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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.
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Investopedia explains '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.
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These contracts provide a guaranteed income stream. Learn how they work and their benefits.
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Annuities offer security but also lock up your cash. The secondary market could be your key.
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Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
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