Our Family of Companies
western & southern financial group
western & southern life
columbus life insurance company
eagle realty group
fort washington investment advisors
gerber life insurance
integrity life insurance company
lafayette life insurance company
national integrity life insurance company
touchstone investments
western & southern financial group distributors

15 Annuity Terms to Know

Retirement Planning
Woman reading about annuity terms at home

Understanding common annuity terms can help you make educated decisions about your finances. There are several different types of annuities available, and each option may have unique features. To help you sort through the differences, here's an annuity glossary with some of the essential terms you should know.

1. Immediate

With an immediate annuity, you purchase it from an insurance company, and you begin receiving income payments from your annuity immediately. That might be as soon as one month, or within the next year, depending on your contract.

2. Deferred

Deferred annuities allow you to keep your money in an annuity contract. You can often let the money sit to potentially earn interest for many years until you're ready to start drawing income or taking withdrawals.

3. Fixed

A fixed annuity is perhaps the easiest type of annuity to understand. You place money into the contract, and the insurance company pays you interest at a fixed, guaranteed rate.

4. Variable

Variable annuities fluctuate with value gains and losses in financial markets. The earnings you receive from your variable annuity will depend on how those investments perform, and it is possible to lose money if the investments decrease in value. You can often choose investments within the contract.

5. Indexed

An indexed annuity typically offers a guarantee on your investment along with potential market index. For example, some contracts prevent you from losing money while providing growth potential through a market index such as the S&P 500. If the index performs well during specific periods, you might benefit from those gains to a limited degree and earn slightly more in your annuity.

6. Single-Premium

With a single-premium annuity, you only make one premium payment into the contract. For example, when you purchase an immediate annuity, you pay a lump sum and begin taking income.

7. Flexible-Premium

With flexible-premium contracts, you can add funds to your annuity multiple times. For example, you might establish monthly premium payments, or you might pay a lump sum at the end of every year (or whenever you choose). The more you put in, the more you'll potentially have later, depending on the gains or losses in your contract.

8. Rider

A rider is an optional feature that you can add to an annuity contract. Riders might provide growth guarantees, income guarantees, enhanced death benefits or other features. Not all annuities have riders, and those features typically come with additional costs, so consider speaking with a financial representative to determine which riders might make sense for you.

9. Annuitize

When you annuitize, you convert assets in your annuity contract into a stream of regular payments. This could be for a specific time period or it could be paid out over your lifetime.

10. Period Certain

If you're concerned about dying shortly after annuitizing, you can select a period certain. During that period, the insurance company pays you or your beneficiaries, regardless of when you die.

For example, you might choose a 10-year period certain. If you die in the year following annuitization, your beneficiaries continue to receive payments for nine more years.

11. Payout Phase

During the payout phase, an annuity contract pays income monthly, annually or on any other schedule available in the contract. Payments might last for your lifetime or for a specified number of years.

12. Subaccount

With variable annuities, a subaccount is an investment option available in the contract. Those options may have different risk and return characteristics, allowing you to choose an investment strategy that fits your needs and goals.

13. Surrender Charge

A surrender charge is a fee that insurance companies charge to discourage you from taking withdrawals shortly after purchasing certain types of annuities. The amount you pay is typically a percentage of your withdrawal, and surrender charges often decline over time until they're completely eliminated.

14. Surrender Period

The surrender period is a specified number of years, and if you withdraw too much from an annuity contract during this time period, you must pay a surrender charge. Not all annuities have surrender periods, and they may be four years, 10 years or another term.

15. Beneficiary

The beneficiary receives assets in your annuity after your death. By designating a beneficiary, you might make the process of transferring assets faster and easier.

A Final Word

Annuities can be complicated or simple, depending on the products you choose and the goals you're working toward. If there are any annuity terms you don't understand, consider speaking with your financial representative.

Related Products

Related Articles

Learn How to Master Retirement Planning to Help Achieve the Life You Want

Give us a call 866-832-7714 866-832-7714
Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.