Specializing in retirement planning and personalized investment management.

Variable Annuity with Guaranteed Lifetime Withdrawal Benefits (GLWB)

Variable Annuity

A variable annuity is a tax-deferred investment vehicle that allows you to select various investment options and participate in the market.  Like a 401(k), IRA, or other brokerage account, the performance of the investment options determines your account value.  This is different than a fixed annuity which pays a fixed amount for life or a certain time period, like a CD.

There are many insurance companies and even more variable annuity products.  A lot of variable annuities are very expensive (2.25% or more of an ongoing fee, not including riders) and could have surrender charges.  These costs can have a significant drag on your performance over time.  Each product can also have their own investment options, riders, and gimmicks making it thoroughly confusing for the consumer.

A Guaranteed Lifetime Withdrawal Benefit (GLWB) is a rider you can add to a variable annuity.  For an additional cost, it provides a guaranteed income for life even if the market drops significantly.  This guarantee is subject to the claims-paying ability of the issuing insurance company.  Even the GLWB rider can be different across the various products, but this is how a simpler version would work:

  1. When you fund your variable annuity with a GLWB benefit, the account value becomes your “total withdrawal base”.  This amount can never go down in value, unless you withdrawal excess money.
  2. Each year, on the anniversary date of your policy, your account value is compared to your total withdrawal base.  If your account value is higher, the total withdrawal base is increased to match the account value.  If your account is lower, the total withdrawal base stays the same.
  3. When you decide to take withdrawals, your guaranteed annual income amount is determined by multiplying your total withdrawal base and a withdrawal percentage based on your age.

    Age at First Withdrawal

    Single Life Rider

    Joint Life Rider
    (based on younger age)













    $250,000 total withdrawal base x 5.0% coverage percentage = $12,500 of guaranteed annual income for a 65-year old.

  4. If while taking withdrawals, your account value increases over the total withdrawal base, you still get the stepped-up amount and your guaranteed annual income increases.  If your account value does not increase over the total withdrawal base, you still receive the same amount.  If your account becomes fully depleted, you still receive your guaranteed income for life.


As mentioned before, variable annuities can be expensive, especially with a GLWB rider.  Even some of the lowest cost options can still charge 0.6% - 0.7% for the annuity and 1.2% for the GLWB rider.

Other considerations

Deposits into a variable annuity can be either from non-qualified (taxable) or qualified (IRA, 401k, etc.) assets.  You’ll need to select from certain “approved” investments or portfolios to be able to add the GLWB rider.

Some GLWB riders measure the account quarterly and even monthly, which could render a higher total withdrawal base.  You can remove the rider anytime and have access to your account value.

Variable annuities come in all shapes and sizes, so just consider this a general overview.  Always check the financial rating of an insurance company before trusting them with your assets.