Final answer:
The main difference between a Guaranteed Minimum Withdrawal Benefit (GMWB) and a Guaranteed Lifetime Withdrawal Benefit (GLWB) lies in the period of payout. GMWB guarantees a certain return of your initial investment while GLWB promises lifetime income even after the initial investment is exhausted.
Step-by-step explanation:
The primary difference between a Guaranteed Minimum Withdrawal Benefit (GMWB) and a Guaranteed Lifetime Withdrawal Benefit (GLWB) pertains to the period of payout. A GMWB guarantees a minimum withdrawal amount over a specific period, typically your initial investment, regardless of market performance. It permits you to withdraw an agreed percentage of your total investment each year until the full amount is recovered.
On the other hand, a GLWB provides a similar benefit, but with an additional guarantee of lifetime income. With a GLWB, you can keep withdrawing the agreed percentage for as long as you live, even if the total amount withdrawn exceeds the original investment.
Both GMWB and GLWB are forms of guarantees on variable annuities offered by insurance companies to protect against market declines while giving potential for growth. The choice depends on individual need for income continuity and risk tolerance.
Learn more about GMWB and GLWB