Annuity terms, in plain English.
A working reference of the terms you'll encounter in an annuity contract, an income illustration, or a conversation with a licensed specialist. Nothing here is advice — just definitions written for the owner, not the industry.
MYGA (Multi-Year Guaranteed Annuity)
A fixed annuity that credits a set interest rate for a defined term, commonly three to ten years.
Fixed-Indexed Annuity (FIA)
A fixed annuity whose interest credits are tied to an external index, subject to caps, spreads, or participation rates, with principal protected from index loss.
Variable Annuity
An annuity whose sub-account values fluctuate with underlying investments; principal is not protected from market loss.
Immediate Annuity (SPIA)
A single-premium contract that converts a lump sum into a stream of income payments beginning almost immediately.
Deferred Annuity
An annuity that accumulates value over time before income begins.
GLWB (Guaranteed Lifetime Withdrawal Benefit)
A living-benefit rider that guarantees a defined withdrawal amount for life, regardless of account value.
Income Rider
An optional feature, often carrying an annual fee, that provides guaranteed future income separate from the account value.
Benefit Base
A bookkeeping value used to calculate guaranteed rider income; generally not an amount available on surrender.
Excess Withdrawal
A withdrawal above the amount a rider guarantees, which commonly reduces or resets the rider benefit base.
Enhanced Death Benefit
An optional rider that pays beneficiaries an amount greater than the contract value, typically for an added annual cost.
Surrender Charge
A declining fee applied to withdrawals above the free-withdrawal amount during the surrender period.
Surrender Period
The defined number of years during which surrender charges apply, after which the contract generally becomes fully liquid.
Free Withdrawal Provision
The portion, commonly up to ten percent annually, that may be withdrawn each year without a surrender charge.
Market Value Adjustment (MVA)
A contract provision that raises or lowers the amount received on early withdrawal based on interest rate movement since issue.
1035 Exchange
An IRS provision, Section 1035, permitting the tax-free exchange of one annuity contract for another.
Qualified Annuity
An annuity held inside a tax-qualified retirement account such as an IRA; distributions are generally fully taxable.
Non-Qualified Annuity
An annuity funded with after-tax dollars; only the earnings are taxable at withdrawal.
RMD (Required Minimum Distribution)
The minimum annual amount the IRS requires you to withdraw from qualified accounts beginning at the applicable age.
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