Fixed Indexed Annuities with income riders have two account values: the Accumulation Value and the Guaranteed Withdrawal Base
This is similar to an investment’s account balance. It is invested in the market (but limited by participation rates and caps), charged fees and spreads, and available to be withdrawn (subject to surrender charges). This is what we’ve been discussing so far.
Guaranteed Withdrawal Base
Alongside the Accumulation Value is another account which determines the guaranteed income benefit available. It’s “phantom” in that its value can’t be accessed directly. Typically, it grows at a fixed, pre-determined, rollup rate for a set period of time and then remains constant but could increase to the level of the Accumulation Value if it is ever higher. For this to happen, the market performance would have to be extraordinary such that the Accumulation Value growth, after participation rates, caps, spreads, and fees are applied, exceeds the rollup rate. It is extremely unlikely.