The accumulation phase is a period of time when an annuity investor is in the early stages of building up the cash value of the annuity.

Accumulation phase has two meanings for investors and those saving for retirement. The accumulation phase is also a specific period when an annuity investor is in the early stages of building up the cash value of the annuity. In terms of annuities, when a person invests money in an annuity to provide income for retirement, they are at the accumulation period of the annuity's life span. The accumulation phase essentially begins when a person starts saving money for retirement and ends when they begin taking distributions. The accumulation phase is then followed by the distribution phase, in which retirees begin accessing and using their funds.

Accumulation Phase

An accumulation unit is the value invested in a variable annuity account or an investment where a unit trust’s income is reinvested into the trust.

An accumulation unit is a measurement of the value invested in a variable annuity account during the accumulation period or a kind of investment where a unit trust’s income is reinvested into the trust. An accumulation unit is a measurement of the value invested in a variable annuity account during the accumulation period or a kind of investment where a unit trust’s income is reinvested into the trust. 2) In the case of a unit trust, an accumulation unit is a kind of investment in which the income of the trust is not paid out as cash to the investor and is instead reinvested into the trust directly. Accumulation units within a unit trust can be reinvested back into the trust by spiking the unit price, or else by issuing more units to investors. When an investor wants to make distributions, they convert their accumulation units to income units.

Accumulation Unit

Advance funding is an early payment made on a future commitment or appropriation. 

Advance funding is any advance made on a future commitment or payment. The term advance funding is used very broadly and can involve a wide assortment of financial scenarios ranging from personal or project loans, future contractual payments like annuities or royalties and government appropriations. The term advance funding is used very broadly and can involve a wide assortment of financial scenarios ranging from personal or project loans, future contractual payments like annuities or royalties, and government appropriations. Usually, advance funding would involve an assignment of the contract or series of payments due in the future, or waiver of the amount of those payments sufficient to repay the advance. Some examples of advance funding are: payday loans, viatical settlements, and lawsuit settlement advances.

Advance Funding

An annuitant is an individual who is entitled to receive a periodic payment, or annuity. The recipient of a pension or an investor in an annuity may be an annuitant.

An annuitant is an individual who is entitled to collect the regular payments of a pension or an annuity investment. For example, if the annuitant is 65 years old, but the annuity is transferrable to his 60-year-old wife if she survives him, the insurance company will calculate that it will make monthly payments for about 24 years, which is the life expectancy of a 60-year-old woman. A deferred annuity is usually a retirement investment similar to an IRA or 401(k).
An annuity is a regular payment of a guaranteed income for life or for some specified number of years. An annuitant is an investor or a pension plan beneficiary who is entitled to receive the regular payments of a pension or an annuity investment. An annuitant may be a retired civil servant who receives a pension plan, or an investor who has paid a sum of money to an insurance company in return for a regular income supplement.

Annuitant

Annuitization is the process of converting an annuity investment into a series of periodic income payments, and is often used in life insurance payouts.

SECURE Act Alters 401(k) Compliance Landscape

Annuitization is the process of converting an annuity investment into a series of periodic income payments. The significant difference between using a specified period versus a lifetime period is that, if the annuitant lives beyond their life expectancy, the life insurer must continue the payments until the annuitant's death. The resulting payout rate establishes the amount of income that the insurer will pay whereby the insurer will have returned the entire annuity balance plus interest to the annuitant by the end of the payment period. For instance, if an annuitant selects a refund option for a period certain of 10 years, death must occur within that 10-year period for the insurer to pay the refund to the beneficiary. Individuals can enter into a contract with a life insurance company that involves the exchange of a lump sum of capital for a promise to make periodic payments for a specified period or for the lifetime of the individual who is the annuitant.

Annuitization

The annuitization method is an annuity distribution structure providing periodic income payments for the annuitant's life, or a specified period of time. 

Annuitization: Should I Annuitize My Annuity?

The term annuitization method refers to an annuity distribution structure. This means that if someone elects to receive payments under a period certain option for 15 years but dies after 10, the contract guarantees to make payments to the beneficiary for the remaining five years. The annuitant can choose to receive payments through a life option or period certain options. The annuitization phase is the point at which the annuitant starts to receive payments from the annuity. The monthly payment from a joint-life annuity is lower than that of the life option because the calculation is based on the life expectancy of both spouses.

Annuitization Method

The annuitization phase of an annuity refers to the period when an annuitant starts to receive payments from his or her investment in the annuity.

The annuitization phase of an annuity refers to the period when the owner of an annuity—called the annuitant—begins to receive payments from the annuity investment. The annuitization phase of an annuity refers to the period when the owner of an annuity—called the annuitant—begins to receive payments from the annuity investment. The payout period is the time when the method of payment comes into play: the annuitization method, the systematic withdrawal schedule, or the lump-sum payment. The value of a lump-sum payment is generally less than the sum of all payments that you would otherwise receive because the party paying the lump-sum payment is being asked to provide more funds upfront than it otherwise would have been required to. A lump-sum payment is a one-time payment for the value of an asset such as an annuity or another retirement vehicle.

Annuitization Phase

An annuity certain is an investment that provides a series of regular payments for a set period of time to the investor or the investor's beneficiary.

An annuity certain is an investment that provides a series of payments for a set period to a person or the person's beneficiary or estate. Synonyms for annuity certain include years certain annuity, period certain annuity, fixed period annuity, and guaranteed term or guaranteed period annuity. In the case of the annuity certain, the buyer chooses how long a period the annuity will payout. Because it has a set expiration date, an annuity certain generally pays a higher rate of return than a lifetime annuity. The set expiration date differentiates the annuity certain from a life annuity.

Annuity Certain

An annuity consideration is the money an individual pays to an insurance company in exchange for a financial instrument providing a stream of payments.

2021 Limitations Adjusted as Provided in Section 415(d), etc.

An annuity consideration or premium is the money an individual pays to an insurance company to fund an annuity or receive a stream of annuity payments. Examples of life guaranteed annuities include the life only annuity (payments are guaranteed for the annuitant's life only) and the life with a guaranteed period annuity (payments are guaranteed for the annuitant's life, but if they decrease within the guaranteed period, the remaining guaranteed payments are paid to their beneficiary. Payments are based on several factors, including the following:
The amount of the annuity consideration or accumulated value of an existing deferred annuity
The age at which the annuitant begins receiving payments
The annuitant's life expectancy or the length of the term
The annuity's anticipated investment returns
Whether the annuity is fixed or variable and guaranteed for a specified amount of time or the lifetime of the annuitant
Payments guaranteed for a shorter-term are often higher. An annuity consideration or premium is the money an individual pays to an insurance company to fund an annuity or receive a stream of annuity payments. Annuities can be structured in many ways, such as immediate or deferred, fixed or variable, and qualified or non-qualified.
Immediate annuities generate payments upon issue after consideration is received.

