521 / What is a guaranteed lifetime withdrawal benefit rider?

A guaranteed lifetime withdrawal benefit rider (GLWB) guarantees that the taxpayer will be able to withdraw a certain percentage of the value of the benefit base of the taxpayer’s annuity, which has been growing by a guaranteed amount over the course of the deferral period (the guarantee is commonly somewhere between 4 and 8 percent). Taxpayers looking for larger payouts later in life should be advised that the longer the base account is allowed to grow, the larger the withdrawals will be in the future. Further, it is important that the taxpayer understand that he or she must stay within the limits of the guaranteed withdrawals; some contracts provide for termination of the feature if the taxpayer takes an excess withdrawal.

One common ground between these types of riders and a lifetime income benefit rider (LIBRs, see Q 522) lies in the fact that the benefit base itself is not available for cash withdrawals. This “account” has no real current cash value to the taxpayer—meaning that, unlike the accumulation value of the account, the taxpayer cannot access this value through surrendering the contract prior to the end of the deferral period.

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