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Annuity Glossary – Understanding Basic to Complex Terms

Annuity glossary will give you the most commonly used terms in annuities and other related financial products.

1035 Exchange: transfer of one annuity from one participant to another. Most people who choose to transfer their annuities are to get better rates and higher yields. This type of transfer is tax-free however; surrender fees may be applied in some cases.

401 (k) plan: this a retirement plan offered by employers to their employees. The employers make contributions to retirement plans. Often employers will match the contributions on a partial or full basis.

FindAnnuitiesAnnuitant: a person who buys annuities from insurance companies. Annuitants are expected to respect and follow all the terms and conditions that are stipulated in the annuity contract.

Annuity: Annuities are insurance products, which are offered by insurance companies. The term annuity refers to the payments or earnings that a person receives on a monthly or semiannual basis. When the original annuitant dies, the beneficiaries may take a part of the annuity.

Accrued interest: refers to the amount of interest that had eventually accrued since payment of most recent interest amount.

Actuary: the person who is an expert in statistical mathematics, which calculate premiums, pension, dividends and annuity rates.

Amortization: the decrease of debt on a gradual basis through monthly or semi quarterly payments that meet latest interest amounts. This should be paid on time to avoid late charges and penalty fees.

Anniversary Date: this is the annual date on which the annuity had started or had become effective.

Annuitization: the process of transferring the annuity into an income stream which are represented by regular payments for a definite period.

Annuity contract: a legal contract where annuitants enter. The contract stated the payments that an annuitant should pay on a specified time.

Annuity period: this is the period where the payments should be received. The annuity period are classified in monthly, quarterly, semi annually or annually.

Beneficiary: any person who receive benefits from annuity death benefit. When the original owner of the annuity dies, the beneficiary will receive a part of the annuity. However, beneficiaries cannot alter or change anything that is stipulated in the contract. They can receive befits but they are not allowed to change anything already stated in the contract.

Bond: bonds are form of debt that is created by institutions for those who wants to borrow money. Buyers of bonds will enjoy regular payments of interest. Most bonds are paid through a lump sum.

Bonus annuity: the bonus added by insurance companies to premium payments. Normally the rates for bonus annuity are between from one percent to five percent.

Certificate annuity: this type of annuity is equal to the guarantee period that is equal to surrender period.

Co-annuitant: co-owner of any original annuitant. The purpose of having a co-annuitant is to lengthen the contract of annuity. Consequently, both the original annuitant as well as the co-annuitant should die before the annuity to stop.

Deferred annuity: annuity is typically deferred. This means that as annuity, it will be not tax immediately because it will only be taxed upon withdrawal. The duration of annuity, usually last from seven to eight years. During withdrawal, a withdrawal tax up to thirty-six percent is charged.

Holding period:  the time when a participant holds ownership over policy plans, annuity contracts or other financial instruments.

Immediate annuity: this type of annuity allows each user to receive payout upon first payment of investment.

Joint annuitant: a person named in annuity contract. The life expectancy and age are some factors used to calculate annuities.

Life annuity: type of annuity that pays a set of standard and periodic basis as long as the annuitant is around.

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Annuity for Retirement: Advantages of Annuities

Annuity for retirement may be a good investment for those who wants to ensure they have a secured life, even after their retirement. If you really put an effort to plan, you can see that your retirement is probably the best period of your life. Now the question is how will you plan your future? Is the pension fund enough for your financial needs? Most retirees’ mistake is that they depend on the pension fund alone. This is very unsafe and may not enough for your own needs.

You have to get a wise investment as early as possible in order for you to have funds, which may cover all your needs for your retirement. The best investment that may yield a high interest and less risk is annuity.

How it Works?

There are several annuities in the market. It is an investment plan offered by insurance companies but directly handled by Securities Exchange Commission since it involves securities and bonds.

You may avail annuities by buying annuity from insurance company, which then the insurance companies will reinvest your money into diversified funds like securities or bonds. You may choose which type of annuity you prefer; you may choose whether you want a deferred annuity or immediate annuity. However, whatever you choose, it is important that you know that annuities are beneficial for you.

Advantages of Annuities

Annuities are much preferred by the majority of people because of its benefits. Annuity is an investment instrument that is tax deferred. Tax deferred means that your investment is not taxed every time you make a deposit. With annuities, you will only be taxed when you withdraw and since withdrawal is normally done after seven to eight years, you will only be taxed during that time for your withdrawal.

