What is the minimum guaranteed return a client might expect from a Guaranteed Minimum Withdrawal Plan?

What is the minimum guaranteed return a client might expect from a Guaranteed Minimum Withdrawal Plan?

• A. Market rate
• B. The principal
• C. Inflation rate
• D. Variable rate

Answer: (B)

A Guaranteed Minimum Withdrawal Plan (GMWP) is designed to provide clients with a certain level of guaranteed income during retirement, regardless of market conditions. The minimum guaranteed return a client may expect from such plans is typically tied to the principal amount invested. This means that, rather than being based on fluctuating market performance or any other variable criteria, the plan ensures that a client can withdraw a specified percentage of their initial investment over a certain period, providing peace of mind that their principal will not decrease below a guaranteed amount. This feature is particularly beneficial for clients seeking stability and predictability in their investment income during uncertain market conditions. The other choices represent returns based on varying factors. The market rate fluctuates and can yield different returns over time, inflation rates may affect purchasing power but do not guarantee a return, and variable rates imply a lack of stability and assurance that can lead to fluctuations in income. Consequently, the principal being the foundation for guaranteed withdrawals aligns directly with the core purpose of a GMWP, ensuring clients' access to their investment base after retirement.

A Guaranteed Minimum Withdrawal Plan (GMWP) is designed to provide clients with a certain level of guaranteed income during retirement, regardless of market conditions. The minimum guaranteed return a client may expect from such plans is typically tied to the principal amount invested.

This means that, rather than being based on fluctuating market performance or any other variable criteria, the plan ensures that a client can withdraw a specified percentage of their initial investment over a certain period, providing peace of mind that their principal will not decrease below a guaranteed amount. This feature is particularly beneficial for clients seeking stability and predictability in their investment income during uncertain market conditions.

The other choices represent returns based on varying factors. The market rate fluctuates and can yield different returns over time, inflation rates may affect purchasing power but do not guarantee a return, and variable rates imply a lack of stability and assurance that can lead to fluctuations in income. Consequently, the principal being the foundation for guaranteed withdrawals aligns directly with the core purpose of a GMWP, ensuring clients' access to their investment base after retirement.