Living Benefits on Annuities: EDU #2530
The Retirement and IRA Show
Jim Saulnier, CFP® & Chris Stein, CFP®
4.3 • 730 Ratings
🗓️ 23 July 2025
⏱️ 88 minutes
🧾️ Download transcript
Summary
Chris’s Summary
Jim and I explain living benefits on annuities, covering how guaranteed income riders work and why they can appeal to those hesitant to annuitize. We describe what we call noun annuities (pre-annuitization) and verb annuities (post-annuitization), then unpack how living benefit riders like guaranteed minimum withdrawal benefits provide income without giving up access to principal. We also discuss what we refer to as the “pretend account,” alongside actual account balances and the significance of guaranteed versus hypothetical projections.
Jim’s “Pithy” Summary
Chris and I finally deliver the long-promised show on annuity living benefits! After wrapping up Annuity Awareness Month, we realized this topic still needed its own deep dive—so here it is. I explain how living benefits evolved from death benefits to guaranteed accumulation and now to income riders that let you turn your noun annuity into a verb without actually doing so. Why? Because people hate the verb! They don’t want to give up their lump sum—they want to “keep a noun a noun,” as I say—and still get some income out of it.
We also talk about the trickery behind what I call “pretend accounts”—those “mystical magical” numbers insurance companies use to calculate your guaranteed income while your real account shrinks from fees. I explain how the ten percent growth you’re promised isn’t on your actual money—it’s on that “pretend account.” And yes, your fees? Those are based on the “pretend account” too, not your real balance. It’s all sizzle, no steak for most people—unless you’re like me and you’re actually using the income. I share that I own one of these riders myself, but only because the guaranteed income benefit made sense for my Roth IRA.
Bottom line: these products aren’t always terrible. If you know you want income and you understand what you’re paying for, some of these living benefit riders might actually make sense—even after you account for the outrageous fees. But the key is understanding what you’re buying and not falling for a hypothetical illustration that doesn’t tell you what you’re actually getting.
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Transcript
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| 0:47.1 | This is the retirement and IRA show coming to you from beautiful Northern Colorado. |
| 0:52.7 | Join us as certified financial planner Jim Sonier, as well as Colorado State University Finance Instructor and Certified Financial |
| 0:55.0 | Planner Chris Stein teach you about IRAs, borrow-in-case, annuities, Social Security, |
| 1:01.1 | pension plans, and estate planning in a fun and enjoyable show. |
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| 1:10.7 | Jim and Chris want you to know that |
| 1:12.3 | they're available to help you plan for your retirement. Just visit their website at Jimhelps.com. |
| 1:18.4 | That's Jim H-E-L-P-S dot com and click the Meet the Team button on the homepage. Now here's Jim |
| 1:25.6 | and Chris with today's show. |
| 1:29.0 | Well, hello and welcome to the Retirement and IRA show EDU edition for this week. |
| 1:34.8 | So today's show's been long promised. It's kind of a lingering leftover show from |
| 1:42.0 | annuity awareness month last month. |
| 1:49.8 | And one thing we had promised to go over that we didn't quite get to during the month of June is what are called living benefits on annuities. |
| 1:55.1 | So like the name suggests, certain annuities have a death benefit, right, which is triggered by the death of the |
| 2:05.7 | annuitant. But there are other benefits, usually some type of withdrawal or income benefit that |
| 2:14.4 | are referred to kind of as a group as living benefits because these are |
| 2:18.8 | additional benefits beyond the act of annuitization that you can receive from these |
| 2:25.5 | annuities without dying and receiving a death benefit. |
... |
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