Guaranteed Minimum Withdrawal Benefit (GMWB)

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Definition of 'Guaranteed Minimum Withdrawal Benefit (GMWB)'

A guaranteed minimum withdrawal benefit (GMWB) is a feature that is sometimes offered with annuities. It provides a guarantee that the annuitant will receive a certain amount of money each year, regardless of how the underlying investments perform. This can be a valuable safety net for retirees who are concerned about outliving their savings.

There are a few things to keep in mind when considering a GMWB annuity. First, the guaranteed amount is usually only a percentage of the annuity's initial value. For example, a GMWB annuity might guarantee that the annuitant will receive 75% of the initial value each year. This means that if the annuity's value declines, the annuitant will still receive a guaranteed minimum amount. However, if the annuity's value increases, the annuitant will not receive any of the additional gains.

Second, GMWB annuities typically have higher fees than traditional annuities. This is because the insurance company is taking on the risk of guaranteeing the minimum withdrawal amount.

Finally, it is important to understand that a GMWB annuity is not a guaranteed investment. The underlying investments can still lose value, and the annuitant could end up with less money than they originally invested. However, the GMWB provides a layer of protection against this risk.

If you are considering a GMWB annuity, it is important to speak with a financial advisor to make sure that it is the right choice for you.

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