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Glossary

Annuity Glossary

Every annuity term you will run into, defined in plain English.

1

Glossary1035 exchangeMove annuity or life insurance value into a new contract tax-free.

A

GlossaryAccumulation periodThe stretch of an annuity contract when your money is growing.GlossaryAM Best ratingA letter grade for how likely an insurer is to pay its claims.GlossaryAnnuitizationTurning an annuity's value into a stream of guaranteed income.GlossaryAnnuity dueA series of payments made at the start of each period, not the end.

B

GlossaryBailout provisionAn exit ramp if your annuity's renewal rate drops too low.GlossaryBest interest standardThe rule requiring agents to recommend what actually fits you.

C

GlossaryCap rateThe ceiling on what a fixed index annuity can earn in a period.GlossaryCarrierThe insurance company that issues and stands behind your annuity contract.GlossaryCOLAA rider that raises annuity income payments each year to offset inflation.GlossaryCredited rateThe interest rate an insurer applies to your annuity balance.

D

GlossaryDeath benefitThe amount paid to your beneficiary when the annuity owner or annuitant dies.GlossaryDeath benefit step-upA rider that locks in your annuity's highest account value for your beneficiary.GlossaryDeferred income annuityA contract that turns today's premium into guaranteed income years from now.GlossaryDiscount rateThe rate used to convert a future payment into today's dollars.

F

GlossaryFiduciaryThe highest legal duty a financial professional can owe a client.GlossaryFlexible PremiumAn annuity funded with ongoing deposits rather than one lump sum.GlossaryFuture Value of an AnnuityWhat a series of equal payments grows into after compound interest.

G

GlossaryGeneral AccountThe pool of insurer assets that backs a fixed annuity guarantee.

I

GlossaryIncome RiderAn optional add-on that guarantees lifetime withdrawals from a growing income base.

J

GlossaryJoint and Survivor AnnuityIncome that keeps paying a spouse for life after the first death.

L

GlossaryLife With Period CertainLifetime income with a guaranteed minimum payout for your beneficiary.GlossaryLifetime income benefitThe guarantee behind annuity income that lasts as long as you live.GlossaryLiquidity riderAn add-on that widens how much of your annuity you can touch penalty free.GlossaryLong-term care riderAn add-on that multiplies your annuity income if you ever need extended care.

M

GlossaryMaturity dateThe day your surrender charges disappear and full access opens up.GlossaryMortality creditsThe pooling effect that lets lifetime annuities out-pay a bond portfolio.

N

GlossaryNew money rateWhat a carrier quotes a brand new buyer today, as opposed to a renewal.GlossaryNon-qualified annuityAn annuity funded with after-tax dollars, so only the growth gets taxed later.GlossaryNursing home waiverA provision that lifts surrender charges if you need extended care.

O

GlossaryOrdinary annuityA payment stream that pays at the end, not the start, of each period.

P

GlossaryPeriod certainA guarantee that income payments continue for a minimum stretch of years.GlossaryPremiumThe deposit you pay the carrier to open an annuity contract.GlossaryPresent valueWhat a future dollar amount is worth in today's dollars.

Q

GlossaryQualified annuityAn annuity funded with pre-tax retirement money, taxed fully on withdrawal.

R

GlossaryRefund annuityA payout guarantee that your beneficiary gets back at least your premium.GlossaryReplacementFunding a new annuity by surrendering or drawing on an existing one.GlossaryRequired minimum distribution (RMD)The minimum yearly withdrawal the IRS requires from qualified accounts.GlossaryRiderAn optional add-on that expands what your annuity contract can do.GlossaryRoll-up rateThe guaranteed growth rate applied to your income rider's benefit base.GlossaryRoth annuityAn annuity held inside a Roth IRA, so growth and withdrawals are tax-free.

S

GlossarySingle life annuityIncome for one lifetime, the highest payout structure available.GlossarySingle premiumOne lump-sum deposit at issue, the standard funding structure for most annuities.GlossarySpreadA flat percentage subtracted from the index gain before your interest is credited.GlossaryState guaranty associationA state-run backstop if your annuity carrier becomes insolvent.GlossarySuitabilityThe baseline standard requiring an annuity to fit your finances and goals.

T

GlossaryTax deferralGrowth inside an annuity isn't taxed until you withdraw it.GlossaryTerminal illness waiverA contract feature that waives surrender charges after a terminal diagnosis.GlossaryTime value of moneyA dollar today is worth more than the same dollar later.

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