Annuity

Definition

• A financial agreement which arranges an agreed upon number payments over a set period of time. Commonly used for dispersing retirement income, making plans for regular payments to a savings account, or arranging periodic payments like mortgage or insurance payments.

Synonyms
annuitize, capital extraction, retirement account, subsidy, allowance, receive payments

Related Terms and Acronyms

• Annuitant — Definition,
  • An individual who owns or is the recipient of an annuity.
• Annuitization — Definition,
  • The process of turning a retirement plan or annuity into income in the form of periodic payments or a single lump sum.
• Annuitization Options — Definition,
  • The different income dispersal options available when annuitizing a retirement plan or annuity, such as the timeframe and list of beneficiaries.
• Annuity Certain — Definition,
  • A type of annuity that makes payments to the annuitant for a set term; payments stop when the agreed upon term ends, even if the annuitant is still alive after the term ends.
• Annuity Consideration — Definition,
  • The payment(s) made by an individual in order to accumulate value in an annuity.
• Annuity Contract — Definition,
  • A contract that outlines each party's responsibilities as they relate to an annuity.
• Annuity in Advance — Definition,
  • When payments are made at the start of a period as opposed to the end.
• Annuity in Arrears — Definition,
  • When payments are made at the end of a period as opposed to the start.
• Annuity Table — Definition,
  • A table that can be used to find the future value of an annuity.
• Canada Pension Plan (CPP) — Acronym, Canada, Important,
  • A public pension plan administrated by the Canadian government.
• Certified Annuity Specialist (CAS) — Acronym, Important,
  • A professional who is certified to provide investment advice about annuities to clients.
• Deferred Annuity — Definition,
  • An annuity that makes payments to the annuitant at some date in future instead of immediately.
• Estate Planning — Definition,
  • The process of determining how assets will be dispersed after an individual's death, ideally in the most tax-efficient way possible.
• Future Value of an Annuity (FVA) — Acronym,
  • The value of an annuity at some future date.
• Guarantee Period — Definition,
  • A time period where income payments from an annuity are guaranteed.
• Immediate Payment Annuity — Definition,
  • An annuity where payments to the annuitant start immediately after the annuity has been set up.
• Indexed Annuity — Definition,
  • An annuity where investment performance is pegged to a stock index.
• Inflation-Protected Annuity — Definition,
  • An annuity that guarantees a return equal to or above inflation.
• Investment in the Contract — Definition,
  • The principal that has been contributed to an annuity.
• Investment Income — Definition,
  • Income that is earned from investments such as interest, dividends, and capital gains.
• Issue Age — Definition,
  • The policyholder's age when the policy was first issued, to the nearest year.
• Joint and Survivor Annuity — Definition,
  • An annuity with multiple annuitants (usually spouses) that makes payments as long as either of the annuitants are alive.
• Life Expectancy Method — Definition,
  • A method of calculating the appropriate size of payments in an annuity's income phase by estimating the annuitant's life expectancy.
• Maturity Guarantee — Definition,
  • A guarantee that after a certain date a contract, such as a life insurance policy or annuity, will have a minimum dollar value.
• Old Age Security (OAS) — Acronym, Important,
  • A Canadian pension plan for eligible Canadians over the age of 65.
• Payout Phase — Definition,
  • The phase of a deferred annuity where the annuity begins to make payments to the annuitant.
• Pension — Definition,
  • A retirement plan where money is set aside over many years for an individual's retirement.
• Premium — Definition,
  • A payment made to an insurance company for insurance coverage.
• Private Annuity — Definition,
  • An arrangement where one party agrees to transfer ownership of an asset to another party (usually a beneficiary) in exchange for lifetime payments.
• Registered Retirement Savings Plan (RRSP) — Acronym, Canada, Very Important,
  • A savings plan introduced by the federal government to encourage Canadians to save money for retirement. The investment and the interest earned on it is sheltered: it will not be taxed as long as it is left in the plan.
  ➥ Tax deferred investment contribution used to reduce income tax.
• Reverse Mortgage — Definition, Important,
  • A loan that allows an older homeowner to convert built-up equity into cash. The loan comes due when the owner dies, sells the house or moves out.
• Revocable Beneficiary — Definition,
  • A beneficiary whose benefit can be modified without his or her consent.
• Second-To-Die Insurance — Definition,
  • Life insurance that only pays a death benefit when both spouses have died, commonly used in estate planning.
• Single Premium Deferred Annuity (SPDA) — Acronym,
  • A deferred annuity funded with a single payment.
• Split-Funded Annuity — Definition,
  • Two annuities purchased together, one with a deferred payout and the other with an immediate payout.
• Straight Life Annuity — Definition,
  • An annuity that stops all payments upon the annuitant's death.
• Substandard Health Annuity — Definition,
  • An annuity with increased income payments for people with shorter life expectancies due to medical conditions.
• Superannuation — Definition,
  • A retirement plan used in Australia.
• Surrender Charge — Definition,
  • A charge levied when a life insurance policyholder cancels his or her policy.
• Surrender Rights — Definition,
  • The contractual right for a life insurance or annuity policyholder to cancel his or her policy.
• Survivorship — Definition,
  • The right of a person to secure ownership by reason of his/her outliving someone with whom s/he shared undivided interest in the land.
• Tax Deferred Annuity (TDA) — Acronym, Important,
  • A type of annuity where taxes are deferred until the annuitant decides to withdraw money from the annuity.
  ➥ More commonly known as a Tax Sheltered Annuity (TSA).
• Tax-Free Savings Account (TFSA) — Acronym, Canada, Important,
  • A savings account for Canadians where income earned is not taxed.
• Time Deposit — Definition,
  • A type of deposit account with a stated maturity at which time the account reverts to another type of account or is "rolled over" for another fixed period of time.
• Wraparound Annuity — Definition,
  • An annuity that allows the annuitant to control how funds in the annuity are invested.