The full menu or “laundry list” of annuity products and features builds off of the basic list discussed in the previous chapter.
Where relevant, each description below will include a brief comment on how the entry relates to the basic list of annuity types.
The following is a list that links to each of the annuity types discussed in this chapter:
- Single Premium Immediate Annuity
- Payout Annuity
- Income Annuity
- Single Premium Fixed Immediate Annuity
- Single Premium Fixed Deferred Annuity
- Flexible Premium Fixed Deferred Annuity
- Single Premium Variable Immediate Annuity
- Single Premium Variable Deferred Annuity
- Flexible Premium Variable Deferred Annuity
- Longevity Annuity
- Longevity Insurance
- Advanced Life Delayed Annuity
- Equity Indexed Annuity
- Indexed Annuity
- Inflation Protected Annuity
- Life Annuity
- Qualified Annuity
- Non Qualified Annuity
- In Plan Annuity
- Private Placement Annuity
- Charitable Gift Annuity
- Impaired Annuity
- Enhanced Annuity
- Foreign Annuity
- Structured Settlements
- CD Annuity
Single Premium Immediate Annuity (SPIA)
A SPIA is essentially the same thing as an immediate annuity:
1) The money goes in as a single lump sum.
2) The money can be invested at a fixed or variable rate.
3) Payments start right away and can be fixed or variable.
Payout annuity is a term used to refer to immediate annuities.
Income annuity is a term used to refer to immediate annuities.
Single Premium Fixed Immediate Annuity
This is a form of single premium immediate annuity (SPIA) with the funds are invested at a fixed rate:
1) The money goes in as a single lump sum.
2) The money is invested at a fixed rate.
3) Payments are fixed and start right away.
Single Premium Fixed Deferred Annuity
This is a form of deferred annuity with the funds are invested at a fixed rate and payments begin at a future date:
1) The money goes in as a single lump sum.
2) The money is invested at a fixed rate.
3) Payments are fixed and start at a future date.
Flexible Premium Fixed Deferred Annuity
A deferred annuity with periodic inflows of money over time:
1) The money goes in as a series of payments over time.
2) The money is invested at a fixed rate.
3) Payments are fixed and start at a future date.
Single Premium Variable Immediate Annuity
A form of single premium immediate annuity (SPIA) with funds that are invested at a variable rate:
1) The money goes in as a single lump sum.
2) The money is invested at a variable rate.
3) Payments are variable and start right away.
Single Premium Variable Deferred Annuity
A deferred annuity with a single inflow of money and a variable payout:
1) The money goes in as a single lump sum.
2) The money is invested at a variable rate.
3) Payments are variable and start at a future date.
Flexible Premium Variable Deferred Annuity
A deferred annuity with period inflows of money over time and a payout that is variable:
1) The money goes in as a series of payments over time.
2) The money is invested at a variable rate.
3) Payments are variable and start at a future date.
A longevity annuity is a deferred annuity with a payout that commences when the annuity owner reaches a pre-determined advanced age.
Longevity insurance is a term used to refer to longevity annuities.
Advanced life delayed annuity is a term that is sometimes used to refer to longevity annuities.
Equity indexed annuity (EIA) is a term used to refer to fixed indexed annuities:
1) The money can go in as a single premium payment or a series of payments.
2) The money is invested at a variable rate although there is a guaranteed minimum rate of return that provides a “floor.”
3) Payments begin at a future date and are at a fixed rate that is based on market performance and is supported by the guaranteed minimum rate.
Similar to equity indexed annuity, indexed annuity is a term that is used to refer to fixed indexed annuities:
1) The money can go in as a single premium payment or a series of payments.
2) The money is invested at a variable rate although there is a guaranteed minimum rate of return that provides a “floor.”
3) Payments begin at a future date and are at a fixed rate that is based on market performance and is supported by the guaranteed minimum rate.
Inflation protection is an optional feature that can accompany fixed annuities. For an additional cost, fixed annuity payments can be adjusted based upon future rates of inflation. Inflation protection is an important feature because the value of future fixed payments can be severely impacted by inflation.
The term life annuity is used to refer to an annuity with payouts that are guaranteed to last for the lifetime of the annuity owner. This stands in contrast to annuities with payouts that only last a certain period of time.
A qualified annuity is purchased through any tax qualified retirement plan—whether employer-based or individual. For example, an annuity purchased through an employer-sponsored 401k or 403b plan would be considered a qualified annuity. An annuity purchased with funds that are in an individual retirement account would also be considered qualified. Pre-tax money can be used to purchase qualified annuities through an employer-sponsored plan.
A non qualified annuity is any annuity purchased outside of individual or employer-sponsored tax qualified retirement plans.
The term in-plan annuity is used to refer to annuities that are offered through an employer-sponsored retirement plan such as a 401k or 403b.
Private placement annuities are variable annuities that have investment offerings such as hedge funds and private equity funds that are not registered with securities regulators. Private placement annuities are only available to qualified investors who have high net worth or high incomes.
Charitable gift annuities allow donors to make tax deductible contributions to a charitable organization. In exchange for the charitable contribution, donors receive a stream of regular, annuity-like payments for their lifetime.
An impaired annuity offers pricing that takes into account the health status of the potential annuity owner. For example, a person with a serious health condition may receive more attractive pricing through an impaired annuity due to the fact that they are in poor health and their mortality risk is above average. In contract to life insurance, poor health and higher mortality risk can result in better annuity prices.
An enhanced annuity is the same thing as an impaired annuity.
An annuity purchased in a foreign country from an insurance company licensed and operating in that foreign country. Foreign annuity payments are based on the foreign currency.
Structured settlements are used to convert a lump sum payout into a series of payments over time. Structured settlements are often used for lottery and lawsuit payouts.
A CD annuity (CD stands for certificate of deposit) is a fixed annuity with multi-year rate guarantees. Deferred annuities do not guarantee rates beyond 1 year. A CD annuity addresses this issue by locking-in current rates over a longer time horizon.
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