Life Annuity


DEFINITION of 'Life Annuity'

An insurance product that features a predetermined periodic payout amount until the death of the annuitant. These products are most frequently used to help retirees budget their money after retirement. Typically, the annuitant pays into the annuity on a periodic basis when he or she is still working. However, annuitants may also buy the annuity product in one large purchase. When the annuitant retires, the annuity makes periodic (usually monthly) payouts to the annuitant, providing a reliable source of income. When a triggering event (such as death) occurs, the periodic payments from the annuity usually cease.

BREAKING DOWN 'Life Annuity'

Because of the complex nature of annuity products and their implications for the annuitant's standard of living, people are well advised to consult a reputable professional before purchasing any annuity product.

Due to the tax-preferred nature of annuities, very wealthy investors or above-average income earners often use these life insurance products to transfer large sums of money or to mitigate the effects of taxes on their annual income.

  1. Certain And Continuous

    A type of annuity that guarantees a number of payments, even ...
  2. Fixed Annuity

    An insurance contract in which the insurance company makes fixed ...
  3. Deferred Annuity

    A type of annuity contract that delays payments of income, installments ...
  4. Life Insurance

    A protection against the loss of income that would result if ...
  5. Triggering Event

    1. A tangible or intangible barrier or occurrence that, once ...
  6. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
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  1. What are the main differences between a Registered Retirement Income Fund (RRIF) ...

    A Registered Retirement Income Fund (RRIF) is a tax-advantaged plan that allows investors the benefit of tax-deferred growth ... Read Full Answer >>
  2. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  3. What are the main kinds of annuities?

    There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
  4. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  5. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  6. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>

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