AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREThe joys and headaches of holiday travel: John PhillipsThese products can be dizzyingly complicated, involving not only decisions of what investments to pick and when to start taking an income stream but also often complex tax and estate planning considerations and analysis of benefits vs. costs. Don’t buy one unless you understand it thoroughly and/or get unbiased advice from a qualified professional, preferably one who doesn’t stand to gain or lose anything whether you buy or not. Nobody can, in the space of a newspaper column, explain everything you need to know about these annuities. But I want to at least explain the basic differences between the GMWB-for-life benefit and the GMIB, an area of much confusion and misunderstanding. With a GMWB-for-life benefit, the insurance company issuing the annuity guarantees you can withdraw for life at least a percentage of the amount you invest, often 5 percent. For example, if you invest $100,000, you can withdraw $5,000 a year for life, no matter how your investments perform. (You can always withdraw more than 5 percent but then the lifetime withdrawal guarantee would be reduced or lost.) In this example, as long as you don’t withdraw more than $5,000 a year, you will continue to receive the lifetime payments even if your actual account value goes down to zero. In that event, the insurance company will continue to pay you out of its own money. In their quest for lifetime income that can outpace inflation, baby boomers and seniors are being pitched two alphabet-soup variable-annuity guarantees: GMWBs for life and GMIBs. I mentioned these benefits briefly in a column in July about retirement income options and have received dozens of e-mails from readers wanting to know more. In the industry jargon, these initials stand for “guaranteed minimum withdrawal benefit” and “guaranteed minimum income benefit.” They are part of an ever-evolving breed of “living benefits” tacked onto variable annuities, which are tax-deferred, mutual-fund-like investments within an insurance wrapper. The benefits, for which you pay an additional ongoing fee, guarantee that you, or you and a beneficiary, usually your spouse, will receive a minimum lifetime income regardless of how your annuity investments perform. When this benefit was initially offered, the guarantee for lifetime withdrawals covered only the one person investing in the annuity. Many insurance companies have since added the option, for a slightly higher ongoing fee, of extending the lifetime withdrawal guarantee to the investor’s surviving spouse. “We realize peace of mind for many couples comes from knowing a spouse will be taken care of financially” after the first one dies, said Mark Phelan, a senior vice president of Nationwide Financial, one of the companies offering the spousal guarantee. To many financial advisers, the biggest attraction of the GMWB-for-life benefit is the potential to lock in higher guaranteed lifetime withdrawals if your investments do well. While details vary widely, these annuities typically allow you to periodically “step up” the amount you can withdraw for life if your account value has increased sufficiently. “Many of these annuities are incorporating these features on an annual or five-year basis,” said Tucker Scott, a financial adviser with Oldham Resource Group in Norwalk, Conn. Knowing that the amount you can withdraw could go up but can’t go down helps investors cope better with market volatility, Scott said. With a GMIB benefit, rather than withdraw money from your account, you must “annuitize” it, that is, give up access to your principal in exchange for lifetime payments to you or you and a beneficiary. The insurance company guarantees a minimum lifetime income regardless of investment performance or actual account value. Humberto Cruz offers personal finance advice. Write him at AskHumberto@aol.com.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!