DOCSLIB.ORG

Stat 475 Life Contingencies I Chapter 5: Life Annuities

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Stat 475 Life Contingencies I Chapter 5: Life Annuities Stat 475 Life Contingencies I Chapter 5: Life annuities Life annuities Here we're going to consider the valuation of life annuities. A life annuity is regularly (e.g., continuously, annually, monthly, etc.) spaced series of payments, which are usually based on the survival of the policyholder. These annuities are important for retirement plans, pensions, structured settlements, life insurance, and in many other contexts. Many of the ideas and notation used in the valuation of life annuities borrow from annuities-certain. As with life insurance, the life-contingent nature of the payments means that the present value of benefits is a random variable rather than a fixed number. 2 Review of annuities-certain Recall the actuarial symbols for the present value of n-year annuities-certain: n X 1 − v n Annuity-immediate: a = v k = n i k=1 n−1 X 1 − v n Annuity-due:a ¨ = v k = n d k=0 Z n n −δt 1 − v Continuous annuity:a ¯n = e dt = 0 δ nm n (m) X 1 1 − v mthly annuity-immediate: a = v k=m = n m i (m) k=1 3 Review of annuities-certain | continued Increasing annuity-immediate: n n X a¨n − nv (Ia) = k v k = n i k=1 Decreasing annuity-immediate: n X n − a n (Da) = (n + 1 − k) v k = n i k=1 For the corresponding accumulated values, we replace a by s in each case. For example: n a n (1 + i) = s n 4 Whole life annuity-due Consider an annuity that pays (x) an amount of $1 on an annual basis for as long as (x) is alive, with the first payment occuring immediately. This type of life annuity is known as a whole life annuity-due. We'll denote the random variable representing the PV of this annuity benefit by Y : Y = 1 + v + v 2 + ··· + v Kx =a ¨ (1) Kx +1 The pmf of Y is given by: P Y =a ¨k = k−1jqx for k = 1; 2; 3;::: 5 Whole life annuity-due EPV The EPV of this annuity is denoted bya ¨x and we can use our general strategy to find this EPV: 1 X k a¨x = v k px k=0 We could also take the expectation of the expression given in (1): Important Relation 1 − A a¨ = E [Y ] = x so that 1 = d a¨ + A x d x x This relationship actually holds between the underlying random variables, not just the expected values. 6 Whole life annuity-due EPV, variance, and recursion Finally, we could calculate the EPV using the standard formula for the expectation of a discrete RV: 1 X a¨x = a¨k+1 k jqx k=0 We can find the variance of Y in a similar manner: 2A − (A )2 V [Y ] = x x d2 (Note that we cannot find the second moment of Y by computing the first moment at double the force of interest.) Further, we have the recursiona ¨x = 1 + v px a¨x+1 7 Term annuity-due Now consider an annuity that pays (x) an amount of $1 on an annual basis for up to n years, so long as (x) is alive, with the first payment occuring immediately. This type of life annuity is known as a term annuity-due. For this type of annuity, PV of the benefit is: a¨ if K ≤ n − 1 Kx +1 x Y =a ¨min(K +1; n) = x a¨n if Kx ≥ n In this case, the EPV is denoted bya ¨x:n EPV for Term Annuity-Due n−1 n−1 1 − Ax:n X X a¨ = = v t p = a¨ jq + p a¨ x:n d t x k+1 k x n x n t=0 k=0 8 Example Suppose that a person currently age 65 wants to purchase a 3-year term annuity due with annual payments of $50; 000 each. Given that p65 = 0:95 p66 = 0:91 p67 = 0:87 i = 7% calculate the expected value and variance of the present value of this annuity benefit. [132,146.91; 503,557,608.1] Now suppose that a life insurance company sells this type of annuity to 100 such people, all age 65, all with the same payment amounts. Assuming these people are all independent, calculate the expected value and variance of the total present value of all of the annuity benefits. [13,214,691; 50,355,760,810] 9 Whole life annuity-immediate Now we'll turn to consider life annuities-immediate, starting with a whole life annuity-immediate. This type of annuity pays (x) an amount of $1 on an annual basis for as long as (x) is alive, with the first payment occuring at age x + 1. We'll denote the random variable representing the PV of this annuity benefit by Y ∗: Y ∗ = v + v 2 + ··· + v Kx = a Kx with pmf ∗ P Y = a k = k jqx for k = 0; 1; 2; 3;::: 10 Whole life annuity-immediate (continued) We have the relationship Y ∗ = Y − 1, where Y is the PV of the whole life annuity-due and Y ∗ is the corresponding PV of the corresponding whole life annuity-immediate. The only difference between these two annuities is the payment at time 0. From this relationship, we can obtain expressions for the EPV and variance of Y ∗ 2A − (A )2 a =a ¨ − 1 V [Y ∗] = V [Y ] = x x x x d2 We also have the recursion relation: ax = v px + v px ax+1 11 Term annuity-immediate Now consider an annuity that pays (x) an amount of $1 on an annual basis for up to n years, so long as (x) is alive, with the first payment occuring at age x + 1. This type of life annuity is known as a term annuity-immediate. For this type of annuity, PV of the benefit is: a if K ≤ n ∗ Kx x Y = a min(K ; n) = x a n if Kx > n In this case, the EPV is denoted by ax:n EPV for Term Annuity-Due n X t ax:n = v t px =a ¨x:n + nEx − 1 t=1 12 Example Assume that E = 0:35; q = 0:3; and A1 = 0:2: 20 x 20 x x:20 Find: 1 Ax:20 [0.55] 2 a¨x:20 [13.21] 3 ax:20 [12.56] 13 SOA Practice Problem #25 Your company currently offers a whole life annuity product that pays the annuitant 12,000 at the beginning of each year. A member of your product development team suggests enhancing the product by adding a death benefit that will be paid at the end of the year of death. Using a discount rate, d, of 8%, calculate the death benefit that minimizes the variance of the present value random variable of the new product. [150,000] 14 Whole life continuous annuity Next we'll consider continuous life annuities, starting with a whole life continuous annuity. This type of annuity pays (x) continuously at a rate of $1 per year for as long as (x) is alive, starting now. Letting Y denote the random variable representing the PV of this annuity benefit, we have: Y = a Tx The EPV for this annuity is denoted ax ... EPV for Whole Life Continuous Annuity Z 1 −δt 1 − Ax ax = e t px dt = 0 δ 2 2 Ax − Ax . and the variance is V [Y ] = δ2 15 Term continuous annuity We can also have a continuous annuity that pays for a maximum of n years, so long as (x) is alive. This type of life annuity is known as an n-year term continuous annuity. For this type of annuity, PV of the benefit is: a if T ≤ n Tx x Y = a min(T ; n) = x a n if Tx > n In this case, the EPV is denoted bya ¯x:n EPV for n-year Term Continuous Annuity Z n ¯ −δt 1 − Ax:n a¯x:n = e t px dt = 0 δ 16 Example Suppose that the survival model for (x) is described by the exponential model with µx = µ 8 x. Let Y be the PV of a continuous whole life annuity payable at a rate of 1 per year to (x). d h 1 i 1 Find a − dµ x (δ+µ)2 2 Assuming that δ = 0:08 and µ = 0:04, find the expected value and variance of Y . [8.333; 13.889] 3 Find the probability that Y < 5: [0.2254] 17 SOA Practice Problem #67 For a continuous whole life annuity of 1 on (x): Tx is the future lifetime random variable for (x). The forces of interest and mortality are constant and equal. a¯x = 12:50 Calculate the standard deviation ofa ¯ . [7.217] Tx 18 SOA Practice Problem #79 For a group of individuals all age x, you are given: 30% are smokers and 70% are nonsmokers. The constant force of mortality for smokers is 0.06 at all ages. The constant force of mortality for nonsmokers is 0.03 at all ages. δ = 0:08 Calculate Var a¯ for an individual chosen at random from this Tx group. [14.1] 19 mthly life annuities We can also analyze life annuities that pay on an mthly basis. First consider an annuity that pays an amount of 1 per year, paid 1 th in installments of amount m at the beginning of each m of a year, so long as (x) lives. K (m)+ 1 1 − v x m The PV of this annuity is Y =a ¨(m) = (m) 1 (m) Kx + m d The EPV of Y is given by (m) 1 (m) 1 − Ax X 1 k E[Y ] =a ¨x = = v m k px d(m) m m k=0 1 We can also consider the \immediate" version: a(m) =a ¨(m) − x x m 20 mthly term annuities Now consider an annuity that pays an amount of 1 per year, paid 1 th in installments of amount m at the beginning of each m of a year, so long as (x) lives, but for a maximum of n years.
