Defined terms for the annuity market and lifetime income landscape.
A return of premium rider is a rider attached to a deferred annuity that guarantees the contract owner or beneficiary will receive at least the total premium paid into the contract, less any prior withdrawals, regardless of the account value or the cumulative income payments made.
A roll-up rate is the contractually specified annual rate at which the benefit base of a deferred annuity rider increases during a defined accumulation period, separate from and independent of the contract's actual investment performance.
Safe withdrawal rate is the initial percentage of a retirement portfolio that an individual can withdraw in the first year, adjusted for inflation in subsequent years, with a specified probability of the portfolio sustaining the withdrawals over a stated planning horizon.
A separate account is a legally distinct pool of assets maintained by an insurance carrier — segregated from the general account — that holds subaccount investments supporting variable annuity and RILA contracts, dedicated to those contracts and unavailable to general creditors in insolvency.
Sequence of returns risk is the risk that the order of investment returns — not just their average — determines whether a portfolio subject to withdrawals sustains a planned income, with poor early returns causing disproportionate damage during drawdown.
