Annuity income riders are sold as added protection against market downturns to variable and indexed annuity owners. The sales pitch is the riders will provide a guaranteed lifetime income for those worried about not having enough money to support themselves after retiring if their investments perform below expectations.

These riders are optional. Annuity buyers can choose, for an extra cost, to purchase these riders. Two popular types of income riders are the guaranteed minimum withdrawal benefit and the guaranteed minimum income benefit. Before you purchase either rider you need to evaluate the costs and benefits of the rider in your unique situation as the riders will only recover their costs in very specific circumstances.

When do Income Riders for Variable Annuities for Seniors Make Sense?

Variable annuity income riders always generate additional costs and you will only recover those costs at some point years in the future and under specific circumstances that may or may not occur. The value or lack of value of the it will depend more on the buyer's needs and circumstances than on the performance of the stock market.

For example if your health declines or if you decide you want to cash in your variable annuity to take advantage of another or better investment opportunity you will never recover the costs you have paid for the riders. You have to actually receive income payouts from the annuity to see a return on your investment.

For an income rider to make financial sense you will have to hold your annuity at least 20 years with a guaranteed minimum withdrawal benefit rider and for a guaranteed minimum income benefit you will have to keep the annuity for at least the waiting period required in the rider contract.

When do Income Riders for Indexed Annuities for Seniors Make Sense?

The same rules of thumb apply when evaluating the costs and benefits of it for indexed annuities as for variable annuities. However if your indexed annuity rider offers a 7-8% roll up rate, and considering average variable annuity fees and the cost of the riders you may realize a better rate of return on an indexed annuity with an income rider than the rate of return you will see on most variable annuities with it.