Guaranteed Lifetime Withdrawal Benefit

A guaranteed lifetime withdrawal benefit (GLWB) is also referred to as a guaranteed minimum withdrawal benefit for life. The GLWB is an optional “living benefit” guarantee that can be embedded into a variable annuity product. The GLWB 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 for life. The GLWB does not require annuitization. For example, Catherine invests $150,000 into a variable annuity and selects a GLWB 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 for the remainder of her life. This lifetime income is guaranteed and is not limited to the amount of the initial $150,000 premium payment.

Understanding the Value of Living Benefit Guarantees

Advisor Perspectives just published the first in a series of articles from Wade Pfau. These pieces are important and should be read by anyone considering guaranteed lifetime withdrawal benefits or any of the other optional...

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Questioning the Need for Bonds in Retirement

Conventional financial wisdom says that bonds should comprise an increasing percentage of a portfolio as the owner ages and heads into retirement.

In theory, a retiree’s need for income and a reduced tolerance for risk are the main drivers of the larger allocation to bonds.

A key consideration, though, is...

Research Highlights Fixed SPIAs

Retirement researcher Wade Pfau published a research paper titled “An Efficient Frontier for Retirement Income .” Pfau’s paper analyzes the relative merits of equities, bonds, fixed single premium immediate annuities (SPIA), inflation -adjusted SPIAs and variable annuities with guaranteed lifetime withdrawal benefits ( GLWB ). Each of these allocation options are examined in the context of achieving retirement spending goals. Pfau creates an efficient frontier for a...

Fidelity Variable Annuity Offering Reaches $1 Billion in Sales in First Year

Fidelity Investments recently announced that it reached $1 billion in sales with its MetLife Growth and Guaranteed Income ("MGGI") variable annuity product offering. The MetLife Growth and Guaranteed Income product has only been available since November 2009. The MGGI product is manufactured by MetLife and distributed exclusively by Fidelity. The MGGI product is a deferred variable annuity with a living benefit rider. The living benefit rider is a guaranteed lifetime withdrawal benefit ( GLWB...
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Glenn Daily on Buying Annuities and Why it Might Make Sense to Wait

Glenn Daily is one of the top financial advisors in the country. 

Specializing in life insurance and annuities, Glenn is widely...