GMIB What is This??
- Thread starter iiinycboi
- Start date
- 10,708
GMIB stands for Guaranteed Minimum Income Benefit.
This "account" (better stated as amount) is the amount that your lifetime income would be calculated off of.
This amount is not liquid, it is only accessible as yearly income, you can not take it as a lump sum.
How it was explained (or how you perceive it) is not accurate.
It is a lifetime income feature.
Basically, your Normal "Base" account will act as normal and go up and down with the market.
At the same time, you have your GMIB amount which grows at the interest rate.
When you are ready to draw income during retirement, you have the option of receiving a set % (based on your age) of the GMIB amount for life.
The only way to draw money from the GMIB amount is to draw your age specific yearly income % from it.
If you want to ever lump sum out of the product it would be based on your base account that is dictated by market performance.
It is a great feature for a portion of your portfolio, but not all.
And 5.5% is low. You can get up to 7% compounding with certain companies.
- Thread starter
- #3
i see, this helps a bit. I asked the agent and he couldnt really explain it he kept selling that it will be 5.5% no matter what happens. and i was under the impression its like an IRA and 5.5% compounded for 30 years would be awesome.
So if i have invested 100,000 in my account over 10k, per year for 10 years, my GMIB account is 135,834.98?
I used a compound interest calculator of 10k a year for 5.5 interest up to 10 years.
Now if i was to annutized it i would be able to take out? 7470.92 per year? until i die?
The 100k in my principle account goes with the market but i am not allow to withdraw it at all? or what if the market tanks and say the 100k principle drops to zero will i still be able to receive annual income?
Thanks for you help. I was intrigued by this retirement product but im so confused on how it works i dont want to blindly give the agent my money.
GMIB - Guaranteed Minimum Income Benefit. The GMIB is an annual payment that must be systematically withdrawn from the GMIB base account value at no more than 4-7% per year, deferred until the contract stipulates you can activate the GMIB rider, that grows at 5.5% a year.
- 227
Smart decision not to "blindly" give your money to the advisor/agent especially if he/she can't accurately explain how the product works.
The concept of GMIB or GLWB's attached to Variable or Indexed annuities is relatively simple if explained correctly. However, if an agent, advisor, or client does not fully understand the features then the water becomes muddied fairly quickly.
- 10,708
You mentioned not wanting to "blindly" put your money with the agent. Thats smart.
But no matter what, do not buy from the agent who pitched it to you if that is how they explained it!!! I dont care if its your brother, dont do it!
You need someone knowledgable who can remind you of things and guide you both now & 10 years down the road... you owe it to yourself to use someone who can correctly explain it to you.
And like I said before, 5.5% is pretty low, especially if you are paying a fee for it on top of all the other fees you will pay for a VA...
- Thread starter
- #7
anyone got a sample illustration that i can see?
btw thanks for all the help. im starting to understand it more
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here is one example of VA with GMIB, would you say this is accurate?
An Example:
$200,000 invested in a variable annuity with a GMIB rider that guarantees the greater of:
a) the actual value
b) 6% interest compounded annually, or
c) the highest contract anniversary value of the annuity.
Case #1
Ten years later, due to poor market performance, the actual value of the variable annuity is worth only $243,799, which you can access as a lump sum. But with the GMIB provision of the variable annuity, you have the additional option of being able to annuitize $358,170 ($200,000 compounded annually for ten years at 6%) by taking a stream of income payments suited to your needs. Many investors find that the GMIB and the lifetime stream of income payments brings them peace of mind, and is a reason why many investors prefer to have a variable annuity with a GMIB rider.
Case #2
The market has been up and down several times over the ten years since you purchased the variable annuity. Its current value is $415,319, but it had a high value of $505,993 at the end of the seventh year. Since the GMIB guarantees the greater of:
a) the actual value ($415,319)
b) 6% interest compounded annually ($358,170), or
c) the highest contract anniversary value ($505,993)
the annuitization will be based on: c) the highest contract anniversary value ($505,993).
for case 1 i can take out 35k yearly payments for 10+ years
for case 2 i can take out 50k yearly payments for 10+ years
would you say this is accurate assumption or this is totally mis represented?
if this was accurate represented, it seems like its a win/win for retirements.
btw thanks for all the help. im starting to understand it more
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here is one example of VA with GMIB, would you say this is accurate?
An Example:
$200,000 invested in a variable annuity with a GMIB rider that guarantees the greater of:
a) the actual value
b) 6% interest compounded annually, or
c) the highest contract anniversary value of the annuity.
Case #1
Ten years later, due to poor market performance, the actual value of the variable annuity is worth only $243,799, which you can access as a lump sum. But with the GMIB provision of the variable annuity, you have the additional option of being able to annuitize $358,170 ($200,000 compounded annually for ten years at 6%) by taking a stream of income payments suited to your needs. Many investors find that the GMIB and the lifetime stream of income payments brings them peace of mind, and is a reason why many investors prefer to have a variable annuity with a GMIB rider.
Case #2
The market has been up and down several times over the ten years since you purchased the variable annuity. Its current value is $415,319, but it had a high value of $505,993 at the end of the seventh year. Since the GMIB guarantees the greater of:
a) the actual value ($415,319)
b) 6% interest compounded annually ($358,170), or
c) the highest contract anniversary value ($505,993)
the annuitization will be based on: c) the highest contract anniversary value ($505,993).
for case 1 i can take out 35k yearly payments for 10+ years
for case 2 i can take out 50k yearly payments for 10+ years
would you say this is accurate assumption or this is totally mis represented?
if this was accurate represented, it seems like its a win/win for retirements.
Last edited:
- Thread starter
- #9
- 15,041
If you annuitize it, its gone. Assuming you don't pick some refund option. With annuitization, you trade the money for an income stream.
However, you don't necessarily have to annuitize with some GMIBs. As I recall, with Met's you could either increase your benefit base by the GMIB, 5% for them, or take it as income. All the while, the underlying principal moved according to the market. You could take more than 5%, but then you would affect your guaranteed income for future years. You could also surrender for market value, minus any surrender fees, at any time.
Additionally, I believe with Met you had to wait 10 years after taking income to annuitize, unless you received a step up in basis due to the market.
GMIBs are basically about being able to take income now, but annuitize later using the original principal or current value, whichever is higher.
Admittedly it has been a while since I've looked at any VA, so things may have changed and my memory may be foggy.
