Income Annuity

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DEFINITION of 'Income Annuity'

Annuities designed to start paying income as soon as the policy is initiated. The income annuity is annuitized immediately, although the underlying income units may be in either fixed or variable investments. As such, the income payments may fluctuate over time.

An income annuity is typically purchased with a lump sum payment, often by people who are at or near retirement.

Also known as an "immediate annuity".

BREAKING DOWN 'Income Annuity'

Investors seeking income annuities should have clear picture of how much income will be received and for how long. Most annuities pay out until the death of the annuitant and some pay out until the death of spouse. Although the insurance product may be annuitized immediately, variable investments can allow for some principal protection by participating in equity markets.

Even if all income units are in fixed investments, there may be a provision allowing for a higher return if a specific benchmark index performs extremely well.


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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. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... 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. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>

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