Income Rider Rollup Rate and How the Guaranteed Growth Actually Works

What Is a Rollup Rate?

The single biggest source of confusion with income riders is that the rate you’re quoted doesn’t grow the money the way you think it does.

If you are looking into an income rider with a 7% rollup rate, that doesn’t mean your money grows at 7%. The gap between what the rate sounds like and what it actually does is important to understand.

When you add an income rider to a fixed index annuity, the contract starts tracking two separate numbers.

Your account value is the real money in the contract: It’s the amount you can withdraw or cash out, less any surrender charge that still applies, and it’s typically what you can pass along to your heirs.

Your benefit base is a separate bookkeeping figure that is used only to calculate future income. You can’t withdraw it or cash it out.

The rollup rate is an annual growth rate, set by contract and applied to the benefit base while you wait. This benefit-based rollup is guaranteed (subject to the issuer’s claims-paying ability). It won’t move with the stock market. A 7% rollup increases the benefit base by 7% each year, regardless of what the index does.

Any guarantee is always subject to the issuer’s ability to meet its obligations.

Compound vs. Simple Rollup

Two different products can both be marketed as a “7% rollup annuity” and pay very different incomes. That’s because each credits the rollup differently.

Simple rollup – applies the rate to the original benefit base only. Every year’s credit is the same dollar amount.

Compound rollup – applies the rate to the growing balance. Every year’s credit is larger than the previous year’s.

The brochure number looks identical either way, but look closer, and you’ll notice the differences. For example, for illustration purposes, here’s a $100,000 benefit base over a 10-year deferral period:

• 10-year compound at 7% on $100,000: the benefit base grows to $196,715.
• 10-year simple at 7% on $100,000: the benefit base grows to $170,000.
• That’s a gap of about $27,000, created by one word in the contract that most buyers never ask about.
• At a 5.5% withdrawal rate, that $27,000 is worth about $1,500 a year in lifetime income, every year, for as long as you live.

End of year	7% compound	7% simple
1	$107,000	$107,000
2	$114,490	$114,000
3	$122,504	$121,000
4	$131,080	$128,000
5	$140,255	$135,000
6	$150,073	$142,000
7	$160,578	$149,000
8	$171,819	$156,000
9	$183,846	$163,000
10	$196,715	$170,000

Over a 25-year retirement, the compound contract pays out tens of thousands of dollars more at the same headline rate. If a quote leads with the rollup rate but does not specify whether it is compound or simple, that is the first question to ask, not the last.

Rollup Duration

The rollup does not run indefinitely; its stop date is set in the contract.

• Most carriers cap it at 10 to 15 years, or until your first withdrawal, whichever comes first. A 7% rollup with a 10-year cap and the same rate with a 15-year cap are very different products, and the headline rate alone won’t tell you which one you hold.
• Some carriers offer a “second window” or “step-up” extension that restarts or continues the rollup for an additional period, often at a reduced rate.
• The cap year is really a deadline. If you don’t turn on income before then, the rollup stops while the rider fee continues to be charged. You end up paying for guaranteed growth you’re no longer getting. Don’t make this mistake.

Premium Bonuses and “Doubled” Rollups

Carriers compete on the headline number, so the rollup is often dressed up with what’s marketed as an annuity bonus rollup. Two versions show up most:

Premium bonus – added to the benefit base, commonly in the range of 5% to 20%, applied either at issue or only when you turn on income. A 10% bonus on a $100,000 premium starts the benefit base at $110,000, which then rolls up from the higher figure—so it does more work than it first appears.

Doubled rollup – doubles the rollup rate in any year the index also posts a gain. This feature is marketed as “up to 14%,” but the doubling only happens in up years, so the realized average over a full deferral typically lands well below that ceiling.

Either way, there’s a catch—the bonus isn’t free. You’ll see something like a lengthened surrender period, a lower index cap, a higher rider fee, or some combination of those. Your benefit base may look bigger, but the money you can actually withdraw usually grows more slowly to cover these costs.

None of this makes bonus features bad. It makes them a tradeoff, and that’s the thing to evaluate.

The Relationship Between Rollup Rate and Withdrawal Percentage

The rollup only sets the size of the benefit base. Your actual income is the benefit base multiplied by the withdrawal percentage, the payout rate the carrier applies at the age you turn income on.

For example, let’s look at two contracts, each starting with a $100,000 benefit base and a 10-year simple rollup. (For illustration only — actual rates vary by carrier and contract.)

