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Annuity is an investment plan that helps you prepare for retirement. You pay money into your account with an insurance or investment company and over time it would accumulate earnings. There are different terms used in annuity policies. Here are a few of them and their meaning:1.Accumulation Phase. This is the period that you keep paying money into your account. You can pay a lump sum or some amounts over time. 2.Annuitization Phase. This the time you start receiving payments from your annuity. This payment is usually monthly. 3.Non-qualified annuity. This is an annuity that is funded with after -tax dollars. 4.Qualified annuity. This is annuity that is funded with pre- tax dollars. 5.Death Benefit. The amount of money your beneficiary receives if you die before the annuitization stage. This is usually the sum you have contributed or the value of your annuity. It depends on which one is greater. 6.Basis points. This is the fees of your annuity. The number of basis points shows the percentage of your investment. For example 400 basis points would be 4% of your investment. 7.Mortality and Expenses (M & E). The fee your insurance collects from you to provide a lifetime income for you and death benefit for your beneficiaries in case you die during accumulation phase. 8.Rider. A feature of annuity that gives you extra benefit. For example a long term care rider would pay for nursing home care. 9.Surrender is when you decide to get out from your annuity. There is a fee you have to pay if you surrender your annuity within seven or eight years of buying it. This fee is also known as a Contingent Deferred Sales Charge (CDSC). 10.Tax deferral. This means that the money is in your annuity account grows tax-deferred. You do not pay tax on it until you begin to receive payment on it. The death benefit on the annuity is taxable to whoever is the beneficiary.


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