Dictionary. com defines an annuity in two ways, firstly: a specified income payable at stated intervals for a fixed or a contingent period, often for the recipient's life, in consideration of a stipulated premium paid either in prior installment payments or in a single payment… come again? (Since this sounds a bit confusing, we’ll define this in layman’s terms: the annual payment of an allowance or income.) Secondly, the site defines an annuity as the right to receive such an income, or the duty to make such a payment or payments.
We are constantly told that if we haven’t started investing in annuities, we are far behind. But, considering the above definition that an annuity is basically an annual allowance, haven’t we been implementing this concept from an early age?
- Every birthday I’ve had, my grandmother has issued me an allowance of between $5 and $100
- One thing I miss the most about going back to school is the “annual allowance” my parents gave me to use toward supplies and new clothes.
- After filing my taxes by April 14, the IRS returns me what they declare to be my annual allowance.
While my personal experience with annuities thus far is limited to birthday presents, school supplies and tax returns, haven’t these incidents laid a foundation for my understanding of this savings vehicle