Faculty Publications

Title

GLWBs: Retiree Protection or Money Illusion?

Document Type

Article

Publication Date

12-13-2011

Abstract

One of the most popular variable annuity riders is the guaranteed lifetime withdrawal benefit (GLWB), which offers downside protection through lifetime income, upside potential with step-ups based on market performance, and minimal surrender penalties. But, examining historical data, I have found that those riders carry a cost that will not be readily apparent to retirees: their cash flows rapidly decrease on an inflation-adjusted basis.