Annuities Glossary: Understand the Foundation of Lifetime Income
Why Understanding Annuities Matters
Annuities are powerful tools for retirement planning — designed to provide guaranteed income, protection from market volatility, and tax-deferred growth. At Insure Your Success, we educate clients on how annuities can secure their financial future as part of a balanced Assessment → Financial Analysis → Strategy Design plan.
This glossary breaks down essential annuity terms to help you understand how these products work, what options are available, and how to align them with your retirement income strategy.
Top 3 Trending Terms
1. Fixed Indexed Annuity (FIA)
A type of annuity that offers market-linked growth with downside protection.
Pro Tip: FIAs allow you to capture market upside without risk of loss — ideal for conservative investors seeking balance between growth and protection.
2. Guaranteed Lifetime Withdrawal Benefit (GLWB)
A rider that guarantees income for life, even if your account value goes to zero.
Pro Tip: GLWBs are essential for retirees who want predictable, lifelong income and peace of mind against longevity risk.
3. Surrender Charge
A fee applied for early withdrawal within the surrender period.
Pro Tip: Understanding your surrender period helps you avoid penalties and maintain liquidity in your overall strategy.
A - Z Annuities Glossary (30 Core Terms)
1. Accumulation Phase: The period during which your annuity grows before you start withdrawals.
2. Annuitant: The individual whose life expectancy determines annuity payments.
3. Annuitization: Converting your annuity into a stream of regular income payments.
4. Beneficiary: The person who receives remaining annuity benefits after the annuitant’s death.
5. Bonus Rate: An upfront interest rate enhancement offered by some annuity contracts.
6. Cap Rate: The maximum return credited in indexed annuities.
7. Carrier: The insurance company issuing the annuity.
8. Deferred Annuity: An annuity that begins payments at a future date.
9. Fixed Annuity: Provides guaranteed interest and predictable income.
10. Fixed Indexed Annuity: Combines market participation with guaranteed protection.
11. Free Withdrawal: The percentage of account value you can withdraw annually without penalty.
12. Guaranteed Interest Rate: The minimum rate of return provided by the contract.
13. Guaranteed Lifetime Income: Income that lasts for the rest of your life.
14. Immediate Annuity: Begins payments right after a lump-sum investment.
15. Income Rider: An optional feature that guarantees income even if the contract value drops.
16. Inflation Protection: Adjusts payments over time to help offset rising costs.
17. Lifetime Payout Option: Guarantees income for life regardless of account performance.
18. Market Value Adjustment (MVA): A feature that adjusts surrender values based on interest rates.
19. Mortality and Expense Fees (M&E): Charges applied to cover insurance costs and administrative fees.
20. Non-Qualified Annuity: Funded with after-tax dollars and grows tax-deferred.
21. Participation Rate: The portion of market index growth credited to your account.
22. Period Certain: A payout option guaranteeing income for a specific number of years.
23. Premium: The amount you invest in the annuity.
24. Qualified Annuity: Funded with pre-tax retirement accounts like IRAs or 401(k)s.
25. Required Minimum Distribution (RMD): Mandatory withdrawals from qualified annuities after age 73.
26. Riders: Optional features that enhance protection or income guarantees.
27. Surrender Charge: A fee for withdrawing funds before the surrender period ends (see Top 3 Terms).
28. Surrender Period: The length of time before full liquidity is available.
29. Tax-Deferred Growth: Earnings accumulate without immediate taxation.
30. Variable Annuity: Allows investment in subaccounts with potential for higher gains and risk.
Ready to Strengthen Your Retirement Strategy?
Understanding annuity terms is the first step in creating consistent, reliable income for retirement. Take your Financial Assessment to see how fixed or indexed annuities fit into your broader financial plan for growth and protection.