Individual Retirement Annuity

DEFINITION of 'Individual Retirement Annuity'

A retirement investment vehicle that is structured similarly to a individual retirement account (IRA), except that in this instance, an annuity contract must be purchased, subject to a number of conditions which must be met. An individual retirement annuity must be issued in the owner's name, and only the annuity owner or their surviving beneficiaries are eligible to receive benefits from the contract. Annuity payments may be made by persons other than the primary holder.

BREAKING DOWN 'Individual Retirement Annuity'

A number of specific requirements apply to individual retirement annuities. For instance, the owner's entire interest in the annuity must be fully vested, and the owner is not allowed to transfer any of their balance to another person. These types of investment accounts must allow for flexible premiums, and annual contributions are capped at a specified maximum, which was $4,000 for the 2005 to 2007 period and $5,000 in 2008. Distributions from this type of annuity must be made before April 1 of the year in which the owner reaches the age of 70.5.

RELATED TERMS
  1. Valuation Period

    The time between the end of the business day of the first business ...
  2. Annuity

    A financial product that pays out a fixed stream of payments ...
  3. Indexed Annuity

    A special class of annuities that yields returns on your contributions ...
  4. Annuity In Advance

    An amount of money that is regularly paid at the beginning of ...
  5. Years Certain Annuity

    An insurance product that pays the holder a monthly income for ...
  6. Annuity In Arrears

    An annuity that has periodic payments of either interest and/or ...
Related Articles
  1. Retirement

    Are Annuities Retirement-Only Investments?

    Learn more about why annuities are generally purchased and the way that they can positively and negatively affect an individual preparing for retirement.
  2. Financial Advisor

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  3. Retirement

    Guaranteed Retirement Income In Any Market

    By laddering annuities, you can be sure you'll have income no matter what the market does.
  4. Retirement

    How a Fixed Annuity Works After Retirement

    These popular investments can provide a steady stream of income during your retirement years. Here are the details.
  5. Financial Advisor

    Annuities and Baby Boomers: The Pros and Cons

    The pros and cons of annuities that Baby Boomers seeking retirement income need to know.
  6. Investing

    DIY Annuities: What You Need to Know

    Annuities are attractive because they can give you a stream of income, but they can be tricky to buy.
  7. Personal Finance

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  8. Retirement

    Annuities: A Good Option in Turbulent Times?

    Annuities can be an enticing option as Americans near retirement, but there are several reasons to be wary of them.
  9. Investing

    Annuities: The Good, Bad and the Ugly

    Annuities suffer from a few perception problems. This primer that covers the good, the bad and the ugly of annuities.
  10. Retirement

    Buying Annuities in a Low Interest Rate World

    Learn if buying an annuity makes sense in a low interest rate environment. Also discover the different types of annuities and how interest rates affect them.
RELATED FAQS
  1. What is the difference between an individual retirement account and an individual ...

    All these years I thought I had a "regular" IRA (I made $22,000 pre-tax deposits spring of 1985 and 1986), now the company... Read Answer >>
  2. What type of investor should consider annuities?

    Learn about the features and benefits of annuities and when to consider one. Investors seeking to secure income for retirement ... Read Answer >>
  3. What are the risks of annuities in a recession?

    Distinguish between the most common types of annuities, and understand which types of annuities pose the most risk during ... Read Answer >>
  4. Are annuities for seniors only?

    Understand the benefits of investing in annuities at a younger age and how fixed or variable annuities might benefit the ... Read Answer >>
  5. What are the main kinds of annuities?

    Learn about the four basic types of annuities, and why the different investment and payout options are suitable for different ... Read Answer >>
  6. Are annuities qualified or nonqualified retirement instruments?

    Learn the basics of annuity investments and the tax-deferral they offer, and discover the differences between qualified and ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center