GLWB
A Guaranteed Lifetime Withdrawal Benefit (GLWB) is a rider on a deferred annuity (usually a variable annuity or fixed indexed annuity) that guarantees a specified annual withdrawal for the rest of the consumer's life, regardless of the contract's actual account value. The withdrawal is typically expressed as a percentage of a "benefit base" that grows during the deferral period at a contractually defined rate (a roll-up). The actual contract value can decline due to market performance and withdrawals; the GLWB pays the guaranteed withdrawal even if the contract value reaches zero.
A 60-year-old places $200,000 in a variable annuity with a GLWB rider. The rider charge is 1.10% per year. The benefit base rolls up at 6% simple interest until withdrawals begin. At age 65, the consumer begins withdrawals. The benefit base has grown to $260,000 (5 years × 6% simple). The contract's actual account value depends on market performance — let's say it has grown to $245,000. The GLWB pays 5.0% of the higher of the two ($260,000 × 5% = $13,000/year) for life. Even if market performance is poor and the account value declines to zero, the carrier continues paying $13,000 per year.
Why it matters
GLWBs are the most common reason consumers buy variable annuities and FIAs. The rider creates a guaranteed lifetime income floor that the underlying market exposure cannot break. The cost is the rider charge plus reduced upside (the income is capped at the GLWB percentage, regardless of how well the underlying account performs).
How to evaluate
Compare GLWB riders on three dimensions: (1) the roll-up rate during deferral (typically 5-8% simple or compound), (2) the withdrawal percentage at the start age (typically 4.0% to 6.0% depending on age), and (3) the rider charge (typically 0.85% to 1.50% per year). The age tiers matter — a 65-year-old start gets a higher percentage than a 60-year-old start.
In the contract
Look for "Guaranteed Lifetime Withdrawal Benefit," "GLWB," "income benefit base," "roll-up rate," "withdrawal percentage by age," and "rider charge."
Related terms
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