In 2007, Manulife offered the first guaranteed income for life plan which provides retirement income for life. A 5% bonus is added on the guaranteed income if no withdrawal is made for 15 years.
At the age of 65, withdrawals can be made and guaranteed income for life called Guaranteed Minimum Withdrawal Benefit (GMWB) will be available.
It was so popular and was selling so well until it was taken off the market in 2013 when interest rate started to drop and was replaced with another version. Transamerica and Industrial Alliance who followed suit with Manulife model halted selling the product a few years after they were out.
To replace it, Industrial Alliance like Manulife came up with a new version of benefits. While Transamerica got out of the market, a few stayed like Canada Life, Empire Life and Desjardins Insurance. Empire Life kept the 5% bonus until now. Sun Life is seen lately actively marketing its modified “Income for Life” product on TV. Through the years, trimmings were made on the features of this product, like levels of bonus and payouts at retirement to sustain it even on turbulent times.
GMWBs guarantees income for life and transfer of balance of investment to beneficiaries on death of the annuitant. Resets vary as to the number of resets to until what age resets will be done. Resets lock in gains made on investment providing better guaranteed lifetime payout at retirement (depending on the age and the company).
Invested money should remain in the contract until payout but withdrawal is allowed when need arises and depending on the amount, may negatively impact the future income.
Other benefits of GMWBs aside from guaranteed lifetime income, resets and bonus are:
- Creditor protection in case of asset seizure by creditors, and
- No probate fees that allows for quick transfer of funds to beneficiaries at time of death.
With the cost of living going up and life span getting longer, GMWB helps one avoid outliving their savings. It protects your nest eggs and guarantees receipt of a lifetime income no matter how the market performs.
GMWB product is especially appealing to people with extra cash to allocate, those who want conservative investing, nearing retirement or investors who find that the current economy is worrisome and looking for a better investment vehicle.