annuity

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Annuity

A regular periodic payment made by an insurance company to a policyholder for a specified period of time.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Annuity

A product offered by an insurance company or an employer to which one makes contribution(s) and immediately or later begins receiving payments, which usually last the remainder of the annuitant's life. An annuity usually refers to a retirement account into which the annuitant makes payments over his/her working life. The payments are then invested and the annuitant begins to receive the principal plus earnings after retirement. A qualifying retirement account is an annuity that allows for either contributions or withdrawals to be tax-exempt up to a certain amount. However, a wide variety of annuities exist. An annuitant may make a one-time contribution or monthly contributions over a period of time. Likewise, one may begin to receive payments immediately or defer them to a later date such as retirement. One may elect to make fixed or variable contributions as well as to receive fixed or variable payments. See also: 401(k), IRA.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

annuity

A stream of equal payments to an individual, such as to a retiree, that occur at predetermined intervals (that is, monthly or annually). The payments may continue for a fixed period or for a contingent period, such as for the recipient's lifetime. Although annuities are most often associated with insurance companies and retirement programs, the payment of interest to a bondholder is also an example of an annuity. See also annuity certain, contingent annuity, deferred annuity, fixed annuity, joint and survivor annuity, refund annuity, straight life annuity, tax-sheltered annuity, variable annuity.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Annuity.

Originally, an annuity simply meant an annual payment. That's why the retirement income you receive from a defined benefit plan each year, usually in monthly installments, is called a pension annuity.

But an annuity is also an insurance company product that's designed to allow you to accumulate tax-deferred assets that can be converted to a source of lifetime annual income.

When a deferred annuity is offered as part of a qualified plan, such as a traditional 401(k), 403(b), or tax-deferred annuity (TDA), you can contribute up to the annual limit and typically begin to take income from the annuity when you retire.

You can also buy a nonqualified deferred annuity contract on your own. With nonqualified annuities, there are no federal limits on annual contributions and no required withdrawals, though you may begin receiving income without penalty when you turn 59 1/2.

An immediate annuity, in contrast, is one you purchase with a lump sum when you are ready to begin receiving income, usually when you retire. The payouts begin right away and the annuity company promises the income will last your lifetime.

With all types of annuities, the guarantee of lifetime annuity income depends on the claims-paying ability of the company that sells the annuity contract.

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

annuity

a series of equal payments at fixed intervals deriving from an original lumpsum INVESTMENT.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

annuity

a series of equal payments at fixed intervals from an original lump sum INVESTMENT. Where an annuity has a fixed time span, it is termed an annuity certain, and the periodic receipts comprise both a phased repayment of principal (the original lump sum payment) and interest, such that at the end of the fixed term there is a zero balance on the account. An annuity in perpetuity does not have a fixed time span but continues indefinitely and receipts can therefore come only from interest earned. Annuities can be obtained from pension funds or life insurance schemes.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

annuity

A sum of money received on a regular basis as one of a series of fixed payments. Real property is sometimes sold in exchange for a private annuity.The buyer guarantees a fixed monthly income to the seller for the seller's lifetime.The seller, of course, is gambling he or she will live much longer than anyone could expect,and thus ultimately receive far more than the property was worth. The buyer is gambling that the seller will die sooner as opposed to later, and the buyer will have a windfall.Wise sellers will include a clause guaranteeing a minimum term for payments,even if they must be made to their estate or heirs.See advance payment annuity and ordinary annuity.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.

Annuity

An amount payable to a person at specified intervals for a specific period of time or for life. The amouont may be fixed or variable. Payments represent a partial return of capital and a return on the capital investment.
Copyright © 2008 H&R Block. All Rights Reserved. Reproduced with permission from H&R Block Glossary
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