Secondly, annuities are principal protected. This means that you or your heirs will receive the amount of money that you have invested without any deductions. Whatever happens to the market whether it goes up or slums down, you are guaranteed to get your principal money unscathed, thus, making this a favorite for those people who want less risk.

Thirdly, annuities are inflation protected. This means that you can personalize your savings to make sure your investment will be able to keep up with your living conditions. We all know that inflation can devaluate your investment but with annuities, you may be guaranteed that your savings is protected.

Lastly, annuities are a lifelong income. You will receive money as long as you live. Unlike other investment which will only be around for a couple of years or if the plan holder dies, with annuities, the investor can enjoy the money he or she deposited as long as the annuitant is around. If the annuitant dies unexpectedly, the heir will receive a minimum of the investment.

Annuity for retirement is one of the recommended investments for retirees or anyone planning to invest for their retirement due to its minimal risk.

Is Variable Annuity for You?

A specific financial agreement where there is a minimum, guaranteed payout from the annuity provider and a varying payout depending on market performance can be called variable annuity. This market performance element refers to stocks and other bonds where their performance in the market determines the rates of return and total income of the investor. The tax-deferred nature of such an investment makes it a viable one as well.

For a clever investor, it will always be the first choice in spite of so many other annuity plans like the Equity Indexed Annuity. Firstly, there is a great chance of sudden windfalls but this advantage does not come without any hurdles. One has to thoroughly study the market conditions and also gather information about the insurance firm with which he/she plans to deal with. Secondly, there is this huge advantage of passing on the annuity to the one’s heir, i.e child or spouse in case if his/her death, something that is not possible in the cases of Fixed Annuity schemes. In case of death or decease, the family or heir usually gets the full amount in the deceased’s account or in some cases, gets a specific yet assured portion of the same.

It has some disadvantages too. Returns and their rates are hugely dependent on stocks and other market fluctuations and this intensifies the risk level.

There are innumerable surcharge payments that you may have to make if you opt for such a plan. This has no connection at all to the value of your investment. Charges for surrender, mortality charges, expense risk fees and other administrative deductions are liable to be paid by the investor.

Taking into account all the benefits and disadvantages, you might consider going ahead and investing in a variable annuity plan especially if you want a bigger share in the stock market without much direct risk or involvement.

Investing in Variable Annuity – Top Considerations

There are a lot of advantages for the investor who purchases a variable annuity, though there are a lot of risks associated with it as well. It is therefore advisable for the individual to ask as many questions as possible about this type of investment before choosing to purchase it.

Most insurance company usually give investors a period of up to ten days within which they can terminate their contract if they do not think that the terms are favorable. Withdrawals can be made within this period without any surrender charges being imposed on the withdrawals. It is important to check the terms and policies carefully within this period, because after it ends, you will not be able to make any withdrawals without paying a fee.

It is important to know that a variable annuity is best for individuals who intend to save in the long term, as they will not pay taxes during the accumulation fees and their investment will experience compounded growth. It is also important to know that there is the possibility that your account will decrease in value in the event that your investment does not perform well.

It is important to familiarize all the features as well as any variable annuity charges and fees by your insurance company and it is important to know all the advantages and disadvantages. After this, you should evaluate whether the advantages outweigh the disadvantages and whether purchasing the variable annuity will be worth the risk.

Before purchasing a deferred variable annuity, it is important to evaluate your finances so as to ensure that you will be able to last throughout the accumulation phase without withdrawing a single cent from your account. This is because, if you make any withdrawals, you will pay a surrender charge.

Before you settle for an insurance company, it is important to evaluate their bonuses together with the charges for these benefits, and to consider whether the bonus is worth it. You should speak with a professional who understands annuities better so that they can advise you on any consequences of purchasing a variable annuity, as well as the taxes that will be charged on the annuity upon withdrawal.

You should also know what the conditions for exchanging an annuity for a different one and whether there are any fees as well as benefits.

Different insurance companies have different terms and conditions for purchasing a variable annuity, and it is important for the investor to shop around before settling on a particular insurance company. The details of the variable annuity are usually contained in the prospectus, and the investor should read carefully through each prospectus, and ask questions where they do not understand. They can seek the help of a professional who can be able to explain some of the terms as well as some of the hidden charges and calculations. It is only after a critical analysis of these issues that the individual should choose to purchase a variable annuity, as there are consequences for backing out before the agreed time has lapsed.

