GLWB: the rider that pays you even after the money runs out.

A guaranteed lifetime withdrawal benefit — GLWB for short — is an optional rider that guarantees you can withdraw a set percentage of a benefit base every year for life, even if the account value falls to zero.

What it actually guarantees

A GLWB is an optional rider attached to a deferred annuity. It guarantees you can withdraw a set percentage of a calculated amount every year for the rest of your life — even if the underlying account value falls to zero.

That last clause is the whole product. Without the rider, when the account empties, the payments stop. With it, the insurer keeps paying until you die. You are buying insurance against your own account running dry, whether from poor returns, a long life, or both.

Unlike full annuitisation, you keep ownership of the account. If there's money left when you die, it goes to your heirs. That flexibility is why GLWBs largely replaced traditional annuitisation for retirement income.

The benefit base is not your money

This is the single biggest source of confusion, and it causes real disappointment when people discover it late.

A GLWB tracks two separate numbers:

When an illustration shows an impressive guaranteed roll-up, that growth is almost always on the benefit base, not on money you can access. Both numbers are real, but only one of them is yours to take.

The practical test: ask what the surrender value would be in ten years, and ask what the benefit base would be. If the presenter only wants to show you one of them, you've learned something.

What it costs

GLWB riders carry an explicit annual fee, charged every year for as long as the rider is in force. Crucially, that fee is often calculated against the benefit base rather than the account value — so as the benefit base rolls up, the dollar cost of the rider rises with it, even in a year when your actual account value fell.

Three questions worth asking in writing:

• What is the rider fee, as a percentage, and is it charged on the account value or the benefit base?
• Can the insurer raise the fee after issue, and by how much?
• What is the withdrawal percentage at the age I actually plan to start, not the age in the illustration?

Where a GLWB earns its fee

It's genuinely valuable if you want lifetime income but can't stomach handing over the principal permanently, if you're worried about outliving your money, or if you want income that survives a bad market early in retirement — the sequence risk that does most of the damage to retirement plans.

It's poor value if you don't intend to take withdrawals, if you have more guaranteed income than you need already, or if you're buying it for the roll-up rate while planning to surrender the contract later. In that last case you're paying every year for a benefit you never intend to use.

The honest summary: a GLWB is insurance. Like all insurance, it's a bad deal on average and a good deal if the thing you insured against actually happens. Living a long time is the thing.

Next questions.

Own a contract with a GLWB on it?

Most people can't say what their rider costs or what their benefit base is. Bring the statement and we'll find both, free.