Stretch Annuity

AAA

DEFINITION of 'Stretch Annuity'

An annuity option where tax-deferred allowances are passed on to the beneficiaries, offering the beneficiaries more flexibility and control over maintaining the investment. Therefore, the beneficiary has less restraints on wealth transfer, and he or she is able to receive a larger sum of benefits stretched over a longer period of time.

INVESTOPEDIA EXPLAINS 'Stretch Annuity'

Legacy annuities or stretch annuities are not offered by many insurers, unfortunately. This type of annuity is very advantageous because the beneficiary isn't burdened with paying a huge tax bill on his or her gains. This often can be stressful for a family that has just dealt with the loss of a loved one.

RELATED TERMS
  1. Annuity

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

    An insurance contract in which, at the end of the accumulation ...
  6. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
RELATED FAQS
  1. Is an annuity a perpetuity?

    An annuity can be a perpetuity, depending on how it is set up. An annuity is an investment that makes regular payments throughout ... Read Full Answer >>
  2. What are the most common deferred tax assets used by individuals?

    Deferred tax assets โ€“ those that are only taxed when funds are withdrawn or the asset is sold โ€“ are quite common in estate ... Read Full Answer >>
  3. Are annuities for seniors only?

    Though annuities tend to be advertised primarily to seniors, there is no reason why younger generations should not make the ... Read Full Answer >>
  4. What is a longevity annuity?

    A longevity annuity is an investment contract with an insurance company designed to address the potential financial problems ... Read Full Answer >>
  5. What is the difference between a fixed and variable annuity?

    For many people, saving for retirement means tucking money away in a diverse range of investments. Because traditional savings ... Read Full Answer >>
  6. What type of investor should consider annuities?

    Annuities offer great benefits for a secure retirement. Though the features, provisions and associated fees of each are different, ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Calculating The Present And Future Value Of Annuities

    At some point in your life, you may have had to make a series of fixed payments over a period of time - such as rent or car payments - or have received a series of payments over a period of time, ...
  2. Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of Annuities

    These may look like good retirement vehicles, but beware of the fees buried in the fine print.
  3. Home & Auto

    An Overview Of Annuities

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

    Want To Leave Money To Your Family? Stretch Your IRA

    Find out how your beneficiaries can enjoy tax-deferred growth for as long as possible.
  5. Options & Futures

    Selecting The Payout On Your Annuity

    Make sure you understand your options for withdrawing your funds from this complex instrument.
  6. Options & Futures

    Personal Pensions: Repackaging The Annuity

    Discover an investment that can provide a stable income once you've left the work force.
  7. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  8. Professionals

    Are Longevity Annuities in 401(k)s a Good Idea?

    An in depth look at the arrival of longevity annuities in 401(k)s and IRAs.
  9. Retirement

    How To Move From Nest Egg To Income?

    Income vs. a nest egg is closely tied to what most of us are ultimately interested in for retirement โ€“ maintaining our standard of living and to travel.
  10. Retirement

    Strategies To Build Your Retirement Portfolio

    Retirement indexes are designed to estimate how much an investor would need to have saved today to generate annual income in retirement, starting at 65.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center