Flexible premium indexed annuity
An Flexible Annuity is a tax-deferred annuity that will accept multiple premium payments while the annuity is in an accumulation period. FPDA annuities may accept salary reduction payments, bank draft or pre-authorized check plan payments, transfers, rollovers, and single sum direct payments. Some Flexible Premium Deferred Annuities require ongoing payments while others do not. FPDAs may be purchased with qualified or non-qualified monies.
1. Flexible Premium Deferred Annuity (FPDA): A Flexible Premium Deferred Annuity is a financial contract offered by insurance companies that allows the contract holder to make multiple premium payments over time. These payments are made during an accumulation period, and the annuity grows on a tax-deferred basis until the contract holder decides to start receiving payouts.
2. Tax-Deferred Growth: One of the main advantages of an FPDA is that it offers tax-deferred growth. This means that any earnings or interest generated within the annuity are not taxed until the funds are withdrawn.
3. Premium Payments: FPDA annuities are characterized by their flexibility in terms of premium payments. They can accept various forms of premium payments, including:
· Salary reduction payments: Contributions made directly from an individual's salary.
· Bank draft or pre-authorized check plan payments: Automatic payments set up from a bank account.
· Transfers and rollovers: Moving funds from other retirement or investment accounts into the annuity.
· Single sum direct payments: Lump-sum contributions.
4. Ongoing Payments: Some FPDA annuities require regular and ongoing premium payments, while others may allow more sporadic or irregular payments. The flexibility in payment schedules makes it convenient for individuals with varying financial situations.
5. Qualified and Non-Qualified Monies: FPDA annuities can be purchased using both qualified and non-qualified funds:
· Qualified funds: These are funds from tax-advantaged retirement accounts like 401(k)s or IRAs.
· Non-qualified funds: These are funds from sources other than retirement accounts, such as personal savings.
6. Accumulation Period: The accumulation period is the phase during which the annuity's value grows because of premium payments and potential investment gains. The annuity holder can defer making withdrawals until a later date, typically during retirement.
7. Payouts: At the end of the accumulation period, the annuity holder can choose to start receiving payouts. These payouts can be structured in various ways, such as regular income payments or lump-sum withdrawals.