Annuity Consideration

The annuity factor method is a way to determine how much money can be withdrawn early from retirement accounts before incurring penalties.

The annuity factor method is a way to determine how much money can be withdrawn early from retirement accounts before incurring penalties. The fixed annuitization method divides the retiree's account balance by an annuity factor to determine an annual payment sum.
The annuity factor is based on IRS mortality tables and the interest rate will not exceed 120% of the federal mid-term rate. Publication 1457 includes the following sections:
Single Life Factors: Table S
Last-to-Die Remainder Factors: Table R(2) 0.2%–4%; 4.2%–8%; 8.2%–12%; 12.2%–16%; 16.2%–20%
Term Certain Factors: Table B
Commutation Factors: Table H
Annuity Adjustment Factors: Table K
Mortality Table: Table 2000CM Several IRS publications and actuarial tables may be helpful in applying the annuity factor method and retirement account withdrawals, such as Publication 1457, which provides examples for valuing annuities, life estates, and remainders generally. The fixed amortization method amortizes a retiree's account balance over their remaining life expectancy (based on IRS tables) at an interest rate not exceeding 120% of the federal mid-term rate.

Annuity Factor Method

Annuity in advance refers to an amount of money that is regularly paid at the beginning of a term.

Annuity in advance is a series of payments that are due at the beginning of each successive time period. An annuity in advance has three defining characteristics: the amount of each payment is the same, the payment schedule is regular intervals (weekly, monthly, quarterly), and payment is due at the beginning of each period.
There are three elements of an annuity in advance or an annuity due:
1.  Each payment is in the same amount (for example, a series of $100 payments)
2. Since most payments are made at the beginning of a period rather than at the end, the annuity in advance (annuity due) concept is more frequently employed compared to the annuity in arrears (ordinary annuity) concept. Another way to describe an annuity in advance is a series of equal payments that are received at the beginning of each equally spaced period. Rent is the classic example of an annuity in advance for a landlord because it is a sum of money paid at the beginning of each month to cover the period to follow.

Annuity in Advance

Annuity in arrears refers to the payment of an equal amount of money that is made at the end of a regular term. 

Annuity in arrears refers to the payment of an equal amount of money that is made at the end of a regular term. Since payments on an annuity in arrears (or ordinary annuity) are made at the end of a given period, the present value of such payments is lower than in an annuity in advance or annuity due, which features a payment at the beginning of a term. The present value of annuity-in-arrears payments is lower than annuity in advance or annuity due payments. Such a payment could be interest, a mortgage payment consisting of principal and interest, or any other recurring payment—most often a payment on an installment loan—that allows interest to accrue. As such, if you are the one making the payment, an annuity in arrears is preferable because of inflation and the opportunity to earn interest on investments or interest-bearing accounts given that a sum of money today is worth more than the same sum in the future.

Annuity in Arrears

An annuity ladder is an investment strategy that entails the purchase of immediate annuities over a period of years to provide guaranteed income. 

An annuity ladder is an investment strategy that entails the purchase of immediate annuities over a period of years to provide guaranteed income while minimizing interest-rate risk. When interest rates are low, it doesn't make sense to lock in that interest rate for a long time, therefore, purchasing annuities over a period of time will allow for variable interest rates; some higher than the first purchase. An annuity ladder is an investment strategy that entails the purchase of immediate annuities over a period of years to provide guaranteed income while minimizing interest-rate risk. An annuity ladder is an investment strategy that entails the purchase of immediate annuities over a period of years to provide guaranteed income while minimizing interest-rate risk. While variable annuities carry some market risk and the potential to lose principal, riders and features can be added to annuity contracts (usually for some extra cost), which allow them to function as hybrid fixed-variable annuities.

Annuity Ladder

The annuity method of depreciation, also known as the compound interest method, looks at an asset's depreciation be determining its rate of return.

Annuity Method of Depreciation Definition

The annuity method of depreciation is a process used to calculate depreciation on an asset by calculating its rate of return—just as if it were an investment. The annuity method calculation can also be expressed in a formula:
Annuity \= i × TDA × ( 1 \+ i ) n ( 1 \+ i ) − 1 n Depreciation \= annuity − ( i × BVSY ) where: i \= Interest rate percentage / 100 TDA \= Total depreciation on amount n \= Annuity number of years BVSY \= Book value start of year \\begin{aligned}&\\text{Annuity}=\\frac{i\\times\\text{TDA}\\times(1+i)^n}{(1+i)-1^n}\\\\&\\text{Depreciation}=\\text{annuity}-(i\\times\\text{BVSY})\\\\&\\textbf{where:}\\\\&i=\\text{Interest rate percentage}/100\\\\&\\text{TDA}=\\text{Total depreciation on amount} \\\\&n=\\text{Annuity number of years}\\\\&\\text{BVSY}=\\text{Book value start of year}\\end{aligned} ​Annuity\=(1+i)−1ni×TDA×(1+i)n​Depreciation\=annuity−(i×BVSY)where:i\=Interest rate percentage/100TDA\=Total depreciation on amountn\=Annuity number of yearsBVSY\=Book value start of year​
The annuity method of depreciation is useful for assets that have a high initial cost and a long life span, such as property and buildings secured under leases. To calculate using the annuity method of depreciation, you determine the internal rate of return (IRR) on the asset's cash inflows and outflows, then multiply by the initial book value of the asset, then subtracted from the cash flow for the period of time that is being assessed. The annuity method of depreciation, also called the compound interest method of depreciation, looks at how an asset depreciates by determining its rate of return. The annuity method of depreciation is a process used to calculate depreciation on an asset by calculating its rate of return—just as if it were an investment.

Annuity Method of Depreciation

An annuity table is a tool for determining the present value of an annuity or other structured series of payments.

