Common Annuity Language

Accumulation period -- The time during which you pay money into an annuity contract and build up a fund to provide a deferred annuity.

Annuitant -- The person entitled to receive annuity payments or who now receives them.

Annuity -- A contract that provides for a series of payments, usually at regular intervals, for the duration of life.M

Deferred annuity -- Annuity payments that will begin at some future date.

Flexible premium deferred annuity -- An annuity contract that permits varying premium payments from year to year, and which is often used for IRAs.

Immediate annuity -- Annuity payments that begin immediately or within about a year.

Individual Retirement Account (IRA) -- An account set up by an individual that in some cases allows contributions to be deducted from income and permits earnings on contributions to accumulate tax-deferred until retirement, regardless of whether the contributions are deductible. Under the 1986 tax law, only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make tax-deductible contributions to an IRA. All others can make contributions to an IRA on a non-deductible basis.

Keogh plan -- A type of tax-favored retirement plan for self-employed persons.

Load -- Any sales fees or charges you pay in purchasing an annuity contract.

Payout Period -- The period during which you receive the income from your annuity contract.

Principal -- The amount you pay into your annuity contract as distinguished from the interest that is credited to it.

Qualified annuity -- An annuity that is sold as part of a tax-qualified Keogh plan or company pension plan.

Straight life annuity -- An annuity whose periodic payments stop when the annuitant dies.

Variable annuity -- An annuity contract under which the monthly payments will vary because they are linked to the values of investments such as common stocks. This contrasts with the fixed dollar annuity, which guarantees a fixed amount monthly.