annuity
Definition 1
A contract sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement. The holder is taxed only when they start taking distributions or if they withdraw funds from the account. All annuities are tax-deferred, meaning that the earnings from investments in these accounts grow tax-deferred until withdrawal. Annuity earnings are also tax-deferred so they cannot be withdrawn without penalty until a certain specified age. Fixed annuities guarantee a certain payment amount, while variable annuities do not, but do have the potential for greater returns. Both are relatively safe, low-yielding investments. An annuity has a death benefit equivalent to the higher of the current value of the annuity or the amount the buyer has paid into it. If the owner dies during the accumulation phase, his or her heirs will receive the accumulated amount in the annuity. This money is subject to ordinary income taxes in addition to estate taxes.
Definition 2
More generally, a series of payments of set size and frequency, often to a retired person.
A contract sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement. The holder is taxed only when they start taking distributions or if they withdraw funds from the account. All annuities are tax-deferred, meaning that the earnings from investments in these accounts grow tax-deferred until withdrawal. Annuity earnings are also tax-deferred so they cannot be withdrawn without penalty until a certain specified age. Fixed annuities guarantee a certain payment amount, while variable annuities do not, but do have the potential for greater returns. Both are relatively safe, low-yielding investments. An annuity has a death benefit equivalent to the higher of the current value of the annuity or the amount the buyer has paid into it. If the owner dies during the accumulation phase, his or her heirs will receive the accumulated amount in the annuity. This money is subject to ordinary income taxes in addition to estate taxes.
Definition 2
More generally, a series of payments of set size and frequency, often to a retired person.
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annuity is ...
... part of the Insurance, Retirement and Taxes subjects.
... part of the Insurance, Retirement and Taxes subjects.
... #56 on our list of the most popular terms.
... an essential investing term.
Related Terms
joint life annuity, life annuity, single-life annuity, single-premium life insurance, qualifying annuity, equity-indexed annuity, preretirement survivor annuity, qualified joint and survivor annuity, 457 plan, actuary and
annuity appears in these other terms
Single-Premium Deferred Annuity, annuity factor method
annuity appears in the definitions of these other terms on BusinessDictionary.com
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