Page 137 - Ready Set Retire

Ready. Set. Retire!

(79 basis points, or BPS) of the greater of the contract value or
original premium. In other words, on a $100,000 deposit, it can
never be less than $790 per year, but it can be more (an
egregious charge, as we will see in a moment). So, let’s run
through the scenarios.

First, assume the market goes down, by say, 10% and the
owner dies. What are you getting for the $790 a year you are
paying? Remember, the rider merely guarantees you will not
receive less than you put in. So the benefit received will be:

$100k - $90k = $10k

So, you are effectively paying $790 a year for $10,000 in life
insurance protection (sometimes). But wait! There’s more!

Assume the market bounces back and you are even when the
owner dies. What is the benefit you are getting for your $790 a
year?

$100k - $100k = $0

Right! $790 a year with no benefit at all. But again, there’s
more!

Assume the market has gone up fairly dramatically since the
annuity was purchases, and its value is $150k when the owner
dies.

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