A type of 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.
Investopedia Says:
The best aspect of this guarantee is that it protects annuitants against any investment losses that have been incurred without losing the benefit of upside gain. For example, suppose that Jamie's initial investment was $100,000, but due to downturns in the economy, the investment is now only worth $85,000. Since Jamie had purchased a guaranteed minimum withdrawal benefit with a rate of 10%, she will be able to withdraw a certain percentage each year (in this case, $8,500) until the entire $100,000 is recovered.
Related Links:
These products tempt investors with some impressive benefits - but they come at a price. The Cost Of Variable Annuity Guarantees