Load more

Recommended publications
  • PENSION MATHEMATICS with Numerical Illustrations
    PENSION MATHEMATICS with Numerical Illustrations Second Edition Howard E. Winklevoss, Ph.D., MAAA, EA President Winklevoss Consultants, Inc. Published by Pension Research Council Wharton School of the University of Pennsylvania and University of Pennsylvania Press Philadelphia © Copyright 1977 (first edition) and 1993 (second edition) by the Pension Research Council of the Wharton School of the University of Pennsyl­ vania All rights reserved Library of Congress Cataloging-in-Publication Data Winklevoss, Howard E. Pension mathematics with numerical illustrations / Howard E. Winklevoss. -2nd ed. p. em. Includes bibliographical references and index. ISBN 0-8122-3196-1 I. Pensions-Mathematics. 2. Pensions-Costs-Mathematics. 3. Pension trusts-Accounting. I. Title. HD7105.W55 1993 331.25'2-dc20 92-44652 CIP Printed in the United States ofAmerica Chapter 3 Basic Actuarial Functions The purpose of this chapter is to introduce several actuarial functions used in the development of pension mathematics throughout the remainder of the book. The discussion begins with the composite survival function and interest function, per­ haps the two most basic concepts in pension mathematics. Pen­ sion plan benefit functions are then presented, followed by a dis­ cussions of annuities, the latter representing a combination of interest and survival functions. COMPOSITE SURVIVAL FUNCTION The composite survival function represents the probability that an active plan participant survives in service for a given pe­ riod, based on all of the decrement rates to which the employee is exposed. Whereas the probability of surviving one year in a sin­ gle-decrement environment is equal to the complement of the rate of decrement, the probability of surviving one year in a mul­ tiple-decrement environment is equal to the product of such complements for each applicable rate of decrement.
    [Show full text]
  • Annuity Life Assurance Policy
    Annuity Life Assurance Policy Hulkier Parsifal always footnote his lavaboes if Kristos is zoophobous or sniggles anon. If vacillating or maniac lightsomeMyles usually is Rabbi? argufying Quint his remains D-day impersonalizing engrossing: she eightfold constrain or her seek caroler transgressively catholicised and too unidiomatically, discontentedly? how Xyz can use our top insights about life policy has lower premiums need to the compensation may take This information supports the promotion and marketing of this annuity. Tax or guaranteed regular payment starts to buy life assurance against financial, they stay or regulations involve annuity provides. In in to paying a portable benefit, any worth the Separate Accounts in connection with the Consolidation. We also routinely engage with limited financial assurance against a policy protects against market. Within is of the main types of life insurance are different types of policies. Are variable annuities covered by the guaranty association? Are annuities are the annuity plans are more productive workforce with financial assurance iq offers a means making savings. Why consider before it is policy information on this annuity policies to annuities? Diversification does not guarantee profit to protect against market loss. Turn use money into and immediate stream of income. Learn where they tolerate and options you define have. As term life policies sold to such issues of time of life. Annuity policies in life assurance corporation to help provide for policies with a linked website. How is a life insurance is life insurance policy here to be a series analyzing the various payout will have sole financial advisors. Mandates affecting consumers will be permitted under policies, life annuity based on an the same portfolio yields assume the consolidating account, announcing bonus or simply credited in.
