Variable Annuities finally designed a variable annuity with a Guaranteed Minimum Accumulation Benefit (GMAD) that gave clients protection against market losses and the owner did not have to die to obtain it. The passenger finally earned the term “living benefits.”

GMAB guaranteed heirs of an annuity the minimum payment of principal plus possible interest if the value of the policy fell due to market declines. The GMAB or living benefits applied this same calculation to this living benefit. Again, you can take advantage of this income while you are still alive.

REQUIRED MAINTENANCE PERIOD

In order to receive this benefit, the annuity had to be maintained for at least 7 or 10 years. If the policyholder was alive at the end of the stated time period, then the policyholder would receive the higher of the account value or the guaranteed value of the policy.

EXIT BENEFIT

Variable annuities with a GMAB also got the term “retirement benefit.” If you stayed for the required holding period, you could take the benefit and leave that insurance company and 1035 exchange the value for a new annuity with a new insurance company.

As the public took advantage of walking away with their money, the price of the GMAB became much more expensive than guaranteeing the death benefit.

At the end of the holding period, you could do the following:

Transfer account value

Throw GMAB value

leave the money

1035 exchange

Annualize the contract

ASSET ALLOCATION REQUIREMENTS

The living benefit rider will not allow you to choose all the portfolios that would normally be offered to someone who chooses the same variable annuity without the rider. Since this clause guarantees the owner a life benefit, the insurance company is protected from allowing the client to choose riskier assignments.

DISADVANTAGES OF GMAB

Rider cost. This jockey is not cheap and could hurt your profits

The client has to maintain the annuity for at least 7 or 10 years.

Limits on investment options

Future annuitization rates are set at current rates