1. 7% rollup, 5% withdrawal: the benefit base grows to $170,000. Income: $8,500 a year.
2. 5% rollup, 6% withdrawal: the benefit base grows to $150,000. Income: $9,000 a year.

Looking only at the rollup, you would pick the 7% contract, and you would end up with less income for life. That’s because the rollup and how long you wait combine to set the size of the benefit base, and the withdrawal percentage sets how much of it you actually get. The rollup is one input of three, not the answer.

That’s why some carriers publish a single blended figure, often called the guaranteed income rate, that combines all three into a single number. It can be a useful shortcut, but only when you compare two quotes at the same activation age. Measured at different ages, even that number stops being apples-to-apples.

How Rollup Rates Have Moved Over the Last Decade

Rollup rates are not fixed by nature. They move with the broader interest rate environment, which is why a number that looked strong a few years ago may say more about its era than about the contract today.

• The range: Between 2014 and 2026, advertised annuity rollup rates ranged from 4% to 10%.
• Rate changes: Rates compressed over the years when interest rates were historically low, then climbed after 2022 as rates rose and carriers competed more aggressively for guaranteed income.
• What it means for you: A rollup rate is only meaningful in the context of when it was quoted. An illustration from five years ago does not reflect what is available today.

What Ends the Rollup

Three things stop the rollup, and only three:

1. Hitting the cap year. The rollup period written into the contract simply runs out.
2. Taking a withdrawal. Most contracts freeze or cut the rollup the moment you take money out before activating income. That’s why a pre-activation withdrawal is usually a bad idea on a rider you intend to use: A small early withdrawal can cost you years of guaranteed growth on the benefit base.
3. Activating the income rider. This locks the benefit base and converts it to a payout. The rollup has done its job and stops.

Rollup Rate Examples by Carrier

The three income riders below are described exactly as in their product brochures.

Read across, and one thing stands out: Only one of the three even states a rollup rate. The others grow the income base through bonuses and interest multipliers, or hand the number off to a separate rate sheet entirely.

What does that mean for you? The rollup rate that an agent quotes you may not appear in the brochure at all. It can sit in a separate rate sheet, change from one printing to the next, or be a bonus dressed up to sound like a rate.

So before you compare two products on their rollup, get the exact figure in writing, for the exact option, as of a specific date, and then compare the income each one actually pays, not the number on the sales page.

Product	How the income base grows	Bonus to the income base	Key condition	Rider fee
American Equity IncomeShield 10	Pick simple or compound when you buy (e.g., 4% compound/15 yrs or 7.25% simple/7 yrs)	7% up front, earned over 10 years	Rate locked in by the option you pick	None up to 1.20%
Athene Ascent 10 Bonus	A guaranteed simple rate, plus an optional interest-linked boost	A bonus up front; amount not in the brochure	Rate is on a separate sheet, not the brochure	Not given in the brochure
Allianz 222	No set rate; grows by adding half of any interest earned, plus a bonus	15% on money paid in the first 3 years	Usable as lifetime income only after 10 years	Built in; no separate rate

American Equity actually prints income-based rates, but they vary by option and are locked in at issue. Athene’s brochure prints no rate at all and points you to a separate disclosure. The Allianz 222 has no rollup rate in the usual sense; the income base grows by a premium bonus plus 50% of whatever interest is credited, and only if you hold the contract for 10 years and then take income.

Point being, it can be difficult to easily compare various carriers’ and products’ rollup rates.

How To Evaluate a Rollup Rate Quote

As you compare various annuity quotes, ask some key questions.

1. Is it compound or simple? The headline rates may look identical, but the underlying mechanics could be quite different. Compound rollup means each year’s growth credit applies to the benefit base, including all prior growth, while simple rollup means each year’s credit applies only to your starting balance.
2. How many years does it run? A high rate that stops in seven years can lose to a lower rate that runs for 15 years, when you compare the math. Ask your agent when the growth ends.
3. What’s the withdrawal percentage at the age you plan to turn on income? The rollup rate grows your benefit base while you defer income. The withdrawal percentage converts that base into the actual money you receive annually.
4. What’s the rider fee? It’s charged every year on the income base and comes out of your real money. A bigger base means a bigger fee.
5. What happens to your interest cap when this rider is attached? A cap is the ceiling on how much your money can earn in a year. Many contracts lower it to pay for the rider, so ask your agent for the details about this.