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Don’t Make Me Say I Told You So 176

Earnings Enhancement Death Benefit – This type of death
benefit will pay the beneficiary an additional amount of money
upon the death of the annuity owner. This additional amount is a

percentage of the gain in the contract value. As an example, let’s

say that a contract offers an earnings enhancement benefit of
40% of earnings. If the original investment was $500,000 and the
account value had increased to $700,000 at the time of the owner’s

death, the beneficiary would receive a check for $780,000.

► Original investment: $500,000

► Account value at owner’s death: $700,000
► $200,000 in earnings x 40%: $80,000

► Amount paid to beneficiary: $780,000

How Withdrawals Affect Death Benefits

The effect of a withdrawal when a death benefit is calculated will

differ among variable annuity contracts. The two most common
calculation methods are “dollar-for-dollar” and “proportional” or

“pro rata.” It’s important to understand how withdrawals from an
annuity contract work, both before you make the investment and

before you begin taking withdrawals.

Chapter 4: Annuities

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