Guaranteed Minimum Withdrawal Benefit - GMWB

AAA

DEFINITION of 'Guaranteed Minimum Withdrawal Benefit - GMWB'

A type of option that annuitants can purchase for their retirement annuities. This specific option gives annuitants the ability to protect their retirement investments against downside market risk by allowing the annuitant the right to withdraw a maximum percentage of their entire investment each year until the initial investment amount has been recouped.

INVESTOPEDIA EXPLAINS 'Guaranteed Minimum Withdrawal Benefit - GMWB'

The best aspect of this guarantee is that it protects annuitants against any investment losses that have been incurred without losing the benefit of upside gain. For example, suppose that Jamie's initial investment was $100,000, but due to downturns in the economy, the investment is now only worth $85,000. Since Jamie had purchased a guaranteed minimum withdrawal benefit with a rate of 10%, she will be able to withdraw a certain percentage each year (in this case, $8,500) until the entire $100,000 is recovered.

RELATED TERMS
  1. Guaranteed Minimum Accumulation ...

    A rider on a variable annuity, which guarantees the minimum amount ...
  2. Guaranteed Lifetime Withdrawal ...

    A rider on a variable annuity that allows minimum withdrawals ...
  3. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
  4. Guaranteed Minimum Income Benefit ...

    A type of option that annuitants can purchase for their retirement ...
  5. Downside Risk

    An estimation of a security's potential to suffer a decline in ...
  6. Guaranteed Earning Increase Death ...

    A type of option that annuitants can purchase for their retirement ...
Related Articles
  1. Retirement

    Variable Annuities With Living Benefits: Worth The Fees?

    Added features can make a variable annuity suitable for certain investors. Find out if it could work for you.
  2. Retirement

    The Cost Of Variable Annuity Guarantees

    These products tempt investors with some impressive benefits - but they come at a price.
  3. Professionals

    New 401(k) Pension Rollover Rule: Pros and Cons

    Is the new rule allowing participants to roll their 401(k) balances into pensions a good idea?
  4. Retirement

    Strategies To Build Your Retirement Portfolio

    Retirement indexes are designed to estimate how much an investor would need to have saved today to generate annual income in retirement, starting at 65.
  5. Professionals

    Why Auto-Enrollment Will Save Your Retirement

    Savers need all the help they can get, even if it amounts to an offer they can't refuse. That's why the biggest improvement to 401(k)s is auto-enrollment.
  6. Professionals

    Retirement Planning Essentials for Your Clients

    You may have heard these retirement planning tips before, but has your client actually put them into action yet?
  7. Professionals

    Which Robo-Advisor is Right for You?

    Which robo-advisor is right for you? There are many factors to consider, including breadth of services, ease of use and cost.
  8. Investing Basics

    This Investment Strategy Could Be Your key To Success

    Goal-based investing seems like an obvious tactic. But many investors have only a vague idea what their goals are, much less how to achieve them.
  9. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  10. Entrepreneurship

    10 Tax Benefits For The Self-Employed

    Running your own business has both personal and financial perks.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center