With the recent turn in the stock market, many investors are getting that weary sinking feeling again especially those getting close to retirement. It is difficult to predict the markets. Wouldn’t it be nice to have your money invested in a product where there is guaranteed growth of your contributions, even if markets go down, with additional potential growth if markets go up?
We’ll there is such an investment product out there. It is not often talked about because the banks, the largest marketers out there, are not allowed to offer it and therefore don’t talk about it.
The product is called a GMWB (Guaranteed Minimum Withdrawal Benefit) plan. It is an insurance based product and therefore can only offered by insurance licensed individuals such as financial advisors.
It is a fantastic way for business owners, the self employed and those looking to top up their government pensions to set up their very own defined benefits pension plan.
A handful of the larger life insurance companies offer such pension products called GMWB (Guaranteed Minimum Withdrawal Benefit) plans. They offer a set guaranteed growth of your contributions with additional potential growth through market appreciation.
Here is the premise: You make a lump sum deposit or regular monthly deposits. For every year your deposits are not touched you get a 5% increase in the guaranteed value from which your future withdrawals will be made. When you finally retire and start drawing on those funds, you can take up to 5% of that new realized guaranteed value every year for the rest of your life. Unlike, other investments, you never have to worry about running out of money. The best part is if the markets outperform the guaranteed 5% increase, your new guaranteed value is set to the new market value. It truly is the best of both worlds – you win if markets go up and you win if markets go down.
Talk to your financial advisor about setting up your own defined benefits pension plan.