Split-funded annuity

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Split-Funded Annuity

An annuity in which part of the premium is paid out to the annuitant immediately in monthly installments, while the remainder is set aside and paid to the annuitant in monthly installments in the future. A split-funded annuity allows the annuitant the flexibility of receiving monthly payments at once while still investing a significant amount of money. The deferred payments are usually higher when the annuitant begins to receive them.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Split-funded annuity.

A split-funded annuity lets you begin receiving income from a portion of your principal immediately, while the rest of the money goes into a deferred annuity.

The advantage of split-funding is that you have the benefit of some income right away for immediate needs or wants, while the balance compounds tax deferred, allowing you to build your retirement assets.

One goal of a split-funded annuity is providing a larger future income when you begin to draw on the deferred portion than you would receive if you annuitized the entire principal now.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.