What is a GLWB Rider?

A GLWB Rider, or Guaranteed Lifetime Withdrawal Benefit Rider, is an optional rider available for a cost on some fixed index annuity and variable annuity contracts. Occasionally, a GLWB rider is built into the annuity contract and is not optional (although this is a fairly new trend).

GLWB Riders Explained

Guaranteed Lifetime Withdrawal Benefit Riders (GLWB) provide additional guarantees above and beyond what is already included in an annuity contract. There are different varieties, but most commonly, a GLWB establishes a second account value called the benefit base.

The benefit base is not a cash value and is never available for withdrawal in a lump sum. The Benefit Base is only used to calculate lifetime income payments.

Read our Ultimate Guide to Fixed Index Annuities if you are unfamiliar with how they credit interest or how they work in general.

Let’s consider an example. You purchase an index annuity with a GLWB at age 55 and intend to turn on your lifetime income payments at age 65. For illustrative purposes let’s assume the GLWB you purchase has a 10% simple roll-up rate and a 5% lifetime withdrawal at age 65. Additionally, let’s assume this GLWB Rider cost 95 bps.

Your account value would grow based on the performance of the market index you’ve allocated your money and the crediting factors in your contract. The benefit base would grow by 10% simply each year guaranteed. So a $100,000 annuity would have a benefit base of $110,000 after year 1, $120,000 after year 2, $200,000 after year 10, etc.

Using our example of a 55-year-old purchasing a $100,000 annuity with the above rider, the benefit base would be $200,000 guaranteed at age 65. Assuming a 5% lifetime withdrawal rate at age 65, the guaranteed lifetime withdrawal would be $10,000 ( .05 X $200,000). The $10,000 annual withdrawals would be subtracted from the account value each year in addition to the rider fee.

Guaranteed Lifetime Withdrawal Benefit GLWB Rider Fees

In almost every case the GLWB rider fee is calculated using the benefit base and subtracted from the account value. So, a 95bps GLWB Rider fee may actually amount to more than 95bps because the account value is almost always less than the Benefit Base. Let’s assume in year 5 the $100,o00 annuity has an account value of $130,000 while the GLWB Benefit base is $150,000.

The annual fee would be $1425 ($150,000 x .0095) because it is calculated using the Benefit Base, not the account value. The $1425 would be subtracted from the account value, we are assuming an account value of $130,000. $1425 of $130,000 is 1.1%, so in essence, the fee is really 1.1% of the account value in the 5th year, not .95%.

Index Annuities w/ Optional GLWB Rider Available

Insurance Company	Annuity Name	Term	GLWB Riders
Guggenheim Life and Annuity Company	ViStar	10 yrs	Optional
Guggenheim Life and Annuity Company	Highlander	10 yrs	Optional
Allianz Life Insurance	Allianz 360 Annuity	10 yrs	Included
North American Company	BenefitSolutions 10	10 yrs	Included
Protective Life	Protective Guaranteed Income Indexed Annuity	10 yrs	Multiple
Oxford Life Insurance Company	Silver Select	10 yrs	Optional
North American Company	Strategic Design Annuity X with Embedded Benefits Rider	10 yrs	Included
National Western Life	NWL IMPACT 10	10 yrs	Optional
Fidelity & Guaranty Life	Performance Pro with GMWB	10 yrs	Included
Fidelity & Guaranty Life	Prosperity Elite 10 Protection	10 yrs	Included
Guaranty Income Life	WealthChoice 10	10 yrs	Optional
Guaranty Income Life	WealthChoice 10 PREMIUM BONUS	10 yrs	Optional
Athene IA	Agility 10	10 yrs	Included
Oxford Life Insurance Company	Royal Select	10 yrs	Optional
Global Atlantic Financial Group	Income 150+ SE	10 yrs	Optional
American General Life Insurance	Power 10 Protector Plus Income	10 yrs	Included
American Equity	Retirement Gold (Index 02-09)	10 yrs	Optional
American Equity	Retirement Gold (INDEX-4-10-FL.3)	10 yrs	Optional
Allianz Life Insurance Company	Allianz 222 Annuity	10 yrs	Included
Allianz Life Insurance Company	Allianz Benefit Control	10 yrs	Optional
Athene IA	Ascent Pro 10	10 yrs	Optional
North American Company	IncomeChoice 10	10 yrs	Included
American Equity	IncomeShield 10 w/ LIBR	10 yrs	Included
Integrity Life Insurance Company	Integrity IndextraTM 10	10 yrs	Optional
EquiTrust Life Insurance Company	Market Ten Bonus Index IBR	10 yrs	Included
Fidelity & Guaranty Life	Safe Income Plus	10 yrs	Included
Athene IA	Ascent Pro 10 Bonus	10 yrs	Optional
Athene IA	Ascent Pro 10 Bonus (FL)	10 yrs	Optional
Athene IA	Ascent Pro 10 Bonus (State Variations)	10 yrs	Optional
Global Atlantic Financial Group	Choice Income II 7 with Income Multiplier Benefit	7 yrs	Optional
EquiTrust Life Insurance Company	MarketSeven Index IBR	7 yrs	Included
Oxford Life Insurance Company	Select 7	7 yrs	Optional
American Equity Investment Life Insurance Company	California IncomeShield 7	7 yrs	Included
American Equity Investment Life Insurance Company	IncomeShield 7	7 yrs	Included
Protective Life	Protective Income Builder	7 yrs	Included
Global Atlantic Financial Group	Choice Income II 7 with Guaranteed Income Builder	7 yrs	Optional
Fidelity & Guaranty Life	Prosperity Elite 7 Protection		Included

