Annuity Unit

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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.

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RELATED FAQS
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    Because the present value of an annuity formula relies on a consistent interest rate and identical payments for a set period ... Read Full Answer >>
  2. What exact information is included in the interest rate when calculating the present ...

    When calculating the present value of an annuity, the interest rate percentage is the rate at which future payments are discounted ... Read Full Answer >>
  3. How do you calculate a present value of annuity using Excel?

    Calculating the present value of an annuity using Microsoft Excel is fairly straightforward if you know the interest rate, ... Read Full Answer >>
  4. What is the difference between the present value of an annuity and the future value ...

    The present value of an annuity represents the sum that must be invested now to guarantee a desired payment amount in the ... Read Full Answer >>
  5. Why would I need to calculate the present value of an annuity?

    To calculated the present value of an annuity, all that is needed is the interest rate, payment amount and number of periods ... Read Full Answer >>
  6. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
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