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. Annuity Contract

    The written agreement between an insurance company and a customer ...
  3. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
  4. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
  5. Life Annuity

    An insurance product that features a predetermined periodic payout ...
  6. Pension Maximization

    A retirement strategy for couples that involves purchasing a ...
RELATED FAQS
  1. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
  2. How does a pension income drawdown work?

    While there are similar drawdown plans in the United States, a pension income drawdown plan most commonly refers to a specific ... Read Full Answer >>
  3. What is the difference between a bond's yield rate and its coupon rate?

    An annuity is an investment in which a person receives a fixed sum of money annually. Coupon payments received by a bondholder ... Read Full Answer >>
  4. 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 >>
  5. What are the most common deferred tax assets used by individuals?

    Deferred tax assets – those that are only taxed when funds are withdrawn or the asset is sold – are quite common in estate ... Read Full Answer >>
  6. 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 >>
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. Professionals

    Pension Annuity vs. Lump Sum: Which is Best?

    Which pension distribution option best serves your client, a pension annuity or a lump-sum payout?
  8. Fundamental Analysis

    Calculating the Present Value of an Annuity

    The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate.
  9. Investing Basics

    Are Annuities Right for You?

    Annuities are safe and often appealing, but IRAs and 401(k)s offer advantages that annuities typically can’t match, with little additional risk.
  10. Insurance

    Understanding Cash Surrender Value

    The amount of money an insurance company pays the owner of an insurance policy if the policy is voluntarily surrendered prior to the event that is insured

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!