Annuity Ladder

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DEFINITION of 'Annuity Ladder'

An investment strategy for retirees or near-retirees that entails the purchase of immediate annuities over a period of years to provide guaranteed income while minimizing interest-rate risk. Annuity ladders allow retirees to maintain a portion of their investments in equities and bonds while periodically using a portion to purchase annuities. Purchasing annuities from a variety of insurance companies minimizes the potential for losses if an insurer goes under.

BREAKING DOWN 'Annuity Ladder'

When interest rates are low, it doesn't make sense to lock in that interest rate for a long time. Since no one can predict where interest rates will go, purchasing annuities over a period of years allows an investor to minimize the risk of low returns. An annuity ladder can also generate tax-free income by using a Roth IRA conversion strategy.

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RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. Can you buy penny stocks in an IRA?

    It is possible to trade penny stocks through an individual retirement accounts, or IRA. However, penny stocks are generally ... Read Full Answer >>
  4. Can I use my IRA to pay for my college loans?

    If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
  5. Can my IRA be used for college tuition?

    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>
  6. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>

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