An annuity table is a tool for determining the present value of an annuity or other structured series of payments. The formula for the present value of an ordinary annuity, as opposed to an annuity due, is as follows:
P \= PMT × 1 − ( 1 \+ r ) − n r where: P \= Present value of an annuity stream PMT \= Dollar amount of each annuity payment r \= Interest rate (also known as the discount rate) \\begin{aligned}&\\text{P} =\\text{PMT}\\times\\frac{ 1 - (1 + r) ^ -n}{r}\\\\&\\textbf{where:}\\\\&\\text{P} = \\text{Present value of an annuity stream}\\\\&\\text{PMT} =\\text{Dollar amount of each annuity payment}\\\\&r = \\text{Interest rate (also known as the discount rate)}\\\\&n = \\text{Number of periods in which payments will be made}\\end{aligned} ​P\=PMT×r1−(1+r)−n​where:P\=Present value of an annuity streamPMT\=Dollar amount of each annuity paymentr\=Interest rate (also known as the discount rate)​
Assume an individual has an opportunity to receive an annuity that pays $50,000 per year for the next 25 years, with a discount rate of 6%, or a lump sum payment of $650,000. To find the value of an annuity due, simply multiply the above formula by a factor of (1 + r):
P \= PMT × ( 1 − ( 1 \+ r ) − n r ) × ( 1 \+ r ) \\begin{aligned}&\\text{P} = \\text{PMT} \\times\\left(\\frac{1 - (1 + r) ^ -n}{r}\\right) \\times (1 + r)\\end{aligned} ​P\=PMT×(r1−(1+r)−n​)×(1+r)​
If the above example of an annuity due, its value would be:
P \= $ 5 0 , 0 0 0 \\begin{aligned}&\\text{P}= \\$50,000\\\\&\\quad \\times\\left( \\frac{1 - (1 + 0.06) ^ -25}{0.06}\\right)\\times (1 + 0.06) = \\$677,518\\end{aligned} ​P\=$50,000​
In this case, the individual should choose the annuity due, because it is worth $27,518 more than the lump sum payment. Using the above formula, the present value of this annuity is:
PVA \= $ 5 0 , 0 0 0 × 1 − ( 1 \+ 0 . 0 6 ) − 2 5 0 . 0 6 \= $ 6 3 9 , 1 6 8 where: \\begin{aligned}&\\text{PVA} = \\$50,000 \\times \\frac{1 - (1 + 0.06) ^ -25}{0.06} = \\$639,168\\\\&\\textbf{where:}\\\\&\\text{PVA}=\\text{Present value of annuity}\\end{aligned} ​PVA\=$50,000×0.061−(1+0.06)−25​\=$639,168where:​
Given this information, the annuity is worth $10,832 less on a time-adjusted basis, and the individual should choose the lump sum payment over the annuity.
Note, this formula is for an ordinary annuity where payments are made at the end of the period in question. That factor is then multiplied by the dollar amount of the annuity payment to arrive at the present value of the ordinary annuity.
Below is an example of a present value of an ordinary annuity table:
If we take the example above with a 6% interest rate and a 25 year period, you will find the factor = 12.7834.

Annuity Table

An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees. 

Publication 575 (2019), Pension and Annuity Income

Part 1 Section 1035 - Certain Exchanges of Insurance Policies

H.R. 1994 - Setting Every Community Up for Retirement Enhancement Act of 2019

Table of Contents
What Is an Annuity?
How Annuities Work
Special Considerations
Types of Annuities
Criticism of Annuities
Annuities vs. Life Insurance
Example of an Annuity
Who Buys Annuities?
What Is the Surrender Period? variable annuities allow the owner to receive larger future payments if investments of the annuity fund do well and smaller payments if its investments do poorly, which provides for less stable cash flow than a fixed annuity but allows the annuitant to reap the benefits of strong returns from their fund's investments. A life insurance policy is an example of a fixed annuity in which an individual pays a fixed amount each month for a pre-determined time period (typically 59.5 years) and receives a fixed income stream during their retirement years. An example of an immediate annuity is when an individual pays a single premium, say $200,000, to an insurance company and receives monthly payments, say $5,000, for a fixed time period afterward. The term annuity refers to an insurance contract issued and distributed by financial institutions with the intention of paying out invested funds in a fixed income stream in the future.

Annuities: Insurance for Retirement

An annuity contract is a written agreement between an insurance company and a customer outlining each party's obligations in an annuity agreement. 

An annuity contract is a written agreement between an insurance company and a customer outlining each party's obligations in an annuity agreement. An annuity contract can encompass up to four people--issuer (usually an insurance company), the owner of the annuity, the annuitant, and the beneficiary. The key is knowing if an annuity contract includes multiple tiers and what penalties may be triggered if the owner wants to liquidate their annuity. An annuity contract is beneficial to the individual investor in the sense that it legally binds the insurance company to provide a guaranteed periodic payment to the annuitant once the annuitant reaches retirement and requests commencement of payments. An annuity contract is a written agreement between an insurance company and a customer outlining each party's obligations in an annuity agreement.

Annuity Contract

Annuity due is an annuity with payment due at the beginning of a period instead of at the end. See how to calculate the value of an annuity due.

Table of Contents
What Is Annuity Due?
How Annuity Due Works
Annuity Due vs. Ordinary Annuity
Examples of Annuity Due Just as there are differences in how the present value is calculated for an ordinary annuity and an annuity due, there are also differences in how the future value of money is calculated for an ordinary annuity and an annuity due. The present and future values of an annuity due can be calculated using slight modifications to the present value and future value of an ordinary annuity. Because a series of annuity due payments reflect a number of future cash inflows or outflows, the payer or recipient of the funds may wish to calculate the entire value of the annuity while factoring in the time value of money. How to Calculate the Value of an Annuity Due
Annuity Due FAQs
The Bottom Line
An annuity due is an annuity whose payment is due immediately at the beginning of each period.

Annuity Due

An annuity unit represents the time accumulated during an annuity contract.

Comparing Annuity Unit Values With Mutual Fund Share Values

An annuity unit is an accumulation unit for which the annuitant has annuitized their contract. > The accumulation unit value, or AUV, is the value of each unit within the Variable Account; this value is recalculated each day the stock market is open. The AUV takes into account the underlying fund’s daily performance as measured by the NAV change plus the impact of any distributions, such as capital gains and dividend income, less the annuity’s daily separate account charges. AUV, which stands for accumulated unit value, shows how much each annuity unit is worth. With most annuities, the issuing company is the shareholder, and these distributions decrease the net asset value of the fund and increase the number of shares.

Annuity Unit

Assumed interest rate (AIR) is defined as the rate of interest or growth rate selected by an insurance company.

The assumed interest rate (AIR) is the rate of interest (or growth rate) selected by an insurance company. The assumed interest rate is provided to determine the value of an annuity contract and, therefore, the periodic income payment provided to the annuitant.
Combined with other factors such as the annuitant's age upon annuitization, spousal coverage options and the type of annuity coverage chosen The assumed interest rate (AIR) is the minimum interest rate that must be earned on investments in the policyholder's cash-value account in order to cover the insurance company's costs and expected profit margin. An annuity payment is based on the number of annuity units owned by the investor, multiplied by the annuity unit value. The assumed interest rate (AIR) is the rate of interest (or growth rate) selected by an insurance company.

