An annuity rider is an optional add-on feature you can purchase to customize your annuity contract, providing additional benefits or protections beyond the standard contract terms. Riders allow you to tailor an annuity to your specific needs and concerns, though they come at an additional cost that reduces your overall returns.

Common annuity riders include guaranteed minimum withdrawal benefits that ensure you can withdraw a certain percentage annually regardless of market performance, enhanced death benefits that guarantee your beneficiaries receive at least what you invested (or more), guaranteed lifetime withdrawal benefits that provide income for life even if your account value drops to zero, long-term care riders that increase payments if you need nursing home or home health care, and cost-of-living adjustment riders that increase payments to keep pace with inflation.

The challenge with riders is weighing their cost against their value. Each rider typically costs between 0.25% and 1.5% of your account value annually, and multiple riders can add up to 2-3% in annual fees on top of the annuity's base costs. While these guarantees provide peace of mind, they significantly impact your long-term returns. Before adding riders, consider whether you actually need each protection, whether the cost justifies the benefit, whether you could address the concern through other means (like long-term care insurance), and whether a different type of annuity might better meet your needs without expensive add-ons.