Annuity Settings

Annuities with lifetime withdrawal benefits can be included in an Income Lab plan. Simply add the account in the Assets > Annuities tab.

The particulars of the annuity are set by clicking on the gear icon to the right and clicking on Annuity Settings.

The Annuity Settings link gives you access to settings organized in the following tabs.

1. Income: Information about the life/lives covered by the annuity and when withdrawals from this annuity begin or end.
2. Benefit Increases: Information about when and how the withdrawal benefit can increase during deferral and during withdrawals.
3. Crediting Methods (Fixed Index Annuities only): What crediting method(s) and parameters affect the returns on this fixed-index annuity?
4. Fees: Enter fees particular to this annuity.

Income

The following settings are available on this tab.

1. Guaranteed Withdrawal Base (GWB): The 'benefit base', or amount on which the guaranteed withdrawal amount is based. For example, the GWB could be $200,000 while the annuity balance is $150,000. If the guaranteed withdrawal rate is 5%, the annual guaranteed withdrawal would be $10,000.
2. Guaranteed Withdrawal Rate: The amount of the guaranteed withdrawal base that is guaranteed to be available for withdrawal each year. For example, if the withdrawal rate is 5% and the base is $100,000, the guaranteed withdrawals will be $5,000/year.
3. Covered Life: One or both spouses in a plan can be covered, even if the account is a singly owned IRA or other account.
4. Timing of withdrawals: Enter when you plan to begin withdrawals and whether the withdrawals will be fore the lifetime(s) of the covered life/lives.
5. RMDs: If the RMDs for this annuity (if it has RMDs) are greater than the guaranteed amount, should the plan model taking the higher amount? If 'yes', the guarantee after this withdrawal will not be reduced.

Benefit Increases

This tab covers information on how the annuity withdrawal benefit can increase in the deferral and withdrawal phases.

1. Anniversary Month and Step-Up Frequency: When and how often does the annuity give an opportunity for an increase in guaranteed withdrawals? (There are no step-up inputs for FIAs. All FIAs are treated as having annual step-ups.)
2. Benefit Increase during Deferral:
   1. Rollup: On each anniversary during deferral, apply the "rollup" rate to the guaranteed withdrawal base (GWB) / benefit base
   2. Withdrawal Rate Increase: On each anniversary during deferral, add to the guaranteed withdrawal rate. For example, if the guarantee withdrawal rate is 5% now and the 'Annual Addition to Withdrawal Rate during Deferral' is 0.50%, on the next anniversary the withdrawal rate will go to 5.5%.
3. Benefit Increase during Withdrawal Phase:
   1. Balance High-Water Mark: On each step-up opportunity (anniversary, quarter, etc.) if the balance is higher than the guaranteed withdrawal base (GWB) / benefit base, increase the withdrawal base to this new high-water mark.
   2. Asset Allocation Returns: On each anniversary, increase the guaranteed withdrawal amount by the returns of the annuity's allocation (with a floor of 0%). Apply this increase even if the annuity has a balance that is below the current benefit base, even if the balance is $0. (This option is typically only seen for fixed index annuities.)

The Benefit Increases tab also offers some advanced settings. The advanced settings available will depend on other settings for the annuity. For example, the 'Guaranteed Growth of GWB is...' settings are only seen if the annuity's 'Benefit Increase during Deferral' is set to 'Rollup'.

1. Displayed annual income growth during withdrawal phase: For determining spending capacity and guardrails, actual income growth/step-ups will be used. However, in some places in the application, such as Life Hub and the Income Sourcing graph and table, you may want to assume that the income for this annuity will go up during the withdrawal phase, and display this increase in the application. If you enter a value greater than 0% here, you will see the withdrawals from the annuity going up by this amount in Life Hub, the Income Sourcing Graph, and in Tax Lab.
2. End of guaranteed growth during deferral: Many annuities provide a limited period of guaranteed benefit increases during deferral. Enter the end of this phase here. These guaranteed increases will end at the earlier of this date or the beginning of withdrawals.
3. Guaranteed Growth of GWB is:
   1. Simple | Compounded: If the annuity's guaranteed growth is in the form of a rollup, is this growth rate compounded on previous years' guaranteed growth ('compounded') or not ('simple')?
   2. Stackable | Non-Stackable: If the annuity's guaranteed growth is in the form of a rollup, is this growth rate based off of the annuity's balance high-water mark ('stackable') or not ('not stackable')?
4. Amount on which rollup is based: If the annuity's guaranteed growth is in the form of a rollup and this rollup is either not stackable or simple, enter the amount on which the guaranteed growth will be figured. Note that if the rollup is compounded and stackable, you will not enter this value.

Crediting Methods

The credited returns for fixed index annuities depend on what index or mix of indexes is being tracked, as well as the crediting method or mix of crediting methods being used and the values associated with those crediting methods. For more on these topics, please go to this article that covers these settings.

Fees

Many annuities have fees associated with them. The 'Fees' tab allows you to enter these.

1. Base Annuity Fee (M&E): Fee applied to the overall annuity balance. Include any applied advisory fee here.
2. Living Benefit Fee: Annualized fee that applies to the living benefit withdrawal base. For example, if the fee is 1%, the withdrawal base is $100,000, and the annuity balance is $80,000, the fee for that year would be $1000.

Note that, for variable annuities, the plan's asset class-level fees will be applied. These are the same asset class fees that are applied to the plan's investment accounts. For example, if you have a 0.20% fee set for Large Cap Growth, this same fee will be applied if a variable annuity has an allocation to Large Cap Growth. You can find these fees in the plan's Advanced Settings. No asset-class-level fees will be applied to fixed index annuities. If you would like to apply a higher fee for the annuity, you can do so by increasing the Base Annuity Fee.