Assumed Interest Rate (AIR)

Certified annuity specialist (CAS) is a certification indicating expertise in fixed-rate and variable annuities.

A certified annuity specialist (CAS) is a professional who holds a certification indicating expertise in fixed-rate and variable annuities. According to FINRA, a candidate must complete the following requirements to obtain the CAS designation:
Prerequisite—a bachelor's degree or 2,000 hours of financial services work experience
Complete a self-study program of six modules
Pass three exams and a case study
Complete continuing education requirements of 30 hours every two years A certified annuity specialist (CAS) is a professional who holds a certification indicating expertise in fixed-rate and variable annuities. A certified annuity specialist (CAS) is a certified expert in fixed-rate and variable annuities. Variable-rate annuities are further regulated by the SEC and FINRA, and brokers are required to have both the Series 6 and Series 63 securities licenses in addition to state life insurance requirements.

Certified Annuity Specialist (CAS)

A cash refund annuity returns to a beneficiary any sum left over should the annuitant die before breaking even on what they paid in premiums.

A cash refund annuity returns to a beneficiary any sum left over should the person who purchased the annuity—called the annuitant—die before breaking even on what they paid in premiums. Because of the time value of money, a life annuity with an installment refund will generally pay a slightly higher guaranteed benefit to the original annuitant as compared to a life with cash refund annuity, which features a lump-sum payment. It stipulates that if the annuitant passes away before the annuity payments received equal the annuity payments made, the annuity writer or insurance company will pay the difference to a named beneficiary, which is usually a spouse. A cash refund annuity returns to a beneficiary any sum left over should the person who purchased the annuity—called the annuitant—die before breaking even on what they paid in premiums. For example, under a Single Premium Immediate Annuity (SPIA), an individual may choose to structure their annuity as life with a cash refund or joint-life with a cash refund.

Cash Refund Annuity

Certain and continuous refers to a type of annuity that guarantees a number of payments, even if the annuitant dies.

Certain and continuous refers to a type of annuity that guarantees a number of payments, even if the annuitant dies. Otherwise, if the annuitant lives beyond the 10-year period, they will continue to receive monthly payments for life; however, after the 10-year period, the beneficiary would no longer be eligible for monthly payments. Alternatively, if the annuitant outlives the specified number of guaranteed payments, then he or she would continue to receive income payments for life; however, no payments would be available for the beneficiary. In a certain and continuous annuity, the annuity issuer must make payments for a guaranteed number of years, even if the annuitant dies. If the annuitant dies during the guaranteed period, the annuitant's beneficiary will receive the balance of the guaranteed payments.

Certain and Continuous

A charitable gift annuity is an arrangement for a series of income payments for life, to be paid to an individual in return for a donation of assets.

Internal Revenue Service Number: 200847014

A charitable gift annuity is an arrangement between a donor and a non-profit organization in which the donor receives a regular payment for life based on the value of assets transferred to the organization. A charitable gift annuity is an arrangement between a donor and a non-profit organization in which the donor receives a regular payment for life based on the value of assets transferred to the organization. However, instead of the balance being retained by an insurance or financial services company (as with typical annuities), with a charitable gift annuity, the balance is retained by the charity or nonprofit as a gift. It then determines whether the present value of the residual gift to charity, using the tentative gift annuity contract rate, is at least 20% of the funds transferred to the charity under the contract. Charitable gift annuities offer tax deductions for the annuitant, both on the original lump sum gift and on the ensuing annuity payouts.

Charitable Gift Annuity

Commissioners' Annuity Reserve Valuation Method (CARVM) is a term denoting statutory cash reserves for annuities.

Commissioner's Annual Reserve Valuation Method

The commissioners' annuity reserve valuation method (CARVM) is a method used to calculate the statutory cash reserves for an annuities carrier. The CARVM is equal to the greatest net present value of all future guaranteed benefits. CARVM is equal to the greatest net present value of all future guaranteed benefits. The commissioners' annuity reserve valuation method (CARVM) is a method used to calculate the statutory cash reserves for an annuities carrier. The cash reserve of the annuity must be greater or equal to the value calculated by the CARVM.

Commissioners' Annuity Reserve Valuation Method (CARVM)

Commutation refers to the rights of beneficiaries to exchange one type of income for another. Discover more about it here.

Commutation refers to the right that a beneficiary has to exchange one type of income for another. A liability claim may be resolved with a structured settlement, wherein the risk bearer provides a fixed series of future value payments to the claimant by way of a structured settlement provider at a discounted current cost paid to that structured settlement provider. For the insurer, a commutation can help bring about a clean break in the relationship between the insurance company and the insured, which can help them demonstrate improvements in financial performance over time while eliminating the unknown factors that may be involved with a long-drawn-out settlement period, which may encounter unforeseen risks. Commutation is offered to annuitants and to the beneficiaries of life insurance policies so that they might receive a lump-sum payment instead of a series of future payments. their workers' compensation periodic payment claim for life into a single lump-sum payment.

Commutation

A contingent annuitant is someone designated by an annuitant to receive the annuitant’s payments when they pass away. 

A contingent annuitant is someone designated by an annuitant to receive the annuitant’s payments when they pass away. When an annuity has a contingent annuitant, the annuity does not stop making payments until both the annuitant and the contingent annuitant have passed away. For the same initial lump sum (or principal), an annuity that provides for a contingent annuitant may make lower payments to the annuitant and the contingent annuitant during their lifetimes. There are many different types of annuities, so consumers can choose one that fits their unique circumstances, budget, age, life expectancy, and the desire to provide for a surviving spouse.
Some annuities pay out for a predetermined number of years no matter what (period certain annuity), and if the annuitant dies during that period, the remaining payments go to the annuitant’s beneficiary. For annuities with a contingent annuitant, the payments may be smaller as they are meant to last longer by covering both the annuitant and the contingent annuitant until death.

Contingent Annuitant

A deferred payment annuity is an insurance product that provides future payments to the buyer rather than an immediate stream of income.

The difference between a CD and a fixed deferred annuity

Table of Contents
What Is a Deferred Annuity?
How They Work
Special Considerations A deferred payment annuity, which is also known as a deferred annuity or a delayed annuity, is different from other annuities in how premiums are paid and when it comes to withdrawals. A deferred payment annuity buyer need not ever turn the money in the annuity into a series of income payments. When a deferred payment annuity is used this way, the annuity buyer retains control of their money, rather than being locked into payments by initiating a withdrawal in a distribution or annuitization phase. A fixed delayed annuity, which is more commonly known as a fixed deferred annuity, works just like a certificate of deposit (CD).

