Expenses should be a top priority for any financial services consumer. Many people have been conditioned to be aware of expenses when it comes to investment products. Indexed-bases investment management companies such as
GMWB is an acronym that stands for guaranteed minimum withdrawal benefit. A GMWB is an optional “living benefit” guarantee that can be embedded into a variable annuity product. The GMWB allows the contract holder to, at a minimum, withdraw a fixed percentage of the total annuity premiums each year regardless of market performance. The income payments are guaranteed until the total premium is recovered. The GMWB does not require annuitization. For example, Catherine invests $150,000 into a variable annuity and selects a GMWB that provides 4% annually. The capital markets have performed terribly and as a result the variable annuity contract value is only $75,000 at the end of 10 years. Catherine is in a good position though because she will receive $6,000 ($150,000 x 4%) per year until the $150,000 is recovered.
This is the second part of an interview with...