Annuities: Types and Features

Systematically liquidates both principal and interest

An immediate annuity contract that pays out both principal and interest

Level death benefit

An immediate annuity contract with a fixed death benefit

Fixed annuities

Annuities with guaranteed interest rates and fixed monthly benefit pay out amounts

Equity indexed annuities

Annuities with investments tied to an index such as the S&P 500

Cash Refund Annuity

Annuity settlement that pays a lump sum death benefit equal to the premiums paid

Period Certain Annuity

Annuity settlement that pays a lump sum payment based on the starting fund amount minus what has been paid

Installment Refund Annuity

Annuity settlement that pays a lump sum payment equal to the fund amount on the annuitization date

Life Annuity

Annuity settlement that stops when the annuitant dies

Flexible Premium

Annuity that allows variable payment amounts

Refund Life Annuity

Annuity that pays a lump sum refund to the beneficiary if the annuitant dies after the annuity income begins

Refund annuity

Annuity that pays a lump sum refund to the beneficiary if the annuitant dies after the annuity income begins

Continuous Annuity

Annuity that pays a specified number of years whether the annuitant is alive or dead

Life Annuity with Period Certain

Annuity that pays a specified number of years whether the annuitant is alive or dead

Life with Period Certain Annuity

Annuity that pays a specified number of years whether the annuitant is alive or dead

Straight Life Annuity

Annuity that pays a specified number of years whether the annuitant is alive or dead

Joint Life Annuity

Annuity that provides income for as long as either member of a couple lives

Joint and Survivor Annuity

Annuity that provides income for as long as either member of a couple lives

Deferred

Annuity that starts paying at a later date

Deferred Annuity

Annuity that starts paying at a later date

Level premium deferred annuity

Annuity that starts paying at a later date with equal payments over time

Immediate

Annuity that starts paying immediately

Immediate annuity

Annuity that starts paying immediately after purchase

Single premium immediate annuity

Annuity that starts paying one month after purchase with a single large payment

Variable

Annuity with variable investment options

Variable annuity

Annuity with variable investment options and no guaranteed minimum rate of return

Guaranteed mortality and administrative costs

Factors that influence the benefit payment amount on a single premium deferred annuity

The amount contributed during the accumulation period

Factors that influence the benefit payment amount on a single premium deferred annuity

The annuitant's age when the annuity was purchased

Factors that influence the benefit payment amount on a single premium deferred annuity

The benefit option chosen

Factors that influence the benefit payment amount on a single premium deferred annuity

Surrender charges

Fees for terminating an annuity contract early

Nonqualified individual fixed annuity

Fixed annuity purchased outside of a qualified retirement plan

Cash value guarantees

Guaranteed minimum value of an annuity

Single lump-sum payment

Payment method for purchasing annuities with a single large payment

Level payments

Payment method for purchasing annuities with equal payments over time

Flexible payments

Payment method for purchasing annuities with variable payment amounts

Accumulation period

Period during which annuity funds are built up

Annuity period

Period during which annuity payments are made

Benefit period

Period during which annuity payments are received

Annuitization period

Period when annuity payments begin

10% penalty and tax on interest earned

Tax consequences of surrendering a nonqualified individual fixed annuity prior to age 59 1/2

10% penalty and tax on premium paid

Tax consequences of surrendering a nonqualified individual fixed annuity prior to age 59 1/2

No penalty and tax on interest and premium paid

Tax consequences of surrendering a nonqualified individual fixed annuity prior to age 59 1/2

No penalty and tax on interest earned

Tax consequences of surrendering a nonqualified individual fixed annuity prior to age 59 1/2

The annuitant is the contract owner

The annuitant in a deferred annuity contract is the owner

The beneficiary is named by the annuitant

The annuitant names the beneficiary in a deferred annuity contract

Premiums are paid by the annuitant

The annuitant pays the premiums in a deferred annuity contract

Annuity payments are based on the annuitant's life expectancy

The annuitant's life expectancy determines the payment amounts in a deferred annuity contract

Current Interest Rate

The current rate of return a fixed annuity earns

Difference between the Current and Guaranteed Interest Rate

The difference between the current and guaranteed rate of return a fixed annuity earns

Guaranteed Interest Rate

The minimum rate of return a fixed annuity earns

Minimum Interest Rate

The minimum rate of return a fixed annuity earns

Annuitant

The person on whose life the annuity income is based

Owner

The person who purchases the annuity

Beneficiary

The person who receives the annuity benefits if the annuitant dies

Insured

The person whose life is insured in the annuity