Accumulation Phase: The period between the issue date and the annuity (maturity) date.
Anniversary Date: The anniversary of your annuity's official start date.
Annuitant: The person named in the application who is entitled to receive annuity payments.
Annuitization: The process in which an annuity is paid out according to the annuity option the policy owner has selected.
Annuity: A contract that provides for a series of payments at some future date.
Annuity Date: The date at which the income payments begin. Also called the maturity date.
Beneficiary (primary): The person(s) first entitled to receive any benefits under the contract upon the death of the annuitant and/or owner prior to the annuity period.
Beneficiary (contingent): The person(s) first entitled to receive any benefits under the contract upon the death of the annuitant and/or owner prior to the annuity period should the primary beneficiary predecease.
Confirmation Statement: Statements sent out that reflect the values in a policy or documentation of a transaction.
Contract Year: Period between anniversaries of the issue date of a contract.
Cost Basis: The amount of principal paid into the annuity contract less any withdrawals.
Death Benefit: A payment made to a designated beneficiary upon the death of the annuitant.
Deferred Annuity: An annuity providing for the income payments to begin at some specified future date.
Fixed Annuity: A fixed annuity offers a current interest rate on premiums contributed to a policy, along with a guaranteed minimum rate for the life of the policy. Typically, the current rate is higher than the guaranteed minimum. Money accumulates tax-deferred. There are several income options for receiving payments from the annuity.
Guaranteed Interest Rate: The minimum interest rate by which the insured's values in the policy are increased each year.
Income Phase: The payout phase of the annuity during which time the payments are made to the annuitant according to a number of options.
Individual Retirement Account (IRA): An account to which an individual, in 2003, can make annual contributions of 100% of earnings up to $3,000 ($6,000 for a one-income, married couple). These contributions are tax-deductible for most workers, and income earned in the account is deferred until withdrawn.
Minimum Distribution: A mandatory, partial withdrawal from an IRA account that must start when the owner reaches age 70 1/2 and continues for every year thereafter.
Non-Qualified Annuity: A contract which does not permit pre-tax contributions. Such a contract would be purchased independently with after-tax dollars and not as part of an employer-sponsored plan.
Owner: The person or entity to whom the contract is issued, who is entitled to exercise all rights and privileges under the contract.
Principal: The amount of money invested in a security, exclusive of earnings.
Qualified Plans: A retirement plan which receives favorable tax treatment from the Internal Revenue Service. These plans generally allow employees to make pre-tax contributions and defer income tax on employee and employer contributions and all earnings until distributed.
Rollover: A distribution from a qualified plan in which the money is placed into another qualified plan.
Settlement Option: The payment option(s) given to the beneficiary of an annuity policy upon the death of the annuitant, or during the accumulation phase upon the death of the owner.
Surrender Schedule: The stipulation of the percentage of penalty charge assessed for early withdrawal from the contract.
Systematic Withdrawals: The ability to have partial withdrawals sent automatically on a pre-determined frequency to an owner without annuitizing the policy.
Tax Deferral: Taxes on earnings are postponed (deferred) until earnings are withdrawn from the annuity.
1035 Exchange: Transferring a non-qualified annuity from one insurer to another. See the article, Move Your Money with no Tax Consequences, for more information.
Withdrawals: All or part of the annuity's value can be withdrawn at any time during the accumulation period. Surrender charges, taxes and/or early withdrawal penalties may apply.
