Accumulation Unit

AAA

DEFINITION of 'Accumulation Unit'

1) In the case of a variable annuity, a measurement of the value invested in the account during the accumulation period of the contract. The more funds you contribute to your annuity account, the more accumulation units you will build.

2) In the case of a unit trust, a type of investment structure where the trust's income is directly reinvested into the trust, instead of being paid out as cash to the investor.

BREAKING DOWN 'Accumulation Unit'

1) Accumulation units are used to accurately measure the value of contributions by the annuitant. In times when the variable annuity's investments dip, a fixed amount of funds will buy more accumulation units than when the securities are more highly priced, just as investors are able to by more shares of cheaper stock than they can of higher priced stock with the same amount of currency.

2) Accumulation units within a unit trust can be reinvested back into the trust via boosting the unit price, or issuing additional units to investors. Either way, the investor is able to reinvest their share of profits back into the trust.

RELATED TERMS
  1. Annuity

    A financial product that pays out a fixed stream of payments ...
  2. Reinvestment

    Using dividends, interest and capital gains earned in an investment ...
  3. Unit Trust - UT

    An unincorporated mutual fund structure that allows funds to ...
  4. Separate Account

    1. A privately managed investment account opened through a brokerage ...
  5. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
  6. Unit Investment Trust - UIT

    An investment company that offers a fixed, unmanaged portfolio, ...
Related Articles
  1. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  2. Taxes

    Designating A Minor As An IRA Beneficiary

    Leaving liquid assets like cash or securities to minors can be a complicated procedure. Make sure you understand how your gift will be distributed, managed and taxed.
  3. Options & Futures

    20 Investments You Should Know

    To take advantage of all your investing options, you need to know what your choices are. Here we tell you about the diverse features and advantages of 20 different financial instruments.
  4. Retirement

    Best Ways to Save For Retirement Without an IRA or 401(k)

    Learn the most common types of savings vehicles used to accumulate money for retirement outside employer-sponsored 401(k)s or IRA accounts.
  5. Professionals

    How to Buy Annuities When Interest Rates Are Low

    The current low interest rate environment complicates the decision to buy an annuity. Here's what financial advisors need to consider for their clients.
  6. Professionals

    Top Retirement Prep Questions to Ask Clients

    Is your client really ready for retirement? Here are some essential questions to ask.
  7. Stock Analysis

    How MetLife Became a Global Insurance Giant

    MetLife is the largest life insurer in the United States. Here's how it has managed to stay on top.
  8. Investing

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  9. Professionals

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
  10. Fundamental Analysis

    Present Value Interest Factor of Annuity (PVIFA)

    PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.
RELATED FAQS
  1. What are the requirements that a trust needs to meet to be qualified?

    The requirements that a trust must meet to be qualified are as follows: The trust must be a valid trust under state law ... Read Full Answer >>
  2. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  3. How are non-qualified variable annuities taxed?

    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  4. Can a variable annuity be rolled into an IRA?

    You can roll qualified variable annuities, such as other qualified retirement plan accounts, into a traditional IRA. Non-qualified ... Read Full Answer >>
  5. Are variable annuities subject to required minimum distribution (RMD)?

    Variable annuities are insurance contracts that provide tax-deferred growth of assets that can later generate a guaranteed ... Read Full Answer >>
  6. For what types of financial instruments would I want to calculate the present value ...

    Because the present value of an annuity formula relies on a consistent interest rate and identical payments for a set period ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!