Transforming Livelihood to Legacy: Switching from 'Enjoy Now' to 'Pass On'

In the world of retirement planning, death benefit riders are a small but growing feature in the array of annuity options. These riders can be a strategic tool to enhance an annuity's legacy value, making them an attractive choice for those looking to secure their family's financial future.

One of the key benefits of death benefit riders is their predetermined rate of growth, allowing for a guaranteed accumulation of the death benefit value. This means that the death benefit can grow over time, even after the annuity owner has passed away.

Annuity death benefit riders can be paid out in a lump sum or over five years. In some cases, they can also be used to satisfy Required Minimum Distributions (RMD) requirements, allowing qualified account holders to keep the death benefit growing. Spousal continuation is an option for many death benefit riders, allowing the spouse-beneficiary to continue the death benefit rider or step up the annuity's accumulation value to the death benefit.

The ideal clients for a death benefit rider are 65-to-80-year-olds who don't need the asset for living expenses in retirement. It's common for annuity owners to die with an annuity partially or fully intact due to the structure of many annuity contracts. In such cases, a death benefit rider can ensure that the remaining funds are passed on to the beneficiaries.

Death benefit riders come with fees based on the growing death benefit value and charged against the account value. It's important to understand these fees and how they may impact the overall value of the death benefit. Some death benefit riders may also have a minimum eligibility age.

Annuity sales reached record levels in 2024, totaling $434.1 billion, according to LIMRA. This surge in annuity sales may indicate a growing interest in death benefit riders and other annuity features that provide financial security for retirees and their families.

As the great intergenerational wealth transfer era is underway, with an expected $124 trillion passing from the baby boom generation to millennials and Generation X by 2048, death benefit riders may become even more popular as a way to ensure that wealth is passed on effectively.

However, it's crucial to remember that every client's situation is unique, and the ultimate purpose of a client's assets should be clearly understood. To determine this purpose, ask: What is this asset? What is this for? Who is this for? Don't assume clients know the difference between product and purpose; ask the questions to clarify.

In some cases, a life policy can be rescued through a tax-free 1035 exchange, allowing the death benefit value to recover over time with a death benefit rider. For clients who may not qualify for life insurance, an annuity death benefit rider can be a reasonable alternative.

Despite their growing popularity, there is limited information available about the background and involvement of individuals like Paul Garofoli in the annuity industry. As with any financial decision, it's important to do thorough research and consult with a trusted financial advisor before making a decision.

In conclusion, death benefit riders can be a valuable addition to an annuity, providing financial security for retirees and their families. By understanding the benefits, fees, and eligibility requirements, clients can make informed decisions about whether a death benefit rider is right for them.