GMWB – Guaranteed Minimum Withdrawal Benefit

Protection of Principle, Upside Potential & Guaranteed Lifetime Income


Contrary to popular opinion, the big story in fixed annuities, especially fixed index annuities, is income – not rate. Many clients are seeking protection from downside market risk for their retirement assets while looking for options to generate income.

This is where a fixed annuity contract with a Guaranteed Minimum Withdrawal Benefit (GMWB) provides sales opportunities. A GMWB is a rider added to a fixed annuity, which creates an income value separate from the contract’s cash value. The income value grows at a guaranteed rate for a declared period of time independently of the contract’s cash value. Then at a time of the client’s choosing they can walk away from the contract with the cash value, or activate an income stream based on the income value of the contract. The income is generated for the life of the annuitant or joint payee even if the account value drops to zero. Best of all, the cost for a GMWB is usually much lower than similar riders on other products (typically around 70 basis points).

With a fixed index annuity with a GMWB attached to it, you are able to show a client what the income stream will be the day the contract is taken out, even if the client is not looking to take income for several years. Additionally, since it is a fixed product with no direct market exposure, as long as the client does not take money out of the contract subject to surrender charges, you know the contract’s cash value will be higher at the end of the surrender period than when the contract began. This also maintains the overall liquidity of the contract for the client since they will never need to “make up ground” in bad market years.

What a great sales opportunity it is to show a client a way of guaranteeing an income stream, and giving them the flexibility to pivot to another product at the end of the surrender period should interest rates or the client’s need for the money changes. When pared with other annuity products, such as a variable annuity, a fixed annuity with GMWB is a powerful one – two combination. For more information on products featuring a GMWB, contact your BUA Brokerage Sales Consultant.



Business Underwriters Associates
Phone: 330.576.1100
Toll Free: 1.800.792.6795