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When you invest in a fixed annuity scheme, you will receive a contract which will detail all the terms and conditions regarding your investments. This document will have some technical words from the investments fixed annuity glossary. Most people might not understand these words or might have the wrong impression of such words and clauses. Consequently, you might find yourself contravening the contract and hence attracting some fines. Therefore, it would be necessary to conduct some research before signing this document. Here are some of the words from fixed annuity glossary that you are likely to encounter.

a)            1035 exchange – There are times that you might want to change your investment in this annuity with another product in insurance. This term defines the legal exchanges that are usually not taxed. The entire definition of this process is in the Internal Revenue Service code. When you want to carry out such a transaction, you should hire a professional to do the job for you. This is because the process can be quite complicated.

b)            Accrued monthly benefit – With fixed annuity investment, you should receive your payments after retiring every month. Such payments are referred by this term. They are calculated after considering several factors and the formula used will have some variables. Since you are assured of a minimum value, these changes in these variables can contribute to higher values for your payments.

c)            Accrued interest – With the deferred annuity option, your principal earns some interest which is not taxed. Moreover, it adds to your principals and continues to earn more interest and hence this term.

d)            Annuity period – This is the duration between any two payments, which you receive after your retirement age. The period can be any one of the four options of after every month, every three months (quarterly), every six months (semi annually) or annually.

e)            Annuitization – Within your annuity contract there is the time that is defined, where you will start receiving payments from the insurance firm. Therefore, the process of converting your principal plus the earned interest into some regular payments is referred to by this term.

f)             Annuitant – There is the person who will be recognized to receive payments from a fixed annuity. That will be the annuitant. In other words, this word refers to the person who owns this investment. One rule for these parties in a contract is that they have to be individuals rather than some company. You will also find that this person’s age will determine the amount of each payment as well as any penalty that may be passed onto him or her.

g)            Annuitant driven – An annuity contract will define the actions that will depend on various conditions of an annuitant. These actions are said to be annuitant driven. The conditions that could trigger such situations are death and disabilities.

h)            Asset allocation – Within annuity investments, annuitants have the option of choosing where they could have their money invested. This is a necessary action to ensure that your money will gain high returns and reduce chances of making some losses.

i)             Guaranteed interest rates – Investing in the fixed options of annuities assures you of a minimum rate of interest, which is referred to by this term. However, these rates can change after a year. Whenever they are set, even when the market conditions deteriorate below that rate, you will still get the minimum interest.

j)             Purchase payments – These are the deposits you make into your account for investment in an annuity.

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