FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsMedium
A client, a 35-year-old single professional with a high income and no dependents, is seeking an investment that provides tax-deferred growth and a guaranteed income stream for life, starting at age 65. They are concerned about outliving their savings. Which variable annuity rider would be most suitable for this client?
- AGuaranteed Minimum Accumulation Benefit (GMAB)
- BStepped-Up Death Benefit Rider
- CGuaranteed Minimum Withdrawal Benefit (GMWB)
- DGuaranteed Minimum Income Benefit (GMIB)
Show answer & explanationAnswer & explanation
Correct answer: D. Guaranteed Minimum Income Benefit (GMIB)
The client's primary concern is 'outliving their savings' and desiring a 'guaranteed income stream for life' starting in retirement. The Guaranteed Minimum Income Benefit (GMIB) rider specifically addresses this by guaranteeing a minimum level of income payments, regardless of the underlying subaccount performance.
Why the other options are wrong
- A. GMAB guarantees the accumulation value, not a future income stream.
- B. A stepped-up death benefit rider relates to beneficiaries, not the client's living income needs.
- C. GMWB guarantees the ability to withdraw a percentage of the principal, but not necessarily a 'guaranteed income stream for life' in the annuitization sense that GMIB offers.
Guaranteed Minimum Income Benefit (GMIB)
A variable annuity rider that guarantees a minimum level of income payments, based on a protected value, regardless of the actual performance of the underlying investments when the annuitant chooses to annuitize.
- Guarantees a minimum income stream for life
- Protects against market downturns impacting future income
- Applies during the annuitization phase
- Often comes with additional fees
Memory trick: GMIB ensures your income 'flows' for life, no matter the market 'tides'.