A Further Look into the Scope of Variable Annuity

AnnuityRatesThe term “Variable Annuity” is one of the basic kinds of annuity in general.  It’s a kind of contract you enter with an insurance company whereby you purchase the company’s deal while the company agrees to make periodic payments to you.  The payments can be made at an agreed future date or immediately as you may choose.  You can purchase the annuity contract as a series of purchase payment or single payment as well.

Variable Annuity gives you a wide range of investment options with diverse values. Oftentimes, the value of the investment depends on its performance over a period of time.  You can invest in a number of variable annuity offers such as bonds, stocks, money market instruments and so on. You can even invest in a number of options at the same time.

Variable Annuity is very unique in diverse ways.  You can be receiving periodic payments all through the days of your life if you desire that.  You can even extend the payment to your spouse or any other beneficiary   when you’re gone. Hence, you won’t lose your assets even when you depart from this world.

There’s also a death benefit option attached to Variable Annuity.  If for instance you die before the insurance company begins to make the agreed payments, there’s nothing to worry about.  Your beneficiary will still be paid the said amount on agreed dates.

Again, Variable Annuity is task deferred.  You’re not expected to pay any tax on the income and the gains you receive from the investment until you’re set to make cash withdrawal.  You also have the freedom to transfer your money from one investment plan to the other without paying any dime in tax when you carry out the transaction.

In any case, you’re expected to be taxed when you take your money out of a variable entity plan.  You’ll be taxed on your earnings at income tax rates.  If you happen to hold your investment for too long, you’re sure to gain more since no tax will be demanded until you’re ready to make cash withdrawal.

Meanwhile, it’s important for you to know that variable annuities do well as long-term investments.  In fact, they are designed to be long term investments with the hope of meeting   the need of your retirement   period and other long-range goals.  You won’t gain much if you decide to hold the investment for a short-term.  This is because; insurance charges and   substantial taxes may apply if you decide to make early cash withdrawal.

To be on a safe side, you need to take time to invest in Variable Annuity.  You need to locate reliable insurance companies you can work with. Actually, there are many of such companies all over the US. You can locate them in every state you’re residing. You need to take time to discover the various investments offers such insurance companies are offering before you make any decision. There’s also the need to engage the services of a financial adviser to help you in choosing the best kind of annuity that can pay you.

What is Annuity – Take a Look at the Variable Annuity Option

You can’t discover what is annuity without knowing about its types and categories.  Annuity can only pay you when you know a lot about how it works and how to go about getting the right type. Variable annuity is one of the basic types of annuity you can benefit from. You need to know what it stands for before thinking of investing your money.

Simply put, Variable annuity is a kind of annuity that gives you the room to choose from diverse investment   options such as   stocks, bonds and mutual funds.  You invest your money through an insurance company that offers the annuity.  In return, the insurance company pays you regular income depending on the performance of your investments.   In most cases, you’ll gain a lot if the investments are doing very fine.  On the other hand, you’ll also lose if the investments are declining.

There are benefits you’ll gain when you go for variable annuity.  You can control the profit or loss by being wise in your investment process.  You need to diversify your investments into various offers.  This will protect you from losing all when one of the investments begins to decline.   If you only invest everything in one option, you may end up losing your money if the investment continues to decline.

Variable annuity is tax-deferred.  This means that, you won’t pay any tax from the income until you’re set to make withdrawals. This can help you save a lot of cash in the process.

Variable annuity can easily build up your savings by giving you the room to enjoy long-term capital growth.  You can begin by investing any amount of money in stock or mutual funds.  You simply sit down to watch the investment grow in leaps and bounds. During the period of growth, no tax is deducted from your income until you’re set to make withdrawals. You’ll also gain from a variable annuity since it’s not affected by inflation.  You’ll always enjoy all other benefits as well.

Meanwhile, there are some dark sides of variable annuity.  When studying about what is annuity, you need to consider the pros and the cons of any type of annuity you’re studying. Variable annuity is not all that good for a beginner. This is because, there are risks involved in it.   There’s the risk of market fall. This can cause you hypertension if you’re not conversant with the economic market

It’s always very good to be well informed when seeking for information concerning what is annuity and its types. You don’t need to jump into conclusions. There are several insurance companies offering variable annuity and every other type of annuity in the US. You have to take some time to look into their offers.  You also need to consider the charges involved. Some insurance companies also have hidden charges also. You need to make proper inquiries before picking any of them. There’s the need to be properly guided by a financial adviser or an insurance agent. This saves you from lots of problems.

