A Guaranteed Lifetime Withdrawal Benefit (GLWB) is a rider on an annuity that guarantees income for life—even if the contract value later reaches zero—provided withdrawals follow the rider’s terms.

How is my lifetime income amount calculated?

Your annual lifetime withdrawal is calculated by multiplying the payout percentage (based on your age and single or joint life status) by the benefit base, which is a separate value used solely to determine guaranteed income.

What is the benefit base?

The benefit base is an internal value used for calculating lifetime withdrawals. It may increase through roll-ups or market step-ups, but it is not cash and cannot be withdrawn as a lump sum.

What is a roll-up rate vs. a step-up?

A roll-up is a guaranteed annual increase in the benefit base, typically for a set number of years before income begins. A step-up resets the benefit base to a higher value if market performance pushes the account value higher, locking in gains for future income calculations.

When can I start income?

You can activate lifetime withdrawals once the deferral period ends. Many people defer for several years to grow the benefit base and receive higher income later.

What happens if my account value goes to zero?

The GLWB guarantees that your income payments continue for life, even if your annuity account value is depleted, as long as withdrawals stay within the rider’s limits.

Can I choose single or joint lifetime income?

Yes. A single-life GLWB provides income for one person, while a joint-life option continues payments for a spouse or partner, often at 100%, 75%, or 50% continuation.

Are GLWB payments fixed or variable?

Payments are typically fixed once income begins, though some riders offer inflation-adjusted or market-linked increases depending on product design.

Can I cash out the benefit base?

No. The benefit base is a calculation value only. Withdrawals in excess of the guaranteed amount can reduce or terminate the rider guarantees.

Who benefits most from a GLWB?

A GLWB is best suited for retirees who want guaranteed lifetime income while keeping control of the underlying annuity for growth, liquidity, or legacy purposes.

How does a GLWB Work

Jason Stolz CLTC, CRPC

How does a GLWB work? A Guaranteed Lifetime Withdrawal Benefit (GLWB) is an optional rider available on many fixed indexed and variable annuities. It guarantees a lifetime income stream, even if the account value eventually drops to zero due to withdrawals or market performance. The goal: turn your retirement savings into a predictable lifetime paycheck without giving up growth potential.

At Diversified Insurance Brokers, we compare income rider designs from 100+ carriers to help you find the highest payout rates and most flexible terms for your needs. The right GLWB can serve as your personal pension—providing steady income while protecting your principal.

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How Does A GLWB Rider Work

When you add a Guaranteed Lifetime Withdrawal Benefit to an annuity, the insurer tracks two values:

Account Value: The real balance, which may grow or shrink based on performance.
Benefit Base: A separate “shadow value” used to calculate guaranteed income for life. It often grows by a fixed annual roll-up rate (e.g., 6–8%) until withdrawals begin.

Once you start income, the payout percentage is based on your age—typically 4% to 8% depending on the contract. Even if the account runs out of money, the insurer keeps paying your guaranteed income for life.

Key Features of a GLWB

Guaranteed lifetime income: You receive payments for life, regardless of market results.
Roll-up growth: The benefit base may increase annually by a guaranteed rate before withdrawals.
Joint-life options: Protects both spouses with income continuing for the survivor.
Flexible start date: You choose when to activate income to maximize payouts.
Liquidity: Most contracts allow partial withdrawals or emergency access.

Who Should Consider a GLWB?

Retirees seeking predictable income with no market downside.
Couples who want joint lifetime protection.
Individuals delaying retirement who want guaranteed growth before income begins.
Investors concerned about longevity risk and market volatility.

This rider is ideal for those wanting a pension-like structure while retaining control of their principal.

Example: How a GLWB Payout Is Calculated

Imagine you invest $200,000 in a fixed indexed annuity with a 7% roll-up rate and 5.5% payout at age 65. After 10 years, your benefit base grows to $393,000. Your guaranteed income would be 5.5% of that, or $21,615 per year for life—even if your actual account value is lower due to market performance.

Benefits vs. Drawbacks

Benefits:

Lifetime income regardless of account balance
Tax-deferred growth
Optional joint payout for couples

Drawbacks:

Annual rider fees (commonly 0.9–1.3%)
Reduced flexibility after income starts
Payouts depend on age and contract rules

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FAQs: Guaranteed Lifetime Withdrawal Benefits (GLWB)

What is a GLWB on an annuity?

A Guaranteed Lifetime Withdrawal Benefit is an optional rider that promises you can withdraw a stated percentage of a calculated “benefit base” every year for life—even if your account value later goes to zero.

How is the GLWB benefit base different from my account value?

Your account value is the real, spendable balance. The benefit base is a bookkeeping value used only to determine lifetime income. It may grow by a guaranteed roll-up rate or by step-ups when the account hits new highs, but it generally can’t be cashed out.

How do roll-ups and step-ups increase my lifetime income?

Before you start withdrawals, many GLWBs credit an annual roll-up (e.g., 6%–8%) to the benefit base or allow step-ups to lock in new highs. A larger benefit base multiplied by your age-based payout percentage produces a higher guaranteed income.

When can I start lifetime withdrawals and what affects the payout?

You choose the start date (subject to contract rules). The payout percentage usually rises with age. Waiting longer often means a higher lifetime percentage, but you’ll also take fewer total years of income—your plan should balance both.

Does a GLWB protect me if the market goes down?

Yes. If poor markets or withdrawals deplete the account value, the insurer continues your guaranteed lifetime withdrawals based on the benefit base—even after the account hits zero.

What fees apply to GLWB riders?

Most GLWBs charge an annual rider fee (commonly ~0.9%–1.3% of the benefit base or account value, depending on the contract). Review the exact charge, how it’s calculated, and whether it can change.

Can I choose joint lifetime income for a spouse?

Typically yes. A joint-life option continues income for a surviving spouse (often at 100%, 75%, or 50%). Joint coverage usually lowers the initial payout to price two lifetimes.

How do ad-hoc withdrawals affect my benefit base?

Taking more than the permitted annual GLWB amount often proportionally reduces the benefit base and future guarantees. If you anticipate extra liquidity needs, compare contracts with stronger penalty-free features and review the annuity free withdrawal rules.

Is income from a GLWB the same as annuitization?

No. GLWB withdrawals are lifetime-guaranteed but you’re not surrendering ownership through formal annuitization. That preserves more flexibility for beneficiaries and access features, subject to the contract terms.

How are GLWB withdrawals taxed?

In qualified accounts (IRA/401k), withdrawals are generally taxed as ordinary income. In non-qualified accounts, taxation follows contract rules (often LIFO for rider withdrawals). Your advisor can coordinate tax-aware withdrawal sequencing.

Can I combine a GLWB with inflation protection?

Some riders offer increasing income features (e.g., raises when the account reaches new highs) or optional cost-of-living adjustments. These features may reduce the initial payout; compare level versus increasing designs.

How do I compare GLWB offers across carriers?

Compare: roll-up rate and period, step-up rules, age-based payout grid, joint-life options, rider fee, liquidity terms, and financial strength. Start by reviewing today’s current annuity rates and, if applicable, current bonus annuity rates.