    [Show full text]
  • Know What You Are Getting When You Buy an Annuity an Annuity Is a Financial Product Sold by an Insurance Company
    Financial Education Know What You Are Getting When You Buy an Annuity An annuity is a financial product sold by an insurance company. It involves a contract between you and the insurance company that outlines the terms and conditions of the annuity. Annuities are generally used to accumulate tax-deferred savings under which you make a lump-sum payment, or series of payments, to the insurance company. In return, the insurer agrees to make periodic payments to you beginning immediately or at a future date. This section will provide you with information on various annuity products and what you should know before buying an annuity. Things to Consider When Buying an Annuity Many insurance companies offer annuity products, and the annuity offerings between insurance companies can be quite different. The financial strength among insurance companies can be quite different, too. So an important ‘first cut’ in evaluating an annuity is the financial strength of the issuing company. Companies such as Standard & Poor’s and AM Best provide independent ratings on the financial strength of insurance companies. These ratings are available through the insurance company or through a financial services provider. Types of Annuities Annuities are typically purchased through a financial services provider who is licensed and registered to sell annuities and other insurance-related products. They are considered experts on the annuity products they recommend and sell to their customers. The following are types of annuity products: n Fixed-Rate Annuity The insurance company agrees to pay the contract holder no less than a specified rate of return for a pre-determined period.
    [Show full text]
  • Eagle Platinum Series
    (ICC13 E-SP-MYGA)* EagleSingle Platinum Premium Series Eagle Life Insurance Company® West Des Moines, IA 50266 www.eagle-lifeco.com (866) 526-0995 *Form number and availability may vary by state. The Power of a Tax Deferred Annuity Selecting a retirement vehicle from the vast array of FIXED INTEREST GUARANTEES choices could be the most important decision you make In addition to these annuity benefits, many people are about your future. looking for the stability of competitive interest rate guarantees. To meet our customer’s needs, Eagle Life offers Many people are turning to tax-deferred annuities as the an annuity with a multi-year guaranteed interest rate.* foundation of their overall financial plan. Why? Because interest credited is not taxed until withdrawn. Given an In addition to the multi-year guaranteed interest rate, this equal interest rate, your money grows faster in a tax- product also has a Minimum Guarantee Surrender Value deferred annuity versus a taxable account. that is never less than 90% of the single premium, less any Withdrawals, plus interest credited at the Minimum MORE ADVANTAGES Guaranteed Interest Rate. Besides the tax-deferred benefits, annuities offer many other advantages such as: LIQUIDITY If you need money for any reason, this annuity allows STABILITY you to make Penalty-free Withdrawals. Each contract year after 1st year, you may take one Penalty-free Withdrawal MAY AVOID PROBATE of any amount up to Interest Credited during that contract LIQUIDITY FEATURES year. We also allow systematic withdrawals of interest only or amounts sufficient to satisfy IRS required minimum GUARANTEED INCOME distribution rules.
