What is a 'Guaranteed Minimum Accumulation Benefit - GMAB'

A guaranteed minimum accumulation benefit (GMAB) is a type of rider attached to a variable annuity.

BREAKING DOWN 'Guaranteed Minimum Accumulation Benefit - GMAB'

A guaranteed minimum accumulation benefit (GMAB) guarantees the minimum amount received by the annuitant after the accumulation period, or another set period of time, usually somewhere close to 10 years. This protects the value of the annuity and the annuitant from market fluctuations. This benefit is optional and added to an annuity for an added cost, which varies by insurance provider.

The guaranteed minimum accumulation benefit will only be used if the annuity’s market value falls below the minimum guaranteed value. In certain scenarios, the cumulative costs of the benefit are returned to the annuity if the value of the annuity is higher than the minimum, eliminating the need to use the rider.

In addition to the guaranteed minimum accumulation benefit, which restricts withdrawals until after the accumulation period, there are other guaranteed minimum living benefit riders that may or may not have a holding period or require annuitization. These include a guaranteed minimum income benefit and a guaranteed minimum withdrawal benefit. Additionally, there are two more recently introduced riders: a guaranteed lifetime withdrawal benefit and a standalone lifetime benefit .

Compare and Contrast Guaranteed Minimum Benefits

A guaranteed minimum income benefit (GMIB) guarantees the annuitant a minimum income during retirement, offering protections against market volatility. If the investor chooses to annuitize the contract, payments will be based on the amount in the fund and an interest rate is attached. This kind of rider is subject to both age limits and holding periods.

A guaranteed minimum withdrawal benefit (GMWB) is a hybrid product which guarantees that a percentage of the retirement fund will be eligible for annual withdrawals until the depletion of the initial investment. Percentages vary but typically range from 5 to 10 percent. The amount available for withdrawal may have age restrictions. If the investments perform well, annuitants can take advantage of a step-up option, securing higher guaranteed withdrawals. A guaranteed lifetime withdrawal benefit (GLWB), also considered a hybrid product, guarantees an investor a specific percentage of the fund’s value for withdrawal during their lifetime, offering further protection against market fluctuations. A GLWB is sometimes called a GMWB with a lifetime option.

A standalone lifetime benefit (SALB) is similar to the GLWB but doesn’t require purchase of an annuity. Generally, an investor wanting access to their funds would have to annuitize or face penalties. The SALB offers lifetime access to the fund, regardless of market performance, with fees and certain restrictions.

RELATED TERMS
  1. Guaranteed Lifetime Withdrawal ...

    Guaranteed Lifetime Withdrawal Benefit (GLWB) is a rider on an ...
  2. Guaranteed Minimum Income Benefit ...

    A guaranteed minimum income benefit (GMIB) is a type of annuity ...
  3. Guaranteed Earning Increase Death ...

    A guaranteed earning increase death benefit is a type of option ...
  4. Certain And Continuous

    Certain and continuous is a type of annuity that guarantees a ...
  5. Annuitization Method

    The annuitization method is an annuity distribution structure ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream ...
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

    Variable Annuity Benefits: What The Fine Print Won't Tell You

    Learn the truth before you strap yourself into these annuity "seat belts".
  3. 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.
  4. Financial Advisor

    Living and Death Benefit Riders: How Do They Work?

    Find out how living and death benefit riders work, and which type is right for you.
  5. Investing

    An Overview of Annuities

    As part of your overall investment strategy, annuities may add value to your retirement in more ways than you think. Here's how they work.
  6. Investing

    What Is An Annuity?

    These contracts provide a guaranteed income stream. Learn how annuities work and their benefits.
  7. Investing

    Does an Annuity Make More Money Than Direct Investing?

    Whether an annuity or direct investing makes more financial sense depends on many factors.
  8. Retirement

    3 Variable Annuities to Consider

    Discover three variable annuities to consider in your retirement portfolio. Read summaries of each annuity and the benefits they offer.
Trading Center