Window Guaranteed Investment Contract (WGIC)

A window guaranteed investment contract (WGIC) is a type of contract sold by insurance companies that guarantees a rate of return on installment contributions made during a defined “window” period. WGICs are commonly used in 401(k) and other defined-contribution retirement plans to provide a conservative, predictable investment option.

Key takeaways

• WGICs accept contributions only during a specified window (often one calendar year).
• After the window closes, no further contributions are allowed; the contract then matures over a set term (commonly 3–7 years).
• Returns may be fixed or variable, and are generally lower than market-based investments but often higher than bank savings rates.
• WGICs are backed by the issuing insurance company’s finances, not by FDIC or government guarantees—insurer insolvency is a primary risk.

How WGICs work

• During the contribution window, participants make installment payments into the WGIC and lock in a guaranteed rate announced for that window.
• Contributions are pooled into the insurance company’s general account, which typically holds conservative assets such as corporate bonds, commercial mortgages, and government securities.
• Once the window ends, the contract remains invested for its maturity term. It accrues interest at the agreed rate until maturity, when principal plus interest is returned and can be reinvested or distributed according to plan rules.

Interest and returns

• WGICs can offer fixed or variable interest rates.
• Because they prioritize capital preservation, expected returns are modest compared with equity or long-duration bond investments.
• They may still yield better rates than standard bank deposits or short-term cash alternatives, which makes them attractive for plan sponsors seeking stability.

Risks and protections

• The guarantee depends on the financial strength of the issuing insurance company. WGICs are not FDIC-insured.
• If the insurer becomes insolvent, investors may lose value or face delayed recovery.
• Evaluate insurer credit ratings and financial condition before investing.

Who typically uses WGICs

• Plan sponsors who want a stable, predictable return for a portion of a retirement plan’s assets.
• Smaller businesses or plan start-ups that prefer a fixed-rate, low-risk option during a plan’s early years.
• Investors seeking a capital-preservation option within a diversified retirement portfolio.

Considerations before choosing a WGIC

• Review contract length (maturity) and how it fits plan liquidity needs.
• Check whether the contract rate is fixed or variable and how future rates are determined.
• Understand surrender provisions, withdrawal restrictions, and any penalties.
• Confirm the insurer’s financial strength via ratings from independent agencies.
• Compare WGIC terms and rates with alternatives such as CDs, money market funds, and short-term bonds.

Conclusion

WGICs provide a structured, low-risk way to secure a guaranteed return on installment contributions during a defined enrollment window. They can be useful for retirement plans seeking capital preservation and predictable yields, but investors should weigh lower returns and the credit risk of the issuing insurer against other short-term and cash-equivalent options.