    [Show full text]
  • Your Guide to Fixed Annuities
    Your Guide to Fixed Annuities A Smart Choice for Safety Conscious Individuals Seeking Financial Security RS-2329-TM Protect Your Future Whether you’re preparing for retirement or already enjoying retirement, a fixed annuity can be a smart way to safeguard your retirement income with guaranteed returns. Fixed annuities offer guaranteed tax-deferred growth, protection of principal and lifetime income. A fixed annuity may appeal to you if: • You wish to protect your retirement savings with a guarantee of principal and a guaranteed rate of return. • You need to rollover a lump-sum payment from a company-sponsored retirement or pension plan. • You want to contribute to an annuity because you’ve already contributed the maximum to your IRA or other qualified plans. For more than 100 years, Reliance Standard Life Insurance Company has been helping people achieve their financial objectives. We are proud of our long and distinguished heritage in serving the needs of generations of Americans. Working with your insurance professional and other trusted advisors, Reliance Standard Life Insurance Company can help you find the fixed annuity that’s right for your needs. RS-2329-TM Why choose What is an annuity? An annuity is a financial contract between you (the owner of the contract) and an a fixed annuity? insurance company that guarantees you regular payments over the lifetime of the Annuities are long term financial annuitant, typically in the form of a check or an automatic deposit made to your bank contracts designed to help secure account. Annuity income can be a welcome supplement to other forms of income in your financial future by providing retirement, such as Social Security payments, retirement plan distributions and earned you with a predictable, guaranteed income—helping you enjoy a more comfortable future.
    [Show full text]
  • Annuity Options in Public Pension Plans: the Curious Case of Social Security Leveling Robert Clark Robert Hammond Melinda Morrill David Vandeweide
    Annuity Options in Public Pension Plans: The Curious Case of Social Security Leveling Robert Clark Robert Hammond Melinda Morrill David Vandeweide 1 Key Questions 1. What is Social Security Leveling? 2. Is SS Leveling a mere curiosity or a widely used annuity option in public retirement plans? 3. Do many retirees choose SS Leveling? 4. How does SS Leveling affect lifetime income? 5. What policy changes would improve this annuity option? 2 What is Social Security Leveling? Public pension plans offer a series of payout options: Lump sum distribution Single life annuities Joint & Survivor annuities Public plans not subject to ERISA J&S annuities are not the default option in most states 3 What is Social Security Leveling? SS Leveling is a single life annuity that front loads payments from the pension Only individuals retiring prior to leveling age are eligible to select leveling Individuals selecting the SS Leveling option are choosing a single life annuity with no survivor benefits 4 Reasons for front loading benefits Desire for consumption smoothing High personal discount rate Possible effects of selecting SS leveling • Reduced likelihood of post-retirement work • Increase likelihood of claiming SS benefits at 62 5 What is Social Security Leveling? Retiring worker must present the pension system an estimate of the SS benefit they are expected to receive at age 62 based on no further work Retirement system determines a benefit (B1) to be paid from time of retirement until age 62 and a benefit that will be paid from age 62 until death (B2)
    [Show full text]
  • Custom Annuity Allstate Life Insurance Company P.O
    Custom Annuity Allstate Life Insurance Company P.O. Box 660191 Dallas, TX 75266-0191 Telephone Number: 1-800-632-3492 Fax Number: 1-877-525-2689 Prospectus dated May 1, 2020 Allstate Life Insurance Company (“Allstate Life”) has issued the Custom Annuity, a group and individual flexible premium deferred annuity contract (“Contract”). This prospectus contains information about the Contract. Please keep it for future reference. The Contract is no longer being offered for sale. If you have already purchased a Contract you may continue to add to it. Each additional payment must be at least $1,000. The Contracts were available through Morgan Stanley & Co. Inc., the principal underwriter for the Contracts. Morgan