What Are GMWB Annuities?

Shawn Plummer

CEO, The Annuity Expert

What is a GMWB Annuity?

A GMWB Annuity, or Guaranteed Minimum Withdrawal Benefit Annuity, is a type of retirement income product. It combines investment growth potential with a guarantee of regular withdrawals, regardless of market performance. The holder can withdraw a certain percentage of their investment annually, even if the investment’s value decreases. This feature provides income stability for retirees.

Use our Annuity Payout Calculator to map out your financial future after retirement.

Gmwb Annuities

How Does a GMWB Annuity Work?

  1. Initial Investment: You make a lump-sum investment or a series of payments into the annuity.
  2. Accumulation Phase: The investment grows tax-deferred, based on the underlying assets’ performance.
  3. Withdrawal Phase: You can withdraw a set percentage of your initial investment each year, typically between 4-7%.
  4. Guarantee: If the investment underperforms, you still receive the predetermined withdrawal amount.

Related Reading: GMWB vs GLWB Annuity

Annuity Gmwb

Examples of GMWB Annuity Benefits

  • Market Downturn Protection: If the market declines, you still get your guaranteed withdrawals.
  • Income Stream: Provides a regular income stream in retirement.
  • Flexibility: You can choose when to start taking withdrawals.

Advantages and Disadvantages

Advantages:

  • Guaranteed income regardless of market performance.
  • Potential for investment growth.

Disadvantages:

  • Higher fees compared to other annuities.
  • Complexity in understanding the terms and conditions.
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GMWB Annuity Features

FeatureDescription
Guaranteed WithdrawalSet percentage of initial investment each year.
Investment GrowthPotential for growth depending on market performance.
Tax DeferralEarnings grow tax-deferred until withdrawal.
Market ProtectionGuarantees apply even in market downturns.

Conclusion

GMWB Annuities offer a blend of income security and growth potential, ideal for those seeking a stable income in retirement. Understanding its features, benefits, and drawbacks is crucial to determine if it aligns with your retirement goals.

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Frequently Asked Questions

How long do I have to wait to withdraw from my GMWB annuity?

Depending on the terms of your annuity, you may be required to wait a minimum period of time before being able to withdraw funds. Speak with your financial adviser for the exact terms and conditions of your GWMB annuity.

Are there any tax implications associated with GMWB annuities?

Generally, you must pay taxes on any withdrawal that exceeds the annual income payment. Your financial adviser can provide more information regarding the tax implications of your specific annuity.

Does the government regulate GMWB annuities?

Yes, GMWB annuities are regulated by the U.S. Securities and Exchange Commission (SEC). As such, annuity providers must abide by federal and state laws. Additionally, all fees associated with your annuity must be disclosed before purchase.

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

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

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