Understanding Annuity Illustrations: How to Read the Numbers

What Is an Annuity Illustration?

An annuity illustration (also called a ledger or proposal) is a document showing projected values of an annuity under different scenarios. It’s required by law before you purchase. Understanding how to read one is essential — the numbers can look very different depending on assumptions.

Key Sections of an Illustration

1. Premium and Surrender Value

Shows your account value over time and what you’d receive if you surrendered (after surrender charges). In early years, surrender value is less than premium paid.

2. Death Benefit

What your beneficiaries receive if you die. In accumulation phase, usually account value or return of premium — whichever is greater.

3. Income Rider Values (if applicable)

Two separate columns:

• Account Value: Your actual money
• Income Base / Benefit Base: The separate value used to calculate income — grows faster, but you can’t withdraw it as a lump sum

4. Projected Annual Income

The guaranteed annual income if you activate the rider in each year shown. Higher in later years because your income base is larger.

Red Flags in Illustrations

• Optimistic crediting rate assumptions: For FIAs, illustrations may show “maximum historical” returns. Focus on the “0% credit” column to see guaranteed minimums.
• Ignoring rider costs: Check that the illustration deducts rider fees from account value each year
• Confusing income base with account value: The income base is not money you can withdraw — it’s only used to calculate income payments

Always Ask for These Columns

• Worst case (0% indexing credits every year)
• Mid-range case (average historical index credits)
• Best case (maximum index credits)

Make your decision based on the worst case being acceptable, not the best case being attractive.