Annuity Unit

AAA

DEFINITION of 'Annuity Unit'

An accumulation unit for which the annuitant has annuitized their contract. This is a sub-account of the retiree's total accumulated annuity. These units represent a fixed share of ownership of the insurer's accounts portfolio.

INVESTOPEDIA EXPLAINS 'Annuity Unit'

When an insured person changes from accumulating wealth to spending their savings, they begin to draw on their saved money to finance their retirement. While saving, the insured party has made periodic payments to their life insurance company to purchase shares of ownership of a very large portfolio managed by the insurer. When the insured wants to start taking money out, they convert their total accumulated savings to start paying them their income. In order to accomplish this, the insured party purchases annuity units with the money that was formerly being saved as accumulation units.

RELATED TERMS
  1. Annuity

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

    The process of converting an annuity investment into a series ...
  3. Annuity Contract

    The written agreement between an insurance company and a customer ...
  4. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
  5. Spending Phase

    The period in a person's life following retirement in which earning ...
  6. Accumulation Phase

    1. A period of time when an annuity investor is in the early ...
Related Articles
  1. Bonds & Fixed Income

    Explaining Types Of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  2. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  3. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  4. Professionals

    Are Longevity Annuities in 401(k)s a Good Idea?

    An in depth look at the arrival of longevity annuities in 401(k)s and IRAs.
  5. Retirement

    How To Move From Nest Egg To Income?

    Income vs. a nest egg is closely tied to what most of us are ultimately interested in for retirement – maintaining our standard of living and to travel.
  6. Retirement

    Strategies To Build Your Retirement Portfolio

    Retirement indexes are designed to estimate how much an investor would need to have saved today to generate annual income in retirement, starting at 65.
  7. Investing

    What are Fixed-Income Securities?

    For a fixed-income security, the periodic return on the investment is the same throughout the life of the security. Principal is returned at the time of maturity. The payment can be in the form ...
  8. Professionals

    Monthly Pension Or Lump-Sum: Which Is Better?

    When a client is faced with the choice of a monthly pension or a lump-sum payment, which one is better? Here's a quick guide on how to decide.
  9. Professionals

    Immediate Annuities: What To Watch Out For

    Immediate annuities can provide substantially higher monthly payouts than other fixed-income instruments, but also have some key limitations.
  10. Investing Basics

    Guidance On Pairing Annuities, Target Date Funds

    The Treasury and the IRS have issued new guidance on pairing annuities with target date funds. Here's a look.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center