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. Deferred Annuity

    A type of annuity contract that delays payments of income, installments ...
  3. Annuity In Advance

    An amount of money that is regularly paid at the beginning of ...
  4. Annuity In Arrears

    An annuity that has periodic payments of either interest and/or ...
  5. Wraparound Annuity

    A type of annuity that allows the investor (the holder of the ...
  6. Annuity Table

    A method for determining the present value of a structured series ...
Related Articles
  1. Investing

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  2. 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.
  3. Investing Basics

    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.
  4. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  5. Options & Futures

    20 Investments: Annuity

    What Is It? You can think of an annuity as another way of saying "annual payments". An annuity is a series of fixed-amount payments paid at regular intervals over the specified period of the ...
  6. 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.
  7. Retirement

    Who Benefits From Retirement Annuities

    Annuities guarantee some degree of fixed income in retirement. But is the security worth the fees and less favorable tax treatment? How to decide.
  8. Retirement

    Retirement Tips: Choose the Best Annuity Provider

    It pays to get the best advice if you are thinking of putting your money into one of these complicated investments.
  9. Retirement

    How a Variable Annuity Works After Retirement

    These investments can provide extra income after you retire. Here’s a guide to when and how you will receive the payout.
  10. Home & Auto

    Watch Your Back In The Annuity Game

    Find out how to get the upper hand when dealing with this payout challenge.
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), ... Read Answer >>
  2. 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 >>
  3. Can a variable annuity be rolled into an IRA?

    Learn how to roll over your variable annuity to an IRA when you retire or change jobs. Here's how to do it without triggering ... Read Answer >>
  4. For what types of financial instruments would I want to calculate the present value ...

    Learn about the types of financial instruments the present value of an annuity calculation is most useful for, including ... Read Answer >>
  5. What are the best ways to sell an annuity?

    Learn about the best ways to sell annuities. Annuities are financial products that provide income on a regular basis to their ... Read Answer >>
  6. How do I calculate the future value of an annuity?

    Find out how to calculate the future value of an ordinary annuity or an annuity due, including how the power of compounding ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center