How an income rider drives value for a fixed index annuity (FIA)

Income riders come up in a lot of FIA threads here, so wanted to lay out what they actually do and what they cost.

An FIA income rider is an optional feature you add when you buy the annuity. It guarantees you a stream of income for life, even if the account balance eventually drops to zero. It does not grow your actual account faster. Instead, the rider creates a second number on the carrier’s books called the benefit base.

The benefit base only exists to calculate your future income. You can’t withdraw it as a lump sum and it doesn’t pass to heirs.

There are three numbers you need to know.

The benefit base starts equal to your premium. The rollup rate is the fixed percentage the benefit base grows by each year you delay taking income, and in 2026 that usually falls between 5% and 8%. The withdrawal percentage is the portion of the benefit base you actually receive once you turn income on. And it rises with your age activation. A 60-year-old might get 4.5% and a 70-year-old around 5.5%.

Rider fees in 2026 usually run 0.95% to 1.25% of the benefit base per year, though some contracts do as high as 1.50%. Something to watch out for is fee drag. The rider fee comes out of the account value every year, whether the index performed well or not.

An FIA can’t post a negative credit, but the fee still gets deducted, so during flat index years the account value can shrink even while the benefit base keeps growing.

So, if you already own an FIA, did you add the income rider or skip it? And for those still shopping, is a rider something you’re planning to include?