What is an annuity?
Annuities are tax deferred financial contracts between you and a life insurance company; they are generally designed for retirement funds, and any withdrawal from any annuity prior to age 59.5 is subject to a 10% federal tax penalty. The flip side to this coin is that annuities grow 100% tax deferred under section 72 of the U.S. Internal Revenue Code, which means that an annuity owner never has to report the growth inside his or her account until withdrawals begin – usually when the owner is retired and in the lowest tax bracket of their adult lives. Annuities are based on a term of years during which the insurance company pays interest based on a predetermined method or a predetermined annual rate. Annuities take on two general forms: fixed or variable. Fixed annuities, regardless of how they credit interest, carry a minimum positive annual interest rate for each year of the contract over the contract term. The selling agent is paid a one time commission based on the size of the premi
An annuity is a distribution of money earned on an investment on a set schedule such as quarterly, biannually, or annually. Typically, an annuity is used as part of a retirement plan, to ensure a fixed and stable income once the annuitant, or recipient, stops working, and an annuity may be designed to provide income for two. A common form of annuity is a retirement pension. While the retiree was working, he or she paid into a pension fund which was invested. After retirement, the return on the investment takes the form of an annuity distributed to the retiree. Most people work with a firm to set up an annuity. The annuitant can either invest in installments, or purchase an annuity with a lump sum. Unlike life insurance, an annuity does not require a physical examination and is used to fund the individual during his or her lifetime, rather than surviving children or partners, except in certain circumstances. When the annuity is established, the annuitant signs a contract which outlines
An annuity is long-term retirement savings product that can help protect you against the risk of outliving your assets. It is a contract between you and an insurance company: you receive future income in return for your contributions. Any growth occurs on a tax-deferred basis until amounts are withdrawn, usually at retirement. You may receive income in a number of ways, including guaranteed payments that will last for as long as you live. Annuities can be a valuable addition to your retirement plan.
In its most general sense, an annuity is an agreement for one person or organization to pay another a stream or series of payments. Usually the term annuity relates to a contract between you and a life insurance company, but a charity or a trust can take the place of the insurance company. There are many categories of annuities. They can be classified by: • Nature of the underlying investment fixed or variable • Primary purpose accumulation or pay-out (deferred or immediate) • Nature of pay-out commitment fixed period, fixed amount, or lifetime • Tax status qualified or nonqualified • Premium payment arrangement single premium or flexible premiumAn annuity can be classified in several of these categories at once. For example, you might buy a nonqualified single premium deferred variable annuity. For brief definitions of these categories, click here. In general, annuities have the following attractive features: • Tax deferral on investment earnings Many investments are taxed year by yea
In its most general sense, an annuity is an agreement for one person or organization to pay another a stream or series of payments. Usually the term “annuity” relates to a contract between you and a life insurance company, but a charity or a trust can take the place of the insurance company. There are many categories of annuities. They can be classified by: • Nature of the underlying investment – fixed or variable • Primary purpose – accumulation or pay-out (deferred or immediate) • Nature of pay-out commitment – fixed period, fixed amount, or lifetime • Tax status – qualified or nonqualified • Premium payment arrangement – single premium or flexible premium An annuity can be classified in several of these categories at once. For example, you might buy a nonqualified single premium deferred variable annuity. For brief definitions of these categories, click here. In general, annuities have the following attractive features: • Tax deferral on investment earnings Many investments are taxe
