What is the function of a living benefit rider in variable annuities?

The function of a living benefit rider in variable annuities is to guarantee a minimum income, regardless of how the investment market performs. This rider is designed to provide a safety net for the annuitant, ensuring that they can receive a certain level of income even if the underlying investments within the variable annuity underperform.

Living benefit riders are particularly appealing in volatile markets, as they offer peace of mind that income needs will still be met without the risk of being adversely affected by market downturns. This feature is important for individuals who rely on their annuity for retirement income, as it can help them manage longevity risk—the risk of outliving their resources.

The other choices do not accurately represent the essential function of a living benefit rider. While some riders may have implications for fees or investment risk, the primary purpose is focused on guaranteeing a minimum level of income to the annuitant, enhancing the overall stability and reliability of their financial planning.