Guaranteed Minimum Accumulation Benefit (GMAB)

A guaranteed minimum accumulation benefit (GMAB) is a type of rider attached to a variable annuity.

A guaranteed minimum accumulation benefit (GMAB) guarantees the minimum amount received by the annuitant after the accumulation period, or another set period of time, usually somewhere close to 10 years. This protects the value of the annuity and the annuitant from market fluctuations. This benefit is optional and added to an annuity for an added cost, which varies by the insurance provider.

The guaranteed minimum accumulation benefit will only be used if the annuity’s market value falls below the minimum guaranteed value. In certain scenarios, the cumulative costs of the benefit are returned to the annuity if the value of the annuity is higher than the minimum, eliminating the need to use the rider.

In addition to the guaranteed minimum accumulation benefit, which restricts withdrawals until after the accumulation period, there are other guaranteed minimum living benefit riders that may or may not have a holding period or require annuitization. These include a guaranteed minimum income benefit and a guaranteed minimum withdrawal benefit. Additionally, there are two more recently introduced riders: a guaranteed lifetime withdrawal benefit and a standalone lifetime benefit.

A guaranteed minimum income benefit (GMIB) guarantees the annuitant a minimum income during retirement, offering protection against market volatility. If the investor chooses to annuitize the contract, payments will be based on the amount in the fund and an interest rate is attached. This kind of rider is subject to both age limits and holding periods.

A guaranteed minimum withdrawal benefit (GMWB) is a hybrid product which guarantees that a percentage of the retirement fund will be eligible for annual withdrawals until the depletion of the initial investment. Percentages vary but typically range from 5 to 10 percent. The amount available for withdrawal may have age restrictions. If the investments perform well, annuitants can take advantage of a step-up option, securing higher guaranteed withdrawals. A guaranteed lifetime withdrawal benefit (GLWB), also considered a hybrid product, guarantees an investor a specific percentage of the fund’s value for withdrawal during their lifetime, offering further protection against market fluctuations. A GLWB is sometimes called a GMWB with a lifetime option.

A standalone lifetime benefit (SALB) is similar to the GLWB but doesn’t require the purchase of an annuity. Generally, an investor wanting access to their funds would have to annuitize or face penalties. The SALB offers lifetime access to the fund, regardless of market performance, with fees and certain restrictions.