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February 17, 2009

Annuity Contract

Your Guide



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)

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.


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