Before starting lifetime income from fixed indexed annuities, policy owners who have a guaranteed lifetime withdrawal benefit rider in their contract take partial withdrawals less frequently than policyowners who do not have such a rider, according to a Ruark Consulting report. And those who do take partial withdrawals before starting lifetime income tend to take out less money than owners who have no such rider. Annuity professionals might expect that, since those owners will expect to take their guaranteed withdrawals in the future and might be disinclined to do so in the moment, so to speak. Like, who wants to wreck their guarantee?
The Ruark study blows that expectation to the wind, at least partially. It found that when policyholders did take partial withdraws before starting their lifetime income, the withdrawals were at “levels that are detrimental to the guarantee.” So apparently, when policyowners want or need the money, they’re going to withdraw the amount they want or need, regardless of the guarantee. Ruark said its staffers and its own fixed indexed annuity clients were “surprised at the limits of the rider’s effect on overall withdrawal behavior.” They’re not alone.