A Guaranteed Minimum Withdrawal Benefit (GMWB) is a variable annuity rider that ensures you can withdraw a specified percentage of your investment each year for a set period or for life, regardless of how poorly the underlying investments perform. Even if market losses reduce your account value to zero, the insurance company guarantees you can continue taking the specified withdrawals.

GMWBs typically work by establishing a "benefit base"—often equal to your initial investment or growing by a guaranteed percentage annually if you don't take withdrawals. Once you begin withdrawals (usually after a waiting period and when you reach a certain age), you can take out a predetermined percentage of this benefit base each year—commonly 4-5% for lifetime withdrawals or 5-7% for withdrawals over a specific period. Your actual account value will fluctuate with market performance and be reduced by your withdrawals and fees, but your right to continue those annual withdrawals is guaranteed.

The peace of mind from GMWBs comes at a cost—typically 0.75% to 1.5% of your account value annually, on top of the annuity's other fees. This drag on returns can be substantial over time, especially in years when markets perform well. GMWBs are most valuable for people who want market participation and growth potential but need protection against severe losses that could derail their retirement income plan. They provide a middle ground between the full market risk of keeping money invested and the inflexibility of annuitizing—but that middle ground costs money.