Stanley & Co. Inc., is not required to sell any specific number or dollar amount of securities but will use its best efforts to sell the securities offered. Discussion of Risk Factors begins on page 5 of this prospectus. The registrant’s obligations under the contract are subject to the financial strength and claims paying ability of the registrant. Investment in the Contracts involves serious investment risks, including possible loss of principal. This prospectus does not constitute an offering in any jurisdiction in which such offering may not lawfully be IMPORTANT made. We do not authorize anyone to provide any information or representations regarding the offering NOTICES described in this prospectus other than as contained in this prospectus. Neither the Securities and Exchange Commission ("SEC") nor any State securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
    [Show full text]
  • Retirement Income/Annuities Around the World What US Policy Makers Might Learn
    May 2009 Retirement Income/Annuities Around the World What US Policy Makers Might Learn Barbara Marder, Baltimore Global Defined Contribution Consulting Leader www.mercer.com 1 Comparison of annuity markets (OECD National Annuity Markets: Features and Implications, Rusconi 2008) Mercer 1 2 Retirement Income Across Europe – Diverse Approach DC types in EU Member States Euro, Guarantees, Annuities, Investment Choices, Prevalence United Kingdom (UK) Czech Republic (CZ) Luxembourg (LU) Netherlands (NL) Denmark (DK) (DE) Germany Romania (RO) Lithuania (LT) Hungary (HU) Bulgaria (BG) Bulgaria Slovakia (SK) Slovakia Portugal (PT) Belgium (BE) Sweden (SE) Sweden Slovenia (SI) Estonia (EE) Cyprus (CY) Austria (AT) Greece (EL) Greece France (FR) Poland (PL) Finland (FI) Ireland (IE) Ireland Latvia (LV) Spain (ES) Malta (MT) Italy (IT) Italy Type Euro zone ● = Y ● = N ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Guaranteed returns ● = N ● = Y ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● = Mixture Annuity required ● = N ● = Y ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● = Choice Member investment choice ● = Y ● = N ● = Lifecycle ○ ● ● ○ ● ○ ● ● ○ ● ● ● ● ● ● ● ● ○ ● ○ = Rare ○ = Some ○ = Mixture DC prevalence ● = High ● = Low ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● = Medium Mercer 0 Mercer 2 3 Australia •Programmed withdrawal/allocated income stream is most popular retirement income option •Retiree account increases with investment earnings, can vary annual income received •2007 simplification to remove taxation for persons age 60 +, lump sum and pensions
    [Show full text]
  • Actuarial Mathematics and Life-Table Statistics
    Actuarial Mathematics and Life-Table Statistics Eric V. Slud Mathematics Department University of Maryland, College Park c 2006 Chapter 6 Commutation Functions, Reserves & Select Mortality In this Chapter, we consider first the historically important topic of Commu- tation Functions for actuarial calculations, and indicate why they lose their computational usefulness as soon as the insurer entertains the possibility (as demographers often do) that life-table survival probabilities display some slow secular trend with respect to year of birth. We continue our treatment of premiums and insurance contract valuation by treating briefly the idea of insurance reserves and policy cash values as the life-contingent analogue of mortgage amortization and refinancing. The Chapter concludes with a brief section on Select Mortality, showing how models for select-population mortality can be used to calculate whether modified premium and deferral options are sufficient protections for insurers to insure such populations. 6.1 Idea of Commutation Functions The Commutation Functions are a computational device to ensure that net single premiums for life annuities, endowments, and insurances from the same life table and figured at the same interest rate, for lives of differing ages and for policies of differing durations, can all be obtained from a single table look- up. Historically, this idea has been very important in saving calculational labor when arriving at premium quotes. Even now, assuming that a govern- 149 150 CHAPTER 6. COMMUTATION & RESERVES ing life table and interest rate are chosen provisionally, company employees without quantitative training could calculate premiums in a spreadsheet for- mat with the aid of a life table.