Deferred Payment Annuity

A deferred annuity is an insurance contract that promises to pay the buyer a regular stream of income, or a lump sum, at some date in the future.

Topic No. 558 Additional Tax on Early Distributions From Retirement Plans Other Than IRAs

A deferred annuity is a contract with an insurance company that promises to pay the owner a regular income, or a lump sum, at some future date. Deferred annuities come in several different types—fixed, indexed, and variable—which determine how their rates of return are computed.
Withdrawals from a deferred annuity may be subject to surrender charges as well as a 10% tax penalty if the owner is under age 59½. A deferred annuity is a contract with an insurance company that promises to pay the owner a regular income, or a lump sum, at some future date. A deferred annuity is an insurance contract that promises to pay the buyer a regular income or a lump sum of money at some date in the future. The return on variable annuities is based on the performance of a portfolio of mutual funds, or sub-accounts, chosen by the annuity owner.

Deferred Annuity

A delayed annuity is an annuity in which the first payment is not paid immediately, as in an immediate annuity.

A delayed annuity is an annuity in which the first payment is not paid immediately, as in an immediate annuity. A delayed annuity, more commonly known as a deferred annuity, is a type of life annuity that guarantees a reliable stream of cash payments to an annuitant until death. A delayed annuity—also known as a deferred annuity—is a type of life annuity that guarantees a reliable stream of cash payments to an annuitant until death. A delayed annuity is an annuity in which the first payment is not paid immediately, as in an immediate annuity. A delayed annuity is an annuity in which the first payment is not paid immediately, as in an immediate annuity.

Delayed Annuity

The equivalent annual annuity approach is one of two methods used in capital budgeting to compare mutually exclusive projects with unequal lives.

The equivalent annual annuity approach is one of two methods used in capital budgeting to compare mutually exclusive projects with unequal lives. The EAA of each project is:
EAA Project one = (0.06 x $100,000) / (1 - (1 + 0.06)\-7 ) = $17,914
EAA Project two = (0.06 x $120,000) / (1 - (1 + 0.06)\-9 ) = $17,643
Project one is the better option. For example, assume a company with a weighted average cost of capital of 10% is comparing two projects, A and B. Project A has an NPV of $3 million and an estimated life of five years, while Project B has an NPV of $2 million and an estimated life of three years. Under the EAA approach, the company would choose Project B since it has the higher equivalent annual annuity value. Often, an analyst will use a financial calculator, using the typical present value and future value functions to find the EAA.

Equivalent Annual Annuity Approach (EAA)

The Fixed Annuitization Method is one of three methods that retirees of any age can use to access their retirement funds without penalty before turning 59½.

Retirement Plans FAQs Regarding Substantially Equal Periodic Payments

Retirement Topics—Required Minimum Distributions (RMDs)

About Form 4562, Depreciation and Amortization (Including Information on Listed Property)

The fixed annuitization method is one of three methods by which early retirees of any age can access their retirement funds without penalty before turning 59½. The fixed amortization method consists of an account balance amortized over a specified number of years equal to life expectancy (single life, uniform life, or joint life and last survivor) and an interest rate of not more than 120% of the federal mid-term rate. According to the IRS, the required minimum distribution method consists of an account balance and a life expectancy (single life, uniform life, and joint life and last survivor, each using attained age(s) in the distribution calculation year). The fixed annuitization method divides the retiree's account balance by an annuity factor taken from IRS tables to determine an annual payment amount. The two other methods for early, penalty-free retirement withdrawals are the fixed amortization method and the required minimum distribution method.

Fixed Annuitization Method

A fixed annuity is an insurance contract that pays a guaranteed rate of interest on the owner's contributions and later provides a guaranteed income.

Topic No. 558 Additional Tax on Early Distributions From Retirement Plans Other than IRAs

A fixed annuity is a type of insurance contract that promises to pay the buyer a specific, guaranteed interest rate on their contributions to the account. When the annuity owner, or annuitant, elects to begin receiving regular income from the annuity, the insurance company calculates those payments based on the amount of money in the account, the owner's age, how long the payments are to continue, and other factors. Because a fixed annuity is a tax-qualified vehicle, its earnings grow and compound tax deferred; annuity owners are taxed only when they take money from the account, either through occasional withdrawals or as regular income. A fixed annuity is a type of insurance contract that promises to pay the buyer a specific, guaranteed interest rate on their contributions to the account. The earnings in a fixed annuity are tax deferred until the owner begins receiving income from the annuity.

Fixed Annuity

The future value of an annuity is the total value of a series of recurring payments at a specified date in the future.

The future value of an annuity is the value of a group of recurring payments at a certain date in the future, assuming a particular rate of return, or discount rate. (An ordinary annuity pays interest at the end of a particular period, rather than at the beginning, as is the case with an annuity due.)
P \= PMT × ( ( 1 \+ r ) n − 1 ) r where: P \= Future value of an annuity stream PMT \= Dollar amount of each annuity payment r \= Interest rate (also known as discount rate) n \= Number of periods in which payments will be made \\begin{aligned} &\\text{P} = \\text{PMT} \\times \\frac { \\big ( (1 + r) ^ n - 1 \\big ) }{ r } \\\\ &\\textbf{where:} \\\\ &\\text{P} = \\text{Future value of an annuity stream} \\\\ &\\text{PMT} = \\text{Dollar amount of each annuity payment} \\\\ &r = \\text{Interest rate (also known as discount rate)} \\\\ &n = \\text{Number of periods in which payments will be made} \\\\ \\end{aligned} ​P\=PMT×r((1+r)n−1)​where:P\=Future value of an annuity streamPMT\=Dollar amount of each annuity paymentr\=Interest rate (also known as discount rate)n\=Number of periods in which payments will be made​ So:
P \= PMT × ( ( 1 \+ r ) n − 1 ) r × ( 1 \+ r ) \\begin{aligned} &\\text{P} = \\text{PMT} \\times \\frac { \\big ( (1 + r) ^ n - 1 \\big ) }{ r } \\times ( 1 + r ) \\\\ \\end{aligned} ​P\=PMT×r((1+r)n−1)​×(1+r)​
If the same example as above were an annuity due, its future value would be calculated as follows:
Future value \= $ 1 2 5 , 0 0 0 × ( ( 1 \+ 0 . 0 8 ) 5 − 1 ) 0 . 0 8 × ( 1 \+ 0 . 0 8 ) \= $ 7 9 1 , 9 9 1 \\begin{aligned} \\text{Future value} &= \\$125,000 \\times \\frac { \\big ( ( 1 + 0.08 ) ^ 5 - 1 \\big ) }{ 0.08 } \\times ( 1 + 0.08 ) \\\\ &= \\$791,991 \\\\ \\end{aligned} Future value​\=$125,000×0.08((1+0.08)5−1)​×(1+0.08)\=$791,991​ All else being equal, the future value of an annuity due will be greater than the future value of an ordinary annuity because it has had an extra period to accumulate compounded interest. The future value of an annuity is the value of a group of recurring payments at a certain date in the future, assuming a particular rate of return, or discount rate.

