value, paid annually |
1.0% of the Contract Value, paid annually | 0.9% of the Contract Value, paid annually |
Lifetime Income Benefit Election
You may choose to receive your Lifetime Income Benefit payments any time following your 1st Contract Anniversary, or after you hit the age of 50. When choosing when to begin receiving your LIB payments, you’ll also have to choose between single life and point life payment options (see below). Once your payments commence, the choices you make will be locked and cannot be changed.
Single Life and Joint Life Payout
If you choose single life option, then your payouts will be determined based on your age at the time. However, with joint life option, the other (joint) payee must be your legal spouse whose age is minimum 50 years old. In this case, the LIB payment amount will be determined based on the age of the younger payee. Payouts are made till the death of the last surviving spouse.
Tax Treatment
LIB payments are considered to be withdrawals from your contract value, and are subject to applicable income taxation as outlined by the IRS. Furthermore, the taxable portion of a withdrawal that’s taken before the age of 59.5 might be subjected to a 10% penalty by the IRS.
