Annuitant
What is the definition of an annuitant?
An annuitant is a person who has the right to receive regular payments from a pension or annuity investment. The contract holder or another individual, such as a surviving spouse, can be the annuitant. Annuities are commonly thought of as income enhancements for retirees. They could be linked to a pension scheme for employees or a life insurance policy. The payment amount is usually calculated by the annuitant's life expectancy as well as the amount invested.
TAKEAWAYS IMPORTANT
An annuitant is a pension plan recipient or an investor who is entitled to periodical payments from a pension or annuity investment.
An immediate or deferred annuity may be available to the annuitant.
A deferred annuity, like an IRA or 401(k), is a type of retirement investment (k).
Annuitants: An Overview
An annuity is a guaranteed income payment made on a regular basis for the rest of one's life or for a certain number of years. An annuitant is a retired government employee who receives a pension or an investor who pays a lump amount to an insurance firm in exchange for a regular income supplement.
The owner of an annuity may name one or more annuitants, such as a spouse and an elderly parent, or create a joint annuity, depending on the contract's provisions. If the need arises, the annuitant can also arrange for the payments to be transferred to a surviving spouse. The annuitant must be a person, not a corporation or a trust, in any event.
The quantity of annuity payments is determined by the annuitant's age and life expectancy, as well as the ages and life expectancies of any beneficiaries. If the annuitant is 65 years old and the annuity is transferable to his 60-year-old wife if she survives him, the insurance company will calculate that monthly payments will be made for around 24 years, which is the average life expectancy of a 60-year-old woman.
The majority of annuities are taxed as regular income.
An annuity can also be for a "life-plus" term, which means that payments will continue for the annuitant's lifetime before being handed to a surviving spouse for a set amount of time.
Annuities come in a variety of shapes and sizes.
There are many different forms of annuities, however there are two main types:
1 A deferred annuity is a popular way to save for retirement. The annuitant invests money on a regular basis in exchange for a stream of annuity payments at a later date. This is how many firm pension plans are set up.
2 An immediate annuity is exactly what it says on the tin. The annuitant makes a one-time payment in exchange for a series of payments that begin immediately and continue for the rest of his or her life or for a certain amount of time. A life plus time definite annuity is the later choice.
Annuitants' Taxes
In most cases, annuities are taxed as regular income. Only the gain element of annuity payments is taxed, not the portion that represents the contract holder's basis. The entire payment of an employer pension is normally taxed as ordinary income.
