Guaranteed Minimum Withdrawal Benefit - GMWB

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.

BREAKING DOWN '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 Income Benefit ...

    A type of option that annuitants can purchase for their retirement ...
  2. Systematic Withdrawal Schedule

    A method of withdrawing funds from an annuity account by which ...
  3. Annuitization Method

    A type of annuity distribution structure that gives the annuitant ...
  4. Joint Life With Last Survivor Annuity

    An insurance product that, when annuitized, makes payments to ...
  5. Contingent Annuitant

    Someone designated by an annuitant to receive the annuitant’s ...
  6. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
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. Markets

    Explaining Types Of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  3. Retirement

    Is Annuitization Your Best Strategy?

    Annuitization has traditionally offered annuity owners a stream of income they cannot outlive, but there are some disadvantages to this form of payout. Consider alternatives, such as income-benefit ...
  4. ETFs & Mutual Funds

    Annuities

    What annuities are: Insurance products that provide a source of monthly, quarterly, annual or lump sum income during retirement. Pros: Tax-deferred growth of earnings; no annual contribution ...
  5. Financial Advisor

    An Annuity Lowdown for Investors and Advisors

    Knowing how annuities work starts with an explanation of what each part is. Here is a list of terms that cover the basic aspects of annuities.
  6. Markets

    Deciphering Deferred Annuity Designations

    Tax deferred annuities can be complex arrangements. Discover some of the situations that arise when an owner or annuitant dies and how to reduce tax liability if you're the beneficiary.
  7. Retirement

    Buying Annuities in a Low Interest Rate World

    Learn if buying an annuity makes sense in a low interest rate environment. Also discover the different types of annuities and how interest rates affect them.
  8. Retirement

    The Cost Of Variable Annuity Guarantees

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

    What Is the Best Age to Get an Annuity?

    Optimizing the benefits of an annuity means guaranteeing a stream of income you can't outlive.
  10. Retirement

    How to Use Annuities for Retirement Income

    We explain how to use annuities for guaranteed income in retirement.
RELATED FAQS
  1. Does an annuitized annuity have a death benefit?

    If an annuity is "annuitized" for regular annual payments, does the annuity have a death benefit? This is especially important ... Read Answer >>
  2. What should my 85 year-old mother do with a deferred annuity she purchased in 1992?

    Retirement of the plan is May 2016. She had a one time investment and has never taken money out of the plan. ... Read Answer >>
  3. What happens to my annuity after I die?

    Understand the different types of annuity payment plans and what payments or additional benefits are payable to your beneficiaries ... Read Answer >>
  4. What are the distribution options for an inherited annuity?

  5. How are variable annuities taxed at death?

    Find out how variable annuities are taxed after the death of an annuitant, including an explanation of the various payment ... Read Answer >>
  6. Can I convert my IRA Annuity and 401K to my Roth IRA?

    I am 70 years old. I have Roth IRA, IRA Annuity, and 401k all from different companies. When I turn 70.5, can I withdraw ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center