Annuitization

Annuitization

The reception of monthly payments from an annuity after an accumulation period. Depending on the type of annuity, one may annuitize payments for a period of time or for the remainder of one's life.

Annuitization.

Annuitization means that you convert part or all of the money in a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments, either for your lifetime or the lifetimes of you and your joint annuitant.

Once you choose to annuitize, the payment schedule and the amount is generally fixed and can't be altered.

If you have a qualified retirement plan, such as a 401(k), you generally have three major options when you retire. You can annuitize, roll over the account balance to an IRA, or take the money all at once as a lump sum distribution.

If you have a nonqualified deferred annuity, you have a choice of annuitizing, taking a lump sum, setting up a systematic withdrawal plan, or arranging some other payout method that the contract allows.

References in periodicals archive ?
Annuities are created and sold by financial institutions, which accept and invest funds from individuals and then, upon annuitization, issue a stream of payments at a later point in time.
We’ve made many moves to de-risk; made lump-sum payouts to some terminated-vested participants; utilized LDI [liability-driven investing] based on improvements in the plans’ funded status; reviewed funding strategies to reduce PBGC [Pension Benefit Guaranty Corporation] premiums; and currently we are reviewing options for annuitization of some retiree benefits.”
Wincek's experience includes key roles in a number of well-known pension de-risking annuitization transactions, as well as many smaller annuitization transactions.
Like several recent studies of annuitization (Agnew et al., 2008; Brown, Kapteyn, Luttmer, and Mitchell, 2013; Brown, Kling, Mullainathan, and Wrobel, 2013; Beshears et al., 2014), we accept the possible costs of using a stated preference approach to gain the benefits of controlling many aspects of the decision, such as product framing and descriptions of risk, that have been shown to influence decisions but cannot be held constant in most revealed preference data collections.
Alcoa said it will phase annuitization in over time.
Deferred Annuities: A type of long-term savings product that allows assets to grow tax-deferred until annuitization. This product category includes:
The insurer may provide guarantees of death proceeds or a certain annuitization amount (if purchased) within a variable annuity, thus providing clients with guarantees that otherwise would be unavailable to those clients who purchased the underlying investments directly.
But for nonqualified accounts, annuitization can offer an initial tax advantage over withdrawals because each annuitized payment will include a return of the annuitant's cost basis.
More specifically, regulators should: (1) encourage desirable forms of de-risking by establishing regulatory safe harbors; (2) require a battery of procedural safeguards for annuitization transactions; (3) require improved disclosures for cash buyouts; and (4) limit cash buyouts when beneficiaries are not likely to meaningfully understand the potentially adverse consequences of trading a pension for cash.
This annuitization process involves an irrevocable decision to accept a payment for the annuitant's life or a term of years, usually no fewer than five.
This restructuring of pension risk was achieved through a combination of a third-party annuitization and a self-insurance solution.
* John Beshears, David Laibson, and Brigitte Madrian, Harvard University and NBER; James Choi, Yale University and NBER; and Stephen Zeldes, Columbia University and NBER, "What Makes Annuitization More Appealing?" (NBER Working Paper No.