By David Blanchett

Overview

The rapid increase in interest rates beginning in 2022 has led to some relatively staggering changes in the annuity market: annuities are now available that provide immediate, fixed guaranteed lifetime income with payout rates that exceed those of single premium immediate annuities (SPIAs), where the annuitant has full access to the account value (i.e., they are revocable).

These annuities are generally referred to as a fixed annuity (FA) with a Guaranteed Lifetime Withdrawal Benefit (GLWB). With this structure, the account grows at a fixed rate (e.g., 3% per year) and for an annual fee (e.g., 1% per year) the annuitant is guaranteed income for life. As noted in this research here the expected income from a FA+GLWB is significantly greater than other annuities that also include GLWBs, such as variable annuities (VAs).

This article explains why advisors should become familiar with FA+GLWBs, in addition to considering them for retirees who want fixed lifetime income in retirement.