Guaranteed Lifetime Withdrawal Benefit Annuities

Shawn Plummer

CEO, The Annuity Expert

Retirement is an exciting stage of life where you can finally focus on your passions and interests. However, ensuring that your retirement savings provide a steady and reliable income stream throughout your golden years is crucial. That’s where Guaranteed Lifetime Withdrawal Benefit annuities come into play. These innovative financial products offer a way to secure your retirement income, providing peace of mind and financial stability. In this guide, we’ll explore the ins and outs of GLWB annuities, comparing them to other options and discussing how they can benefit you and your retirement strategy.

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What is a GLWB Annuity?

A GLWB annuity is an insurance product designed to provide you with a guaranteed income stream for life. It combines the growth potential of an investment with the security of a guaranteed income, making it a popular choice for retirees looking for long-term financial stability.

Guaranteed Lifetime Withdrawal Benefit Annuities

How does a GLWB Rider work?

A GLWB rider is an optional add-on to a variable or fixed-index annuity. By purchasing this rider, you secure the right to withdraw a specified percentage of your account value each year for the rest of your life, regardless of market performance or how long you live. The withdrawal percentage typically depends on age and may increase as you age.

Critical features of GLWB Annuities

  • Guaranteed income for life: GLWB annuities ensure you will receive a steady income stream for as long as you live.
  • Flexibility: You can choose when to start receiving withdrawals and adjust the amount withdrawn based on your needs.
  • Market participation: Your account value can grow based on market performance, offering the potential for increased income over time.
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GLWB Annuity vs. Guaranteed Minimum Withdrawal Benefit (GMWB) Annuity

The main differences

While both GLWB and GMWB annuities provide guaranteed income, there are some critical differences between the two:

  • Duration of income: GLWB annuities guarantee income for life, whereas GMWB annuities guarantee income for a specified number of years.
  • Withdrawal amount: GLWB annuities allow flexible withdrawal amounts based on a percentage of the account value, while GMWB annuities provide a fixed dollar amount.

Pros and cons of each

GLWB Annuities:

  • Pros: Lifetime income, flexible withdrawals, the potential for account value growth
  • Cons: Higher fees, the complexity of the product

GMWB Annuities:

  • Pros: Lower fees, easier to understand, predetermined withdrawal amounts
  • Cons: Limited income duration, less flexibility in withdrawals, lower growth potential

How to choose the suitable GLWB Annuity

Assessing your financial needs and goals

Before choosing a GLWB annuity, evaluate your financial needs and retirement goals. In addition, consider your desired retirement lifestyle, other income sources, and risk tolerance.

Evaluating fees

GLWB annuities can come with higher fees than other annuity options. Be sure to compare the fees associated with different GLWB products and consider whether the benefits outweigh the costs.

Seeking professional advice

Given the complexity of GLWB annuities and the range of options available, it’s crucial to seek the guidance of a financial advisor. They can help determine whether a GLWB annuity fits your retirement strategy and guide you through selection.

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The benefits of incorporating GLWB Annuities in your retirement strategy

Guaranteed income for life

One of the most significant advantages of a GLWB annuity is the assurance of a steady income for the rest of your life. This can provide peace of mind and financial security throughout your retirement.

Flexibility and control

GLWB annuities offer the flexibility to adjust your withdrawal amounts based on your needs and the market’s performance. This allows you to maintain control over your financial resources during retirement.

Protection from market volatility

GLWB annuities help protect you from market fluctuations by guaranteeing a lifetime income. So even if the market performs poorly, you’ll still receive a steady income stream.

Guaranteed Lifetime Withdrawal Benefit

Next Steps

Guaranteed Lifetime Withdrawal Benefit (GLWB) annuities offer guaranteed income, flexibility, and market participation. By understanding the differences between GLWB and GMWB annuities and carefully considering your financial needs and goals, you can decide whether a GLWB annuity is the right choice for your retirement strategy. Don’t hesitate to seek professional advice to ensure you’re making the best decision for your financial future. After all, your retirement should be a time to enjoy the fruits of your labor, and a GLWB annuity can help you achieve that financial stability and peace of mind.

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Frequently Asked Questions

What is a guaranteed lifetime withdrawal benefit on an annuity?

A Guaranteed Lifetime Withdrawal Benefit (GLWB) rider can be added to a variable annuity. This rider will provide a guaranteed income for life if the market experiences a significant downturn. However, it is essential to note that this rider has an additional cost and that the guarantee is contingent upon the insurance company’s ability to pay claims.

What are the pros and cons of a guaranteed lifetime income annuity?

Retirement annuities offer both positives and negatives. The benefits include a guaranteed income, customizable options, and tax-deferred growth. However, the downsides include complexity, high fees, and restricted access to your funds in case of an early withdrawal.

Can you withdraw a lifetime annuity?

You have the option to withdraw your money from an annuity at any point in time. However, it’s essential to know that you will only receive a part of the total value of the annuity contract when you do so.

What happens if you outlive your annuity?

If your annuity has a fixed payment period instead of paying out for life, you will stop receiving payments when that period ends. This is a risk of annuities.

What is the difference between a guaranteed life annuity and a living annuity?

To clarify, a life annuity provides a guaranteed income for your entire life. In contrast, a living annuity gives you more control over your investments and greater flexibility but does not come with a guaranteed lifelong income.

Are lifetime annuities safe?

Annuities are considered low-risk compared to traditional investments like stocks and bonds due to their fixed rates and guaranteed income. In addition, they are designed for retirement and, therefore, can be considered a safe option for retirement savings.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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