Future Value of an Annuity

The guaranteed minimum accumulation benefit (GMAB) is a variable annuity rider that guarantees a minimum value to the annuitant after a specified period.

The guaranteed minimum accumulation benefit (GMAB) is a variable annuity rider that guarantees a minimum value to the annuitant after the accumulation period or another set period, usually somewhere close to 10 years. Other guaranteed minimum living benefit riders include the guaranteed minimum income benefit (GMIB), guaranteed minimum withdrawal benefit (GMWB), guaranteed lifetime withdrawal benefit, and standalone lifetime benefit. In addition to the guaranteed minimum accumulation benefit, which restricts withdrawals until after the accumulation period, other guaranteed minimum living benefit riders may or may not have a holding period or require annuitization. If the investments perform well, annuitants can take advantage of a step-up option, securing higher guaranteed withdrawals. A guaranteed lifetime withdrawal benefit (GLWB), also considered a hybrid product, guarantees an investor a specific percentage of the fund’s value for withdrawal during their lifetime, offering further protection against market fluctuations. The guaranteed minimum accumulation benefit (GMAB) is an optional annuity rider that guarantees to pay a minimum value to the annuitant after a holding period: the accumulation or other established period.

Guaranteed Minimum Accumulation Benefit (GMAB)

A guaranteed minimum income benefit (GMIB) is a type of annuity option that guarantees a certain level of minimum payments. 

A guaranteed minimum income benefit (GMIB) is an optional rider that annuitants can purchase for their retirement annuities. For example, a GMIB feature may provide the annuity purchaser with the option to receive either a payment based on the actual market value of the variable annuity investment or the value of the initial investment compounding at six percent interest annually. By guaranteeing a minimum level of annuity payments regardless of investment performance, a GMIB feature can provide additional security for retirees who plan to live on their annuity income. A guaranteed minimum income benefit (GMIB) is an optional rider attached to an annuity contract that guarantees a minimum level of payments once it has annuitized. Another type of GMIB feature may guarantee an annuity benefit based on the highest value the investment account ever reached.

Guaranteed Minimum Income Benefit (GMIB)

A guaranteed minimum withdrawal benefit (GMWB) rider guarantees an annuity holder a minimum stream of income despite market volatility.

A guaranteed minimum withdrawal benefit (GMWB) is a type of rider or contract attached to some annuity insurance policies. A GMWB is unlike a guaranteed minimum income benefit (GMIB), where the latter offers a payout of specified minimum periodic income after a waiting period, regardless of the variable annuity's investment performance. Since Jamie had purchased a guaranteed minimum withdrawal benefit with a rate of 10%, she will be able to activate the rider contract to withdraw a certain percentage each year ($8,500 in this case) until she recovers the entire $100,000 initial investment. Guaranteed minimum withdrawal benefit (GMWB) riders are available for some fixed annuity and variable annuity products. A guaranteed minimum withdrawal benefit (GMWB) is a type of rider or contract attached to some annuity insurance policies.

Guaranteed Minimum Withdrawal Benefit (GMWB)

A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. 

A guaranteed death benefit is a benefit term that guarantees that the beneficiary, as named in the contract, will receive a death benefit if the annuitant dies before the annuity begins paying benefits. A guaranteed death benefit is a benefit term that guarantees that the beneficiary, as named in the contract, will receive a death benefit if the annuitant dies before the annuity begins paying benefits. A guaranteed death benefit is a benefit term that guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. The guaranteed death benefit received amount differs among companies and contracts, but the beneficiary is guaranteed an amount equal to what was invested or the value of the contract on the most recent policy anniversary statement, whichever is higher. The guaranteed death benefit received amount differs among companies and contracts, but the beneficiary is guaranteed an amount equal to what was invested or the value of the contract on the most recent policy anniversary statement, whichever is higher.

Guaranteed Death Benefit

A guaranteed investment contract (GIC) guarantees the owner a specific rate of return from an insurance company in exchange for holding a deposit for an agreed-upon period.

Exemption Requirements - 501(c)(3) Organizations

Code of Federal Regulations, Title 26, Vol. 2, Section 1, Subsection 148

26 USC 401: Qualified Pension, Profit-Sharing, and Stock Bonus Plans

A guaranteed investment contract (GIC) is an insurance company provision that guarantees a rate of return in exchange for keeping a deposit for a certain period. When the GIC is part of a qualified plan as defined by the IRS Tax Code, they may withstand withdrawals or be qualified distributions and not incur taxes or penalties.﻿﻿ ﻿﻿ Qualified plans, which allow an employer to take tax deductions for contributions it makes to the plan, include deferred payment plans, 401(k)s, and some individual retirement accounts (IRAs).
AIG used some of the emergency funding it received from the Federal Reserve in 2008 to pay out GICs it sold to investors, according to a New York Times report. New Year Insurers offers GICs that guarantee URobot gets its initial investment back and also pays out either a fixed or variable rate of interest through the contract's end. Let's say biotech firm URobot Inc. wants to invest in its employees enrolled in the company's pension plan and decides it wants to buy a guaranteed investment contract (GIC) from New Year Insurers. URobot can choose to either have a separate account, in which New Year Insurers will manage their money on its own or have a general account, in which New Year Insurers will comingle URobot's funds with that of its other general account customers.

Guaranteed Investment Contract (GIC)

A hybrid annuity is a retirement income investment that allows investors to split their funds between fixed-rate and variable-rate components.

A hybrid annuity is a retirement income investment that allows investors to split their funds between fixed-rate and variable-rate components. A hybrid annuity is a combination of two or more annuities: a fixed annuity contract and a variable annuity contract that are both placed in the same annuity product. A hybrid annuity is a retirement income investment that allows investors to split their funds between fixed-rate and variable-rate components. A hybrid annuity gives investors more options for investing than a standard annuity, such as pairing a fixed annuity with an indexed product in an effort to better protect the principal in both segments. A hybrid annuity consists of a variable component that allows for investment capital to be allocated to a mutual fund sub-account for growth and a fixed component that guarantees a set amount of payments after retirement.