What Are The Advantages and Disadvantages of A Variable Annuity?

There are various types of investment options for individuals, especially those saving for retirement in the USA. However, a variable annuity stands out from the rest because of some of its features.

The first advantage of a variable annuity is that it offers the investor different investment choices. The investor can choose to allocate their funds to the different options, such as stocks or bonds, and they can even choose to allocate some of the funds to a fixed account. This type of annuity is also very flexible, as the individual has the option of transferring some of their funds to a different sub-account without paying much.

The second advantage of a variable annuity is that the individual does not pay taxes on any gain on investment as long as they do not withdraw the funds. This means that they can leave the funds to accumulate for a particular period of time without paying any tax to the federal government on this income.

This type of investment plan allows an individual to choose the option of receiving an income for the rest of their life. Therefore, you can choose this option when purchasing your variable annuity, and once you start withdrawing funds, you can receive these payments for as long as you live.

Also, a variable annuity is kept in a different sub-account that protects it from creditors, therefore, this type of investment will help you as the investor to protect your assets.

This type of investment also has a death benefit, meaning that the investor’s beneficiary can receive payments even after the investor has passed away.

However, there are some disadvantages that are associated with this type of annuity. The first disadvantage is that the individual cannot withdraw funds from a variable annuity before the age of fifty nine and a half unless they do not mind paying a ten per cent penalty to the federal government.

The second disadvantage is that once you start withdrawing, your withdrawals will be charged an income tax which is more expensive than if they were charged for capital gains.

The other disadvantage is the ‘surrender charges’ that are charged if the individual chooses to start withdrawing early, and this percentage usually decreases until it stops applying once the surrender period ends.

A variable annuity also has a lot of charges, and it is important for the investor to be familiar with all the charges and fees before they invest. Charges are different depending on the insurance company that one chooses to purchase from, and therefore this can determine which insurance company you opt for.

A variable annuity involves a lot of risk, and the investor should be prepared to lose in case their investments do not perform well. However, this can also mean that there is the potential for a lot of gain in case their sub-accounts perform well. Therefore, the investor should always be ready as the axe may fall on either side.

It is important for the investor to carefully consider the benefits as well as the disadvantages when deciding whether a variable annuity is best for them.

Variable Annuity – An Overview to Interested Clients

Variable Annuity is a unique investment option usually offered by many insurance companies in the US.  If you reside anywhere in the US, you can secure you future by investing in several annuities. Variable Annuity is only one of the major kinds of annuities that can also pay you especially when you invest in it with understanding.

You have the opportunity of investing in diverse   investment options such as mutual funds, bonds, stocks as offered by the insurance company you’re dealing with.  You simply make purchase payments for the investment options you choose while the insurance company pays you the dividends or income at agreed intervals.

The payout in a Variable Annuity depends on how your investments thrive in the money market.  Prevailing economic conditions can   cause increase or decrease in the value of the investment. Hence, you’ll be ready to lose or gain from your investment. It’s always very important to invest in diverse investment opportunities in order to forestall losses when they begin to occur.  You may lose in one investment and still cover the loss in another investment option, which is doing well.

To make the most out of Variable Annuity, you’ve got to know more about its features.   The features may vary according to the insurance company involved, but you’ll still find most of the features discussed below in various kinds of variable annuities.

You’ll get to know about Flexible Premium which is actually the lump sum you   pay as your initial purchase payment.  You also get to know about equity investment. Here you find investment options such as stocks, bonds, and mutual funds. You’re free to invest in many of them in order to diversify your investment and prevent excess losses in situations where the market declines.

You also need to know about Flexible Risks involved.  You may attract losses when your investments are not doing well as a result of economic conditions.  You also need to know about Variable Returns, which are the monthly paychecks   you may be receiving. This depends on the agreement you have with your insurer.

There’s always what is known as Fixed Rate Option which is a kind of money market sub-account.  It can easily turn your annuity fixed rate as time goes on. You also need to know more about the various conditions that apply when you go for Variable Annuity.  It’s always very important to be properly informed before you decide to invest your money.

All over the US, several insurance companies have come into the annuity business. Some of them also offer bonus credit when you invest. However, many of the variable annuities with bonus credit attract higher expenses in the course of time. You may end up spending more than you’ll gain from the bonus credit. Hence, it’s always important to be properly guided when thinking of investing in any annuity option.  A reliable financial adviser will always come to your aid if you care to locate him or her. You should never rush into making purchase payments for any kind of annuity if you’re confused about the features.

