What is a Guaranteed Lifetime Withdrawal Benefit (GLWB)?
A Guaranteed Lifetime Withdrawal Benefit (GLWB) is a rider or feature attached to some annuities that guarantees the policyholder a minimum income for life, even if the annuity’s investments underperform. This benefit allows for periodic withdrawals up to a specified percentage of the initial investment, regardless of market fluctuations or the annuity’s account value.
GLWB is particularly useful in retirement planning, providing a safety net for retirees concerned about outliving their assets. For example, if an individual purchases an annuity with a GLWB, they can withdraw a set percentage of the initial investment each year, and these withdrawals are guaranteed for life. This makes it an attractive option for those seeking predictable income during retirement.
The advantage of a GLWB is that it provides financial stability even if the underlying investments in the annuity lose value. However, adding a GLWB rider often involves higher fees, which should be weighed against the benefit of lifetime income security.
