Guaranteed Minimum Withdrawal Benefit
A guaranteed minimum withdrawal benefit (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.
What are "living benefit" options associated with annuities and how do they work?
How can an annuity protect me from a volatile market?
High expenses or fees are one criticism I have heard regarding annuities. Can you explain the fee structure around annuities?
Annuities are products that combine insurance and, in the case of variable annuities,