Variable Annuity Charges – What Comes in With your Plan

As a unique investment opportunity, Variable Annuity attracts some charges.  You need to know more about them before you think of investing.  Several insurance companies in the US have come into the business. There’s every need for you to be properly enlightened before you sign any kind of annuity contract with any of the insurance companies.

In most cases, the charges reduce the value of your account in the Variable annuity plan. They can also reduce the value of your investment returns. You need to know more about such charges.  Let’s examine them now.

•             Surrender Charge

This is the fee you pay when you want to withdraw money from a Variable annuity within a certain period. In most cases, the charge comes after purchase payment has been made up to 6 to 10 years.  Your insurance company   issues   surrender charge as part of commission they require. It’s also known as sales charge. It’s normally used to pay a commission to your financial professional for selling the Variable annuity to you.

The Surrender Charge is simply a percentage of the amount you withdraw.  It normally comes down as the years roll by.  The declining period is usually known as “surrender period”.

•             Mortality and Expense Risk Charge

This is a kind of charge that amounts to a certain percentage of your account value.  Your insurance company uses the charge to compensate itself for the insurance risks it passed through while the annuity lasts.  The gain made from this charge is also used in paying your insurer’s cost of selling the annuity.  This may include the commission paid to your financial professional for selling the annuity to you.

•             Administrative Fees

This can also be known as handling fees.  Your insurer deducts the fees to cover the period of record keeping while the Variable annuity lasts. The fees also cover any other expenses made   during the period of administration.  In most cases, the charge may be a flat maintenance fee for your account. It’s not much. It   ranges as from $25 to $30 per annum.

The above charges are the basic fees you’ll always come in contact with when you go for a Variable annuity.   However, there may be other underlying fund charges, which may spring up.  They are part of the charges that come with some mutual funds which you may be interested in.  Such fees are usually deducted indirectly.

In addition, other special charges come with various features of Variable annuity.  Some of the charges may be attached to death benefits, guaranteed minimum benefit, and longer-term care insurance and so on. They are likely to attract some fees based on the prevailing condition that may apply.

In any case, there’s always the need to   work with reliable insurance company when searching for variable annuities.  Some of the insurance companies in the US that offer annuity packages do have hidden fees which you may never know at the initial states. You have to take your time to make proper inquiries before you agree to sign any contract deal. If you’re confused, always make sure you consult a reliable financial adviser.

Setting Up Annuity for Retirement and its Benefits

As citizens approach middle age years and look towards retirement, the hope of a secure future becomes an important part of our psyche. One great way to ensure a secured financial future after retirement is by investing in annuities. Setting up an annuity for retirement has become very important since we now have longer life expectancy and desire to maintain the same level of lifestyle during retirement.

Setting up an Annuity

To set up an annuity for retirement plan, the first step is to invest some funds from your currents earnings with a reputable annuity plan provider. Though a pre-requisite to this first step is adequate knowledge of the different types of annuities available the actual benefits and possible earnings on your investment and also the proposed withdrawal plan during your years as a retiree.

The two broad categories of annuities are the immediate annuity and deferred annuity, which are defined based on their naming. With immediate annuities, you can start to receive payouts just a few months after your initial investment. However, with deferred annuity, your investments accumulate for years and you receive payouts at a later period in life, most likely after retirement from paid employment.

Under these two categories, we can further classify annuities as either fixed or variable depending on the payout structure you opt for. While some people opt to receive payouts for the rest of their lives, some can opt to receive payout for a specific number of years. These choices are usually based on the agreements signed with the annuity plan providers.

Benefits of Annuities

The greatest benefits attached to annuities are the opportunities to make large amounts of investments while deferring tax payments for long periods. This is due to the fact that there are no restrictions on the amounts you can invest on annuities and the investment is tax free even during the years of payout. Taxes will only be levied on the interest income while the principal invested is free from taxes.


As one senior citizen puts it; “In retirement we should be more concerned with keeping what we have earned rather than risking loss by wanting to increase what we’ve earned.” The good part about annuities is that they ensure that you can get what you have earned, in addition to giving you some profits during payout. Generally, annuities are very safe and risk-free, and have proven to be one of the very best retirement plans in use within the USA today.

To get started, enter your zip code on the top of this page, and then answer some basic questions. This will help you to compare annuity plans from multiple providers for FREE to determine your highest eligible rate. It is important to provide accurate questions to these answers as our pool of providers will provide you with different rates depending on your individual circumstance and situation.