Guaranty Income Life	WealthChoice 7	7 yrs	Optional
American General Life Insurance Company	Power 7 Protector Plus Income	7 yrs	Included
Athene IA	Agility 7	7 yrs	Included
Integrity Life Insurance Company	Integrity IndextraTM 7	7 yrs	Optional

GLWB Riders vs Immediate Annuities

GLWB Riders have become popular because they allow you to purchase an annuity with guaranteed lifetime income amounts that are known at the time of purchase. Historically, income annuities were used for this purpose; however, in today’s interest rate environment, a GLWB Rider almost always guarantees a higher lifetime withdrawal amount vs an income annuity.

When you purchase an income annuity and “annuitize” your account value you give up control of your asset and only have guaranteed income payments. A major benefit of a GLWB rider is you maintain control of your asset and have guaranteed lifetime income.

Another benefit is that if your goals or objective for the annuity change over time you still have the account value available as a lump sum. Whereas most income annuities or annuitization are irreversible decisions.

If for some reason you need extra money in any given year you can withdraw it from your annuity, even with a GLWB rider. This withdrawal reduces your Benefit base “pro-rata”; meaning your guaranteed lifetime withdrawal amounts will be reduced moving forward.

Example: An extra $10,000 withdrawal from an annuity with a $130,000 account value and a $150,000 benefit base would reduce the benefit base by 7.7% ($10,000 / $130,000 = 7.7%).

Your benefit base used to calculate the lifetime withdrawal amount would be $138,450 ($150,000 x 92.3%) moving forward. So instead of getting $7,500 per year (5% x $150,000), the owner would now be guaranteed $6,922 annually (5% x $138,450).

Tips to Consider When Buying a GLWB Rider

Fixed annuities, or MYGAs, are the simplest of all annuities making them the easiest variety to shop for and compare. However, there are still a few important items to consider besides just looking for the highest guaranteed rate of return.

Duration: Typically the longer contract you purchase the higher your guaranteed interest rate will be. But that is not the case, especially given the current inverted yield curve.

Liquidity: Most all fixed annuities have some type of annual free withdrawals, but the amount available varies by product. You’ll see most of the fixed annuities at our marketplace provide interest-only withdrawals annually. Others allow for 10% Free Withdrawals (10% of the previous year’s account value) annually.

Insurer Company’s Financial Rating: An annuity company’s financial ratings are important because they are an indicator of an insurer’s ability to fulfill financial commitments to its policyholders. Usually, a lesser-rated insurance company will offer higher fixed annuity rates, but that is not always the case.