Hybrid Annuity

An immediate variable annuity is an insurance product where an individual pays a lump sum upfront and receives payments right away.

An immediate variable annuity is an insurance product for which an individual pays a lump sum upfront and receives payments right away. However, just like a standard variable annuity, an immediate variable annuity's payments may rise and fall depending on the performance of the underlying investment. The difference between an immediate variable annuity and a standard variable annuity is that the former lacks an accumulation phase. The advantage over a standard variable annuity is that the immediate variable annuity skips straight to the payments. An immediate variable annuity is a type of annuity in which a policyholder deposits a lump sum into an account, after which the annuitization phase begins.

Immediate Variable Annuity

An immediate payment annuity is a contract between an individual and an insurance company, providing a set amount of income immediately to the buyer.

An immediate payment annuity is a contract between an individual and an insurance company that pays the owner, or annuitant, a guaranteed income starting almost immediately. An immediate payment annuity is also known as a single-premium immediate annuity (SPIA), an income annuity, or simply an immediate annuity. It is also possible to buy an annuity that guarantees payments to the annuitant's beneficiaries for a certain period, or that will refund the annuitant's principal if the annuitant dies early (known as a cash refund annuity). An immediate payment annuity is a contract between an individual and an insurance company that pays the owner, or annuitant, a guaranteed income starting almost immediately. One potential drawback of an immediate payment annuity is that payments typically end upon the death of the annuitant, and the insurance company keeps the remaining balance.

Immediate Payment Annuity

An income annuity is an annuity contract that is designed to start paying income as soon as the policy is initiated. Discover more about it here.

An income annuity is an annuity contract that is designed to start paying income as soon as the policy is initiated. An income annuity, also known as an immediate annuity, a single-premium immediate annuity (SPIA), or an immediate payment annuity, is typically purchased with a lump sum payment (premium), often by individuals who are retired or are close to retirement. Another strategy utilizing an income annuity is using them to provide income to pay a retiree's expenses—such as rent or mortgage, food, and energy—assisted living facility fees, and insurance premiums, or provide the cash for any other recurring payment needs. An income annuity is an annuity contract that is designed to start paying income as soon as the policy is initiated. The return an annuity buyer gets from their income annuity is based on how long they live—greater longevity equals more payments and a better return.

Income Annuity

An indexed annuity is a type of annuity contract that pays an interest rate based on a specific market index, such as the S&P 500.

An indexed annuity is a type of annuity contract that pays an interest rate based on the performance of a specified market index, such as the S&P 500. It differs from fixed annuities, which pay a fixed rate of interest, and variable annuities, which base their interest rate on a portfolio of securities chosen by the annuity owner. Many indexed annuities offer a high participation rate for the first year or two, after which the rate adjusts downward. An indexed annuity is a type of annuity contract that pays an interest rate based on the performance of a specified market index, such as the S&P 500. The rate on an indexed annuity is calculated based on the year-over-year gain in the index or its average monthly gain over a 12-month period.

Indexed Annuity

An individual retirement annuity is a retirement investment vehicle, similar to an IRA, that is offered by insurance companies.

Retirement Topics - IRA Contribution Limits

An individual retirement annuity is an investment vehicle similar to an individual retirement account (IRA) that is sold by insurance companies. When the annuity owner begins receiving regular income from the account—known as the payout phase—that money will be taxed as ordinary income, in the case of a traditional individual retirement annuity, or not taxed, in the case of a Roth. An individual retirement annuity is an investment vehicle similar to an individual retirement account (IRA) that is sold by insurance companies. An individual retirement annuity is an insurance contract that works much like an individual retirement account or IRA. Individual retirement annuities invest only in fixed or variable annuities, while IRAs offer a wide range of investments.

Individual Retirement Annuity

An inflation-protected annuity (IPA) is an annuity that guarantees a real rate of return at or above inflation.

An inflation-protected annuity (IPA) is an annuity that guarantees a real rate of return at or above inflation. An inflation-protected annuity (IPA) is an annuity that guarantees a real rate of return at or above inflation. This is because the money invested will increase in value with inflation and compound at least annually with inflation, so initial payments will be significantly lower than later payments—perhaps as much as 20% to 30% less than a regular immediate annuity. Since most pensions are not indexed to rise with the general inflation rate, and Social Security increases have tended to be less than general inflation, there's a real risk that older people will outlive their money. The real rate of return is the nominal return, less the inflation rate, thus protecting annuitants and beneficiary investors from inflation.

Inflation-Protected Annuity (IPA)

An interest-crediting method determines how interest changes to a fixed index annuity are measured. 

An interest-crediting method determines how interest changes to a fixed index annuity (FIA) are measured. Some of those alternative interest-crediting methods used by insurance companies include:
Annual point-to-point averaging
Biennial point-to-point averaging
Monthly point-to-point averaging
Daily averaging / monthly averaging
Hindsight index strategy monthly averaging In a point-to-point interest-crediting method, any increase in the value of an index is calculated from two points in time. An interest-crediting method determines how interest changes to a fixed index annuity (FIA) are measured. The interest-crediting method chosen measures the amount of interest that the annuity holder can receive over a specific time period.

Interest-Crediting Methods

Investment in the contract as applied to annuities is the principal amount the holder has invested. 

Investment in the contract, as it is applied to annuities, is the principal amount the holder has invested. It is considered good practice to always be aware of your investment in the contract since any amount of money withdrawn from an annuity more than that investment is considered a taxable distribution. An annuity contract may have up to four counterparties: the issuer, usually an insurance company, the annuity, the annuitant, and the beneficiary. It legally binds the insurance company to provide a guaranteed periodic payment to the annuitant once the annuitant reaches retirement and requests commencement of payments. An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.

Investment in the Contract

IRS Publication 571 provides tax information for filers who have a 403(b) retirement plan.

Publication 571 (01/2021), Tax-Sheltered Annuity Plans (403(b) Plans)

Publication 590-A (2020), Contributions to Individual Retirement Arrangements (IRAs)

Publication 575 (2020), Pension and Annuity Income,

Retirement Plans FAQs Regarding 403(b) Tax-Sheltered Annuity Plans

Retirement Topics—Who Can Participate in a 403(b) Plan?

