Roll-up vs Payout Rate
Over 100 Carriers to Quote From. Here are a few of them!
Roll-Up vs Payout Rate is one of the most misunderstood topics in annuity income planning. A “7% roll-up” doesn’t mean a 7% income for life. The roll-up rate grows the policy’s income base during deferral years, while the payout rate is the percentage that actually determines your guaranteed lifetime paycheck. At Diversified Insurance Brokers, we model both numbers across 75+ carriers so you can see the real income you’ll receive—before you commit.
See Your Real Income—Not Just a Roll-Up
We’ll compare roll-up growth and payout percentages across carriers to show your actual guaranteed income.
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Lifetime Income Calculator
What Is a Roll-Up Rate?
The roll-up rate is a guaranteed growth factor applied to the income base during the deferral period. It is not your cash value. Think of it as a bookkeeping figure the insurer uses to calculate future lifetime income. Roll-ups may be simple or compounded and often range from roughly 5–8% depending on product and state availability.
What Is a Payout Rate?
The payout rate is the percentage applied to your (possibly rolled-up) income base when you “turn on” income. It determines the size of your guaranteed lifetime paycheck. Payout percentages generally increase with age at first withdrawal and differ for single-life vs. joint-life options.
How They Work Together
- The roll-up grows the income base during deferral years.
- The payout rate is applied to that base to produce your annual lifetime income.
- A big roll-up without a strong payout rate can still yield underwhelming income.
- Marketing often highlights roll-ups; your actual paycheck comes from the payout rate.
Illustrative Example
Scenario: $200,000 premium, 10-year deferral, 7% compounded roll-up. The income base might grow to ~$400,000. If the payout rate at income start is 6%, guaranteed income would be about $24,000/year (~$2,000/month) for life. If the payout rate were only 5.25%, the same base would produce ~$21,000/year. That’s why both numbers matter.
Common Variables That Change Your Income
- Age at first withdrawal: Later starts usually mean higher payout rates.
- Single vs. joint life: Joint lifetime protection typically lowers the initial payout percentage.
- Rider features: Bonuses, step-ups, COLA (inflation) options, period-certain, or death-benefit features can raise guarantees—but may reduce initial income or add fees.
- Carrier/state/product: Availability and pricing vary; shop broadly.
We’ll Show the Real Numbers
Side-by-side: roll-up growth, payout percentages by age, and the dollar income you can bank on.
Pros & Considerations
- Pros: Clear guarantees, lifetime income you can’t outlive, ability to defer for larger payouts, optional joint-life protection.
- Considerations: Rider fees may apply; surrender schedules limit early access; index crediting is formula-based (not direct market investing); benefits vary widely by carrier.
Coordinating With Social Security
Many households use guaranteed annuity income to cover essentials while delaying Social Security for higher lifetime benefits. We’ll model annuity start dates and payout percentages alongside your filing strategy to build a resilient income floor.
FAQs: Roll-Up vs Payout Rate
Is the roll-up rate the same as the payout rate?
No. The roll-up grows the income base during deferral; the payout rate determines the lifetime income you actually receive once withdrawals start.
Which matters more for my paycheck?
The payout rate ultimately drives your guaranteed paycheck. A strong roll-up helps build the base, but a weak payout percentage can still result in lower income.
Do higher roll-ups always mean higher income?
Not necessarily. If the payout percentage is low at income start, your annual income could still be modest despite a big roll-up.
How does age affect the payout rate?
Payout rates generally increase with age at first withdrawal. Deferring income often boosts the percentage used to calculate your paycheck.
What reduces the starting payout?
Joint-life coverage, extended period-certain guarantees, COLA (inflation) increases, or certain death-benefit features can reduce initial income in exchange for stronger protections.
Is the income base the same as cash value?
No. The income base is an accounting value used to calculate guaranteed withdrawals, not a lump sum you can cash out.
Can I compare carriers easily?
Yes. We’ll build a carrier grid showing roll-up assumptions, payout schedules by age, rider fees, and the dollars you’d actually receive—so it’s apples to apples.
Disclosures: Product features vary by state and carrier. This is educational—not tax, legal, or investment advice. Review the actual contract and illustrations before purchasing.
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We’ll compare roll-up and payout designs across 75+ carriers and build a plan around your goals.
