Life Expectancy Method

Definition

• A method used to determine the size of annuity payments that is calculated by dividing the value of the annuity by the annuitant's remaining life expectancy. For example, if a 65 year old woman has $1,000,000 saved in an annuity and has an estimated life expectancy of twenty years, by using the life expectancy method she should withdraw $50,000 from the annuity each year ($1,000,000 divided by 20).

Synonyms
certain method, recalculation method

Related Terms and Acronyms

• Accumulation Period (AP) — Acronym, Important,
  • The period where an investor continues to put money into his or her investment(s).
• Annuitization — Definition,
  • The process of turning a retirement plan or annuity into income in the form of periodic payments or a single lump sum.
• Annuity — Definition,
  • A regular periodic payment made by an insurance company to a policyholder for a specified period of time.
  • A financial instrument that disperses a number of payments over a set period of time.
• Annuity Factor Method — Definition,
  • A way of determining the maximum amount an annuitant can withdraw from an annuity before penalties are applied.
• Annuity Table — Definition,
  • A table that can be used to find the future value of an annuity.
• Commissioners' Reserve Valuation Method — Definition,
  • A method used to determine the minimum statutory reserves for annuities and insurance products.
• Deferred Annuity — Definition,
  • An annuity that makes payments to the annuitant at some date in future instead of immediately.
• Life Annuity — Definition,
  • An annuity that will continue to make payments until the death of the annuitant.
• Payout Phase — Definition,
  • The phase of a deferred annuity where the annuity begins to make payments to the annuitant.
• Present Value Interest Factor of Annuity (PVIFA) — Acronym,
  • A method used to find an annuity's present value.
• Split-Funded Annuity — Definition,
  • Two annuities purchased together, one with a deferred payout and the other with an immediate payout.
• Straight Life Annuity — Definition,
  • An annuity that stops all payments upon the annuitant's death.
• Substandard Health Annuity — Definition,
  • An annuity with increased income payments for people with shorter life expectancies due to medical conditions.
• Tax Deferred Annuity (TDA) — Acronym, Important,
  • A type of annuity where taxes are deferred until the annuitant decides to withdraw money from the annuity.
  ➥ More commonly known as a Tax Sheltered Annuity (TSA).