IRC 403(b) Tax-Sheltered Annuity Plans—Establish a 403(b) Plan

403(b) Plan Fix-It Guide—403(b) Plan Overview

Retirement Plan and IRA Required Minimum Distributions FAQs

Income Ranges for Determining IRA Eligibility Change for 2021

Retirement Plans FAQs on Designated Roth Accounts

IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans) provides tax information for filers who have a 403(b) retirement plan. Individual accounts in a 403(b) plan can be any of the following types:
An annuity contract provided through an insurance company
A custodial account invested in mutual funds
A retirement income account set up for church employees
Generally, retirement income accounts can invest in either annuities or mutual funds.
Like a 401(k) or IRA, you don’t pay income tax on contributions until you begin making withdrawals from the plan, usually, after you retire. The IRS notes that a 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. They are $66,000 for 2021 ($65,000 for 2020) if your filing status is married filing jointly; $49,500 for 2021 ($48,750 for 2020) if your filing status is head of household (with qualifying person); or $33,000 for 2021 ($32,500 for 2020) if your filing status is single, married filing separately, or qualifying widow(er) with dependent child.
Roth versions of the 403(b) may be available, allowing you to contribute after-tax money that can grow with no taxes upon withdrawal of principal or returns. IRS Publication 571 indicates who can contribute to a 403(b) plan, the maximum contribution that can be made to a 403(b) plan during the year, rules regarding excess contributions, and the rules regarding rollovers or distributions.

IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans)

A joint and survivor annuity is an insurance product for couples that continues to make regular payments for as long as either spouse lives.

Retirement Topics - Qualified Joint and Survivor Annuity

Your Benefit, Your Choice • Benefit Options from PBGC

Table of Contents
What Is a Joint and Survivor Annuity? A joint and survivor annuity, also known as a “joint-life annuity,” is an insurance product for couples that continues to make regular payments as long as one spouse lives. With a joint and survivor annuity, insurers typically reduce monthly payments by one third or one half for the surviving annuitant.﻿﻿ These terms depend on the source of funds and options chosen before the payments begin. The life expectancies of spouses can play a significant part in deciding between a joint and survivor annuity and a single-life annuity. A joint and survivor annuity is an insurance product for couples that continues to make regular payments as long as one spouse lives.

Joint and Survivor Annuity

A joint life with last survivor annuity is an insurance product that provides an income for life to both partners in a marriage.

A joint life with last survivor annuity is an insurance product that provides an income for life to both partners in a marriage. A joint life with last survivor annuity may also be referred to as a joint and survivor annuity. A joint life with last survivor annuity is sometimes called a joint and survivor annuity. A joint life with last survivor annuity is an insurance product that provides an income for life to both partners in a marriage. A joint life with last survivor annuity is an insurance product for a couple that provides regular payments as long as one spouse is still living.

Joint Life With Last Survivor Annuity

The L share annuity class is a version of a variable annuity that starts paying out earlier than most but has relatively high administrative costs.

The L share annuity class is a version of a variable annuity that starts paying out earlier than most but has relatively high administrative costs. Other share classes offered by variable annuities are A share, B share, C share, O share, and X share annuity classes. An annuitant with an L share annuity class with a four-year surrender period and annual MEA fees of 1.90% will see that the investment value after five years is $147,614.30, lower than the standard annuity contract above. L share annuity classes offer a relatively higher mortality risk and expense (M&E) charge compared to other variable annuity classes. The L share annuity class offers some advantages versus other annuity classes, including earlier access to funds and no sales charge.

L Share Annuity Class

A life annuity is an insurance product that features a predetermined periodic payout amount until the death of the annuitant. 

Difference Between Cash Value and Annuity

The term life annuity refers to a financial product that features a predetermined periodic payout amount until the death of the annuity owner—called the annuitant. There are several types of life annuities, each with its own benefits and purpose, and they include:
An immediate annuity only has a distribution phase, as is also the case with a payout annuity, an income annuity, or a single-premium immediate annuity. A guaranteed annuity—also called a year's certain annuity or a period certain annuity—pays out for a certain period and continues to make payments to a beneficiary or estate after the annuitant's death. The term life annuity refers to a financial product that features a predetermined periodic payout amount until the death of the annuity owner—called the annuitant. A qualified longevity annuity contract (QLAC) is a type of deferred annuity that is purchased using funds from a qualified retirement plan or an individual retirement account (IRA).

Life Annuity

Life option refers to an annuity payout scheme which guarantees payouts to the annuitant until their death, regardless of when that occurs.

The life option is one example of a payout scheme for an annuity contract. A variation of the joint-life payout plan is the life annuity with period certain, under which payments continue after the annuitant’s death but at a lower dollar amount and for a limited period for the spouse or beneficiary. A joint-life payout plan allows for annuitized payouts to continue beyond the death of the annuitant and until their spouse passes away. A life option is a payout method for an annuity that guarantees periodic payments for life. A fixed period contract can be useful for an investor who expects payouts from another retirement product to kick in at a later date and assures payment to a beneficiary if the investor passes away prior to the period’s end.

Life Option

A lifetime payout annuity is a type of retirement investment that pays out a portion of the underlying portfolio of assets for the life of the investor.

A lifetime payout annuity is a type of retirement investment that pays out a portion of the underlying portfolio of assets for the life of the investor. A lifetime payout annuity is a type of retirement investment that pays out a portion of the underlying portfolio of assets for the life of the investor. A lifetime payout annuity is a type of retirement investment that pays a portion of the underlying portfolio of assets for the life of the investor. An investor may choose a lifetime payout annuity in order to eliminate the risk of outliving the amount of money set aside for retirement. Annuities are created and sold by financial institutions, which invest funds deposited by individuals over time, and then when the client is ready, begin issuing regular payments drawn from the account to the annuity holder.

Lifetime Payout Annuity

A mortality and expense risk charge is a fee on an annuity that compensates insurers for any unexpected costs. It averages 1.25% a year.

A mortality and expense risk charge is a fee imposed on investors in annuities and other products offered by insurance companies. Generally, an underwriter will consider three factors in determining mortality and expense risk charges: the net amount at risk under the policy, the risk classification of the policyholder, and the age of the policyholder.
The insurance company will invest the largest chunk of a premium into a savings fund, and it will be returned to the policyholder at the time of maturity and to the nominee when the policyholder dies. The mortality and expense risk charge protects the insurance company against unexpected events, including the untimely death of the policyholder. That's why a mortality and expense risk charge is calculated whenever an insurance company offers an annuity to a client. With variable annuities, the mortality and expense risk charge is applied only to funds held in individual accounts, not funds held in the general account.

Annuities

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