How To Build a Custom Annuity

You can build a custom annuity to suit your unique needs by adding riders, negotiating your contract, customizing with penalty avoidance in mind and selecting a specific portfolio index.

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  • Written By
    Jennifer Schell, CAS®

    Jennifer Schell, CAS®

    Financial Writer, Certified Annuity Specialist®

    Jennifer Schell is a professional writer focused on demystifying annuities and other financial topics including banking, financial advising and insurance. She is proud to be a member of the National Association for Fixed Annuities (NAFA) as well as the National Association of Insurance and Financial Advisors (NAIFA).

    Read More
    Marguerita M. Cheng, CFP®, CRPC®, CSRIC®, RICP®

    Marguerita M. Cheng, CFP®, CRPC®, CSRIC®, RICP®

    CEO of Blue Ocean Global Wealth

    Marguerita M. Cheng, CFP®, CRPC®, CSRIC®, RICP®, is the chief executive officer at Blue Ocean Global Wealth. As a CFP Board of Standards Ambassador, Marguerita educates the public, policymakers and media about the benefits of competent and ethical financial planning. She is a past spokesperson for the AARP Financial Freedom campaign.

    Read More
  • Edited By
    Savannah Pittle
    Headshot of Savannah Pittle, senior editor for

    Savannah Pittle

    Senior Financial Editor

    Savannah Pittle is an accomplished writer, editor and content marketer. She joined as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

    Read More
  • Reviewed By
    Stephen Kates, CFP®

    Stephen Kates, CFP®

    Principal Financial Analyst for

    Stephen Kates, CFP® is a personal finance expert specializing in financial planning and education. He serves as the Principal Financial Analyst for, where he delves into industry trends to support consumers and financial advisors on wealth management, annuities, retirement planning, and investing.

    Read More
  • Updated: March 13, 2024
  • 6 min read time
  • This page features 3 Cited Research Articles

Key Takeaways

  • Customizing your annuity allows easier access to your money, offers extra benefits, can help you avoid penalties and leaves room for more potential growth.
  • Customization options can influence which annuity type you end up purchasing.
  • Some customization options availability varies depending on what annuity type you purchase. For example, a portfolio index is only available to an indexed annuity.

By tailoring your annuity, you can secure easier access to your funds, unlock additional benefits, steer clear of penalties, and tap into greater potential for financial growth. The options for customization could significantly influence the type of annuity you decide to purchase.

With so many decisions available to you, it’s easy to overlook your multiple customization options with annuities. However, it’s important to consider these options before purchasing an annuity that may be unsuitable for your needs. 

Customize With Riders

Riders can customize annuity contracts by adding additional benefits, such as providing coverage for long-term care or offering disability income. 

Michael M., who purchased an annuity from one of’s partners, customized his annuity with riders

“I have a couple of riders on an annuity. I’m happy with my decision. Annuity riders are kind of like the riders you get with life insurance. Pretty much works the same way. There are specific benefits you can select. It might cost you more, but it’s worth it,” Michael told 

Not all riders are available with every annuity type. If you want to customize your annuity with a specific rider, it may influence which annuity type you purchase.

Common Riders and How They Enable You To Customize Your Annuity

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Guaranteed Withdrawal Benefit

This rider permits easier access to your money. Adding it enables you to withdraw a certain percentage of the principal amount each year until you’ve withdrawn the full amount.

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Disability Income

If you become disabled, the income from your annuity will increase.

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Lifetime Income Benefit

This rider guarantees you’ll receive annuity payments for the rest of your life, even if your annuity balance is depleted.

Long-term care icon

Long-Term Care

A long-term care rider adjusts your income payout to cover long-term care costs.

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A cost-of-living rider adjusts your payments for inflation. This rate can be based on the Consumer Price Index or a specific percentage you choose.

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Return of Premium

With a return of premium rider, the annuity provider will return invested funds to your beneficiary if you pass away before your annuity pays out.

Depending on the annuity provider, some riders have an annual cost while others are free. For example, Nationwide includes a return of premium death benefit rider for free with its variable annuity

Make sure to verify the rider’s potential costs when building your custom annuity to avoid unexpected fees.

I have a couple of riders on an annuity. I’m happy with my decision. Annuity riders are kind of like the riders you get with life insurance. Pretty much works the same way. There are specific benefits you can select. It might cost you more, but it’s worth it.

Michael M., Annuity Buyer

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Negotiate Contract Details

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You can negotiate contract details to allow for things like enhanced spousal or beneficiary benefits or easier access to your funds. These details may influence which type of annuity you purchase since some contracts are more flexible than others. 

There are three main negotiable contract details to help you customize your annuity: when you receive your payments, how long you receive payments for and how your benefits will be dispersed if you pass away.

Ways To Customize Your Contract

Payout Options You can customize your income payment schedule on a monthly, quarterly, semi-annual or annual schedule. Most choose monthly, but you can customize your payouts to fit your financial goals.
Spousal and Beneficiary Provisions See if your annuity allows a spousal continuation. If you were to pass away, this clause would allow your spouse to maintain a tax-deferred status and secure the long-term financial stability of your annuity. Joint and survivor annuities also allow for a named beneficiary to take over the contract in a stream of payments, rather than a lump sum.
Income for Life or Term  Some annuities allow you to negotiate how long your income will last. You could choose income for life or select an income period of a specific number of years. 

If negotiating these custom options seems confusing to you, you can always speak to a financial advisor to help you determine the best customization options before buying an annuity.

No two retirement income plans are the same because no two retirements are the same. Each investor should consider their priorities and rank them: flexibility, growth, guarantees and tax-efficiency. Choose investment vehicles that solve those priorities and, if they include an annuity, choose the right riders to satisfy your needs.

Customize To Avoid Penalties

If easy access to your funds is important to you, consider customizing your annuity to avoid surrender fees and other penalty charges. 

This option is relevant to deferred annuities, as immediate annuities rarely allow for any early withdrawals. 

You have several withdrawal options to customize your deferred annuity. These include:

  • Altering your withdrawals to fit your circumstances.
  • Electing to receive a lump-sum payment at the end of your deferral period.

These options can help you avoid tapping into your annuity early and facing a surrender charge.

According to Nasdaq, certain annuity providers allow the surrender charge to be exempt from your contract. Check with your provider to see if they offer the option to customize your annuity and avoid this penalty in case of an early withdrawal. Additionally, it’s worth noting that some providers may waive surrender charges if the client needs to enter a nursing home or is terminally ill. 

However, some annuities don’t allow customizable withdrawals. This may help you determine which annuity type to purchase.

Annuities that do not offer customizable withdrawals:

  • Immediate Annuities
  • Deferred Income Annuities
  • Qualified Longevity Annuity Contract (QLAC)
  • Medicaid Annuities

Source: Nasdaq

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Ready To Invest in Annuities?

Make informed choices to ensure a secure financial future. Start by understanding the best annuity rates and providers.

Choose Your Portfolio Index

Choosing a specific portfolio market index customizes the level of risk and return you want with your annuity. You’ll only need to choose a portfolio market index if you have an indexed annuity

An indexed annuity pays your rate of interest based on a particular market index. So, when the index performs well, you earn more money. 

According to FINRA, many indexed annuities are based on the S&P 500 or other broad indexes. However, some indexed annuities use other indexes or allow investors to select one or more indexes.

Customize your portfolio index to match a risk and return level you’re comfortable with. If possible, ‌negotiate to select more than one index. 

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: March 13, 2024
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