What is a guaranteed minimum withdrawal benefit (GMWB)?

A guaranteed minimum withdrawal benefit (GMWB) is a rider attached to certain financial products, particularly variable annuities or segregated funds, that guarantees the policyholder can withdraw a specified percentage of their investment annually, regardless of market performance. This means that the individual is assured of being able to take out funds even if the underlying investments have decreased in value. The GMWB ensures that the lifelong income can be maintained up to a certain limit, providing a safety net for investors concerned about market volatility affecting their retirement income.

This benefit is particularly appealing to those seeking a predictable income stream without the risk of depleting their principal investment too swiftly during downturns in the market. It allows for a blend of investment growth potential with the security of guaranteed withdrawals, catering to individuals who desire both growth opportunities and financial protection throughout their retirement years.