What Is a Guaranteed Minimum Accumulation Benefit?
Let me explain what a guaranteed minimum accumulation benefit, or GMAB, really is. It's a rider you can add to a variable annuity that promises you'll get at least a certain minimum value after the accumulation period or some other set timeframe, typically around 10 years. This rider is there to protect your annuity's value from the ups and downs of the market. You have to pay extra for it, and the cost depends on the insurance company you're dealing with.
Key Takeaways on GMAB
Here's what you need to know about the guaranteed minimum accumulation benefit: it's an optional rider that ensures you get paid a minimum value after the accumulation or another specified period. It directly protects you, the account holder, from market fluctuations. If your account value ends up higher than the rider's minimum, you just get the account value instead. There are other similar riders out there, like the guaranteed minimum income benefit (GMIB), guaranteed minimum withdrawal benefit (GMWB), guaranteed lifetime withdrawal benefit, and standalone lifetime benefit.
Understanding the Guaranteed Minimum Accumulation Benefit
You should understand that the guaranteed minimum accumulation benefit only kicks in if your annuity's market value drops below the guaranteed minimum. In some cases, if the annuity value is higher than the minimum, the costs you've paid for the benefit get returned to your annuity, so you don't even need to use the rider. Unlike other guaranteed minimum living benefit riders, the GMAB restricts withdrawals until after the accumulation period. Riders like the guaranteed minimum income benefit (GMIB) and guaranteed minimum withdrawal benefit (GMWB) might or might not have holding periods or require you to annuitize. Additionally, there are guaranteed lifetime withdrawal benefits and standalone lifetime benefits to consider.
GMAB vs. Other Guaranteed Benefits
Let's compare GMAB to other options. A guaranteed minimum income benefit (GMIB) guarantees you a minimum income in retirement and protects against market volatility; if you annuitize, payments are based on your fund amount and a set interest rate, but it comes with age limits and holding periods. A guaranteed minimum withdrawal benefit (GMWB) is a hybrid that lets you withdraw a percentage of your retirement fund annually until the initial investment is gone, usually 5% to 10%, with possible age restrictions. If investments do well, you can step up to higher guaranteed withdrawals. A guaranteed lifetime withdrawal benefit (GLWB), another hybrid, guarantees a specific percentage of the fund's value for lifetime withdrawals, providing more protection from market swings—it's basically a GMWB with a lifetime option. Finally, a standalone lifetime benefit (SALB) is like the GLWB but doesn't require buying an annuity; it gives you lifetime access to your funds no matter the market, though with fees and restrictions, avoiding the need to annuitize or face penalties.
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