    [Show full text]
  • Your Guide to 403(B) Tax-Deferred Annuity Or Voluntary Savings Plans
    Your guide to 403(b) tax-deferred annuity or voluntary savings plans How much can you contribute in 2021? Tax-deferred annuity plans are voluntary savings plans designed to help you build savings for your retirement. In this brochure, we’ll explain the contribution limits set by the Internal Revenue Code (IRC). Plus, we’ll show you how to calculate your maximum contribution amount so you can be sure to take full advantage of your opportunity to save. About TIAA TIAA’s purpose has remained constant for more than 100 years: To help you save for—and generate income during—retirement. For more information, visit us at TIAA.org or call us at 800-842-2252. What is a tax-deferred annuity plan? A tax-deferred annuity (TDA) plan is a type of retirement plan designed to complement your employer’s base retirement plan. Sometimes, a TDA plan is also referred to as a voluntary savings plan, a supplemental plan, a tax-sheltered annuity (TSA) or simply a 403(b) plan. A TDA plan is an employer-sponsored Defined Contribution retirement plan to which you can contribute a percentage of your base salary. Retirement plan contribution limits There are maximum limits to how much you can contribute to your retirement plans each year. These are governed by Sections 415 and 402(g) of the Internal Revenue Code (IRC). W For your employer’s 403(b) plan. The Defined Contribution limit applies to all pretax and after-tax (i.e., non-Roth and Roth) contributions; mandatory employee contributions; and all employer-matching and nonmatching contributions.
    [Show full text]
  • Glossary of Annuity Product Terms
    Glossary of Annuity Product Terms A A-ShARE VARIABLE ANNUITIES Annuity contracts in which sales charges are incurred at time of investment or premium payment. A-share contracts typically have no surrender charges. ACCUMULatION PHASE The period in an annuity contract prior to annuitization when annuity owners can add money and accumulate tax-deferred assets. ACCUMULatION UNIT VALUE (AUV) A variable annuity subaccount price per share during the accumulation phase. An AUV is the net asset value after income and capital gains have been included and subaccount management expenses have been subtracted. ANNUAL CONTRACT FEE An annual fee paid to the insurance company for administering the contract. The fee is often waived for contracts with high account values. ANNUItaNT The person, frequently the contract owner, to whom an annuity is payable and whose life expectancy is used to calculate the income payment. ANNUITIZatION The conversion of the annuity accumulation value to a fixed or variable income stream for the life of the annuitant(s) or for a specified period. ANNUITY A periodic income payable for the lifetime of one or more persons, or for a specified period. A contract in which an insurance company agrees to pay an income for life or for a specified number of years. ANNUITY COMMENCEMENT DatE The date income payments begin, also known as the annuity start date. ANNUITY CONTRACT A legal agreement between the contract owner and the insurance company. ANNUITY OWNER The person or entity that has the rights to the contract, including withdrawals, surrender, change of beneficiary, or other specified terms. ANNUITY INCOME PAYMENts OR PAYOUts A series of payments made over a specific period of time with the duration guaranteed by the life insurance company at the beginning of the period.
    [Show full text]
  • Fact Sheet Explains Life Annuities, One of the TSP Withdrawal Options After You Separate from Service Or Have a Beneficiary Participant Account Established
    Annuities This fact sheet explains life annuities, one of the TSP withdrawal options after you separate from service or have a beneficiary participant account established. For information about your other TSP withdrawal options—TSP installment payments and single withdrawals—see the TSP booklet Withdrawing From Your TSP Account for Separated and Beneficiary Participants. Note: A life annuity purchased with money from your TSP account is not the “basic annuity” or “pension” that you will receive as a result of your retirement coverage under FERS or CSRS, or the military retired pay that members of the uniformed services receive. If you have questions about your eligibility for the basic annuity or military retired pay, contact your agency or service. What is a life annuity? Purchasing an Annuity A life annuity is not like your TSP account, an IRA, a The process for purchasing an annuity using money certificate of deposit, or a bank account. When you from your TSP account is the same as for starting TSP purchase a life annuity, you give up control of your money installment payments or making a single withdrawal. in exchange for lifetime monthly payments from the Log into the My Account section of tsp.gov and click annuity provider. “Withdrawals and Changes to Installment Payments.” Then use the online tool for withdrawals. See the TSP booklet Withdrawing From Your TSP Account for Separated Amount of Your Life Annuity Payments and Beneficiary Participants for more details. The factors that affect the amount of your monthly The minimum amount with which to purchase an annuity payments include the following: annuity is $3,500.
    [Show full text]