What is an annuity?
An annuity pays a monthly (or quarterly, semi-annual, or annual) income benefit for the life of a person or for a specified period of time. The annuitant (insured) can never outlive the income from the annuity. While the basic purpose of life insurance is to provide an income for a beneficiary at the death of the insured, the annuity is intended to provide an income for the life of the annuitant. There are two basic types of annuities, fixed annuities, which pay a fixed income backed by fixed dollar investment such as secure bonds and mortgages, and variable annuities, which vary in payment according to the value of stock and bond investments.
An annuity is a contract between you and an insurance company in which you pay the insurer a lump-sum payment or series of payments. Your money is invested and accumulates on a tax-deferred basis. In return, at retirement the money is returned to you either in a lump sum, through periodic withdrawals, or as a guaranteed income stream for a specified period of time. An annuity can be issued as a nonqualified annuity, an individual retirement annuity (IRA) or a tax-shelter annuity (TSA). The amounts that can be paid into the annuity contract and the tax-treatment of withdrawals from it will depend on what type of annuity it is nonqualified, IRA or TSA. [Return to Top] What does it mean to annuitize? To annuitize is to convert the accumulated value of an annuity into a stream of income. The payments may be a fixed amount, for a fixed period of time, or for a lifetime. [Return to Top] What are the typical income options within an annuity? • Single Life Income Options – This option provides
• Deferred Annuity – a type of an annuity contract that delays payment of income, installments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which one invests money in the account, and the income phase in which the plan is converted into an annuity and payments are received. Earnings on a deferred annuity account are taxed only upon withdrawal, providing the annuity with a tax benefit. A deferred annuity can be either variable or fixed. • Immediate Annuity – an annuity that is primarily tailored to suite a retired individual that is in the need income stage of his/her life. An immediate annuity can benefit such an individual’s financial situation by protecting them against outliving their assets, and also by protecting ones assets from creditors. • Variable Annuity – a type of annuity (insurance contract) in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remai
An annuity refers to the payment option for HOT LOTTO® jackpot prize payments in which the prize money is divided up to be paid in yearly installments. HOT LOTTO® jackpots have a guaranteed minimum estimated annuity of $1 million per drawing, plus eight set cash prizes up to $10,000. The jackpot prize will be divided equally among multiple winners. The jackpot prize for annuity option will be paid in 25 payments over 24 years.
