Submitted by Anonymous on
The 7 percent minimum guarantee that is referenced by the other reviewer is simple interest - not compound interest.
For someone who invests $100,000 in this variable annuity, the minimum guaranteed increase in the income benefit would be $7,000 per year.
If this person holds onto the VA and does not take any withdrawals for 10 years, the income base would have a guaranteed minimum of $170,000.
If the benefit were based on compound interest rather than simple interest, that same income base would be $196,715.
A $26,715 difference is pretty meaningful.
Now assume that the actual income withdrawal benefit is 5 percent.
5 percent of the $170,000 is $8,500 per year.
5 percent of $196,715 is $9,835.
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