Flexible Premium Annuity

What Does Flexible Premium Annuity Mean?

A flexible premium annuity is a retirement plan that allows the policyholder to select the payment method for their premiums and retirement income. This flexibility enables annuitants to potentially exempt themselves from paying taxes on their premium payments.

Insuranceopedia Explains Flexible Premium Annuity

These annuities are termed “flexible” because the annuitant can select how to pay their premiums—monthly, quarterly, annually, or in a lump sum. Similarly, when the annuitant begins to withdraw funds after retirement, they can choose from monthly, quarterly, or annual disbursements. If you’re new to these products, it helps to first understand how an annuity works before deciding whether the flexible structure fits your situation.

One of the key advantages of a flexible premium annuity is that the premium payments are tax-deferred. This means that the annuitant does not pay taxes on the premiums when they are paid; instead, taxes are due only when the funds are withdrawn. Because the tax savings build up over time, flexible premium annuities often appear in retirement plans alongside coverage from the best life insurance companies for seniors.