Annuities - A Brief Description

 

An annuity is a contract that requires regular payments for more than one full year to the person entitled to receive the payments (annuitant). You can buy an annuity contract alone or with the help of your employer.

Common Types of Annuities

  • Fixed period annuities - pay a fixed amount to an annuitant at regular intervals for a definite length of time.
  • Variable annuities - make payments to an annuitant varying in amount for a definite length of time or for life. The amounts paid may depend on variables such as profits earned by the pension or annuity funds or by cost-of-living indexes.
  • Single life annuities - pay a fixed amount at regular intervals during an annuitant's life, ending on his or her death.
  • Joint and survivor annuities - pay a fixed amount to the first annuitant at regular intervals for his or her life. After he or she dies, a second annuitant receives a fixed amount at regular intervals. This amount, paid for the life of the second annuitant, may be the same or different from the amount paid to the first annuitant.
  • Qualified employee annuities - a retirement annuity purchased by an employer for an employee under a plan that meets certain Internal Revenue Code requirements.
  • Tax-sheltered annuities - a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization.

Additional Resources: