If you own a fixed index annuity (“FIA”), you can generally visit the website of the life insurance company from which you purchased your FIA to see the current value of your investment. In addition, your life insurance company will send you an annual statement shortly after the anniversary date of the issue of your contract showing you the accumulation value of your FIA on your anniversary date.
In addition to your anniversary date value, a typical annual statement will provide you with a list of the various transactions during the previous contract year, including investments, interest crediting, withdrawals, surrender charges, and premium bonuses and income and other rider charges if applicable.
How about if you purchased an optional income rider with your FIA? Will your annual statement show any information about the current value of your future income withdrawals? The answer to this question is generally no.
When you purchased your FIA, your financial advisor probably prepared an illustration for you that included the amount of annual lifetime income withdrawals that you will receive beginning at various dates depending upon when you begin your withdrawals. While the accumulation value of your FIA will change over time, unless you make additional investments or take non-income withdrawals, the amount of your lifetime income withdrawals are predetermined and are contractually guaranteed.
Assuming that your FIA includes an income rider, there’s a value that can be calculated and attached to the future income stream that you, and if married, your spouse will receive. Furthermore, the value of your income withdrawals may be greater than the accumulation value that’s shown on your annual statement.
If the value of your income withdrawals can be determined, why don’t life insurance companies include this information on annual FIA statements? The reason is because it can vary depending upon a number of assumptions.
Even though the amount of your income withdrawals beginning at various ages assuming you don’t make additional investments or take any non-income withdrawals can be predetermined when you purchase your FIA, there are other unknowns. Stay tuned to next week’s post to learn more.
Robert Klein, CPA, PFS, CFP®, RICP®, CLTC® is the founder and president of Retirement Income Center in Newport Beach, California. Bob is also the sole proprietor of Robert Klein, CPA. Bob applies his unique background, experience, expertise, and specialization in tax-sensitive retirement income planning strategies to optimize the longevity of his clients’ after-tax retirement income and assets. He does this as an independent financial advisor using customized holistic planning solutions based on each client’s needs and personality.