What are the Phases for an Annuity?

There are two possible phases for an annuity, one phase in which the customer deposits and accumulates money into an account (the deferral phase), and another phase in which the customers receive payments for some period of time (the annuity or income phase). During this latter phase, the insurance company makes income payments that may be set for a stated period of time, such as five years, or continue until the death of the customer(s) (the “annuitants(s)” named in the contract. Annuity contracts with a deferral phase always have an annuity phase and are called deferred annuities. An annuity contract may also be structured so that it only has the annuity phase; such a contract is called immediate annuity.
Annuity insurance may be issued only by life insurance companies, although private annuity contracts may be arranged between donors to non-profits to reduce taxes. Insurance companies are regulated by the states, so contracts or options that may be available in some states may not be available in others.
Although annuities have existed in their present form for only a few decades, the idea of paying out a stream of income to an individual or family dates back to the Roman Empire. The Latin word annua meant annual stipends, and during the reign of the emperors, the word signified a contract that made annual payments. Individuals would make a single large payment into the annua and then receive an annual payment each year until death or for a specified period of time.
During the 17th century, annuities were used as fundraising vehicles. In Europe, governments were constantly looking for revenue to pay for massive, on-going battles with neighboring countries. The governments would then create a tontine, promising to pay for an extended period if citizens would purchase shares today. The United Kingdom, locked in many wars with France, started one if the first group annuity called the State Tontine of 1693. Participants in these early government annuities would purchase a share of the Tontine for £100 from the UK government. In return, the owner of the share, received an annuity during the lifetime of their nominated person (often a child). As each nominee died, the annuity for the remaining proprietors gradually became larger and larger. This growth and division of wealth would continue until there were no nominees left.

Thought For The Week

This year I will stop calling the bathroom “John” and rename it “Jim”. I feel so much better saying I went to the Jim this morning.