Annuity Basics
The individual who purchases and owns the annuity contract.
Who is the contract owner?
The term for a one-time withdrawal from an annuity.
What is a partial withdrawal?
A retirement plan that allows pre-tax employee contributions, often matched by the employer.
What is a 401(k) plan?
This type of contribution is made with a single payment when the annuity contract is signed.
What is a single premium?
A type of annuity funded with pre-tax dollars where all withdrawals are taxable.
What is a qualified annuity?
This person’s life expectancy determines the payout amount for a life-contingent payout option.
Who is the annuitant?
This penalty is imposed if the RMD is not taken from a qualified annuity after age 73.
What is a 50% penalty?
A type of IRA funded with non-qualified (after-tax) dollars where earnings grow tax-free.
What is a Roth IRA?
This method allows policyholders to take withdrawals at regular intervals.
What are systematic withdrawals?
The tax penalty for withdrawing from an annuity before age 59½.
What is a 10% IRS penalty?
A type of annuity funded with pre-tax dollars, often used for retirement savings.
What is a qualified annuity?
This annuitization option pays income for a specified number of years.
What is installments for a specified period (period certain)?
A pension plan where the benefit amount is based on contributions and accrued earnings.
What is a defined contribution pension plan?
This process allows non-qualified policy funds to be transferred tax-free into another policy.
What is a 1035 exchange?
This type of annuity combines non-qualified funding with tax benefits similar to qualified funds.
What is a Roth annuity?
The phase when an annuity begins to pay out benefits to the policyholder.
What is distribution?
This penalty applies to withdrawals made before age 59½ unless exceptions apply.
What is a 10% IRS penalty?
These payments are made from an annuity to settle personal injury or workers' compensation claims.
What are structured settlement payments?
The portion of a non-qualified annuity that is not taxable.
What is the cost basis?
The tax applied if no RMD is taken after age 73 from a qualified annuity.
What is a 50% penalty?
Gains in this type of annuity vary based on the performance of a specific market index.
What is a fixed-indexed annuity?
The amount an owner is required to withdraw annually from a qualified annuity after age 73.
What is a required minimum distribution (RMD)?
The entity that purchases an annuity for a structured settlement to provide payments to the plaintiff.
What is a life insurance company?
Withdrawals made from non-qualified annuities are taxed in this order.
What is interest first, then cost basis?
This tax penalty is designed to deter short-term investment strategies in annuities.
What is the 10% early withdrawal penalty?