Save time with our cheat sheets, fact sheets, checklists & books!

February 17, 2009

Annuity Contract



A contract between an annuitant and the issuer , the terms of which promises to pay the annuitant income. The income is usually for a fixed period of time, over the life of the annuitant or the joint life of the annuitant and beneficiary. The annuitant is the client or the investor. The issuer is the financial institution which is usually the insurance company .

Publication 575 defines an annuity as a series of payments under a contract made at regular intervals over a period of more than one full year. They can be either fixed (under which the annuitant receives a definite amount) or variable (not fixed).

Referring Cite

Annuity contract, IRC § 403(b), IRS Publication 571, IRS Publication 575

Additional Helpful Information

Individuals should work with a financial planner to ensure that the amounts added to their nest eggs during the accumulation phase are consistent with their financial goals & objectives and suit their financial profiles. This includes ensuring that the following factors are taken into consideration.

  • Under a single annuity or single-life annuity, the annuitant usually receives payments for life, unless it is for a fixed period ( term certain) where payments are made for a fixed period.
  • Under a joint life annuity ( or joint and survivor annuity), the annuity payments are usually made to the annuity and continues to his/her surviving spouse after he/she dies
  • 403(b)s can be funded under annuities, and are then referred to as tax-sheltered annuity (TSA) or tax deferred annuity (TDA)

Keep Learning

Applicable RMD Age

Applicable RMD Age The first year for which an IRA owner or plan participant must begin to take RMDs from their tax-deferred retirement account. RMDs

SIMPLE 401(k) Plan

Definition A SIMPLE 401(k) plan is a 401(k) plan established by a small business for it’s employees. Earnings accrue on a tax-deferred basis and distributions

Required Minimum Distribution (RMD)

Definition The minimum amount that must be withdrawn from retirement accounts, including qualified plans, 403(b) accounts, 457(b) accounts or IRAs, each year.  For retirement account

Required beginning date (RBD)

Definition The date by which a retirement account owner must begin distributing required minimum distribution (RMD) amounts from a Traditional,  SEP or SIMPLE IRA, a

Be among the first to know when

IRA Rules