(Skeptically) Understanding Variable Annuities with GMWBs

Guarantee Minimum Withdrawal Benefit (GMWB)– A type of (insurance) option that annuitants can purchase for their retirement annuities. This specific option gives annuitants the ability to protect their retirement investments against downside market risk by allowing the annuitant the right to withdraw a maximum percentage of their entire investment each year until the initial investment amount has been recouped.http://www.investopedia.com/terms/g/gmwb.asp

 

Have you ever heard about something that was too good to be true?   I was reading this article today and thought it important to link.

Robert Huebsher wrote an interesting critique of corporate paid research from seemingly objective resources.  Insurance companies are the best at crafting marketing around ideas that sound great.  Do they hold up under review?

http://www.advisorperspectives.com/newsletters11/Understanding_Variable_Annuities_with_GMWBs.php

Here is a response by the author, Dr. Peng Chen, who wrote the original study, with an additional response from Robert Huebsher.

http://www.advisorperspectives.com/newsletters11/The_Real_Flaws-A_response_to_Understanding_Variable_Annuities_with_GMWBs.php

Dr. Peng Chen’s original study sponsored by Nationwide Financial and released by Ibottson Associates, Inc..

http://corporate.morningstar.com/ib/documents/MethodologyDocuments/IBBAssociates/VA_GMWB.pdf

 

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About Christopher Hessenflow

Christopher Hessenflow is a financial planner in the Chicago area. He works with all sorts of people who are much more interesting than he is. He enjoys his career which lends him time to think and, sometimes, be creative. Chip was born bald.
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