FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsHard
A client, age 45, is seeking an investment that provides tax-deferred growth and supplemental retirement income, but is concerned about potential market downturns impacting their income stream in retirement. They are interested in a product that offers a guaranteed minimum income for life, regardless of how the underlying investments perform. Which variable annuity rider would be MOST suitable for addressing this specific concern?
- AGuaranteed Minimum Death Benefit (GMDB)
- BGuaranteed Minimum Withdrawal Benefit (GMWB)
- CGuaranteed Minimum Accumulation Benefit (GMAB)
- DGuaranteed Minimum Income Benefit (GMIB)
Show answer & explanationAnswer & explanation
Correct answer: D. Guaranteed Minimum Income Benefit (GMIB)
The client specifically wants a 'guaranteed minimum income for life, regardless of how the underlying investments perform.' A Guaranteed Minimum Income Benefit (GMIB) rider ensures a minimum level of annuitized income, even if the subaccount performance is poor, directly addressing this concern. While GMWB provides withdrawals, GMIB guarantees the annuitized income base.
Why the other options are wrong
- A. GMDB guarantees a minimum payout to beneficiaries upon the annuitant's death, not a guaranteed income stream for the annuitant during retirement.
- B. GMWB allows for systematic withdrawals of a specified percentage of the initial investment, even if the account value drops to zero. While it provides income, GMIB specifically guarantees the *annuitized* income for life, which is a stronger guarantee of lifetime income regardless of market performance.
- C. GMAB guarantees a minimum account value (accumulation) at the end of a specified period, not a guaranteed income stream.
Guaranteed Minimum Income Benefit (GMIB)
A variable annuity rider that guarantees a minimum level of income if the annuitant chooses to annuitize the contract, regardless of underlying investment performance.
- Guarantees future annuitized income.
- Protects against poor investment performance.
- Applies during the payout phase (annuitization).
Memory trick: GMIB: Guaranteed Money In Boxes (for life)