life annuity

Life Annuity

An insurance product that features a predetermined periodic payout amount until the death of the annuitant. These products are most frequently used to help retirees budget their money after retirement. Typically, the annuitant pays into the annuity on a periodic basis when he/she is still participating in the workforce. However, annuitants may also buy the annuity product in one large purchase. When the annuitant retires, the annuity makes periodic (usually monthly) payouts to the annuitant, so that the annuitant has a regular income to rely upon. When a triggering event (such as death) occurs, the periodic payments from the annuity usually cease.

Notes:

Because of the complex nature of annuity products and the tremendous implications to the annuitant's standard of living, people are well advised to consult a reputable professional before purchasing any annuity product.

Due to the tax-preferred nature of annuities, very wealthy investors or well-above average income earners often use these life insurance products as a means of transferring large sums of money or as a means of mitigating the effects of taxes on their annual income.

See also: Annuitant, Annuity, Deferred Annuity, Fixed Annuity, Income Tax, Joint Life with Last Survivor Annuity, Life Insurance, Period Certain, Triggering Event, Variable Annuity

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Life annuity

An annuity that pays a fixed amount for the lifetime of the annuitant.

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life annuity

A stream of payments intended to continue during the annuitant's lifetime and to cease automatically at the annuitant's death.