Individual Retirement Annuity

What Does Individual Retirement Annuity Mean?

Individual retirement annuities are a type of annuity designed as an investment vehicle for retirement. They function similarly to individual retirement accounts (IRAs), but a key difference is that the contributions made to individual retirement annuities are not actively managed.

Anyone considering one should first understand how annuities work in general, since the same rules around payouts and tax treatment apply to retirement annuities too.

Many insurance companies offer individual retirement annuities as part of their life insurance policies. In some cases, the annuity is sold alongside a permanent life insurance policy, which can also build cash value over the long term.

Insuranceopedia Explains Individual Retirement Annuity

The goal of an individual retirement annuity is to provide a fixed income during retirement years. Once an individual retirement annuity is established, only the original annuitant or their surviving beneficiaries are eligible to receive payments from it, provided all criteria are fully met.

Because the surviving beneficiary receives whatever is left in the contract, it pays to keep that designation current and to know the rules and common mistakes around naming a life insurance beneficiary.

Many individual retirement annuities come with both contribution limits and tax benefits.