What is Income Rider (GLWB / GMWB)?
An income rider is an optional contract feature added to a fixed index annuity or variable annuity that guarantees a stream of lifetime withdrawals, regardless of how the underlying account value performs. The two most common forms are the Guaranteed Lifetime Withdrawal Benefit (GLWB) and the Guaranteed Minimum Withdrawal Benefit (GMWB).
How Income Riders Work
The rider creates a separate “income base” or “benefit base” that grows at a guaranteed roll-up rate (often 5-8% per year) during the deferral years. When you turn on income, the rider pays a withdrawal percentage based on your age at the time of activation – typically 4% to 6.5% of the income base for a single life. These withdrawals continue for life even if the account value runs to zero.
Costs and Trade-offs
Income riders typically cost 0.95% to 1.50% of the income base each year, deducted from the account value. The cost is usually justified for clients who want guaranteed lifetime income but don’t want to give up control of the principal through full annuitization. The trade-off: the fee compounds, and if you never turn on income, you’ve paid for an unused benefit. Always compare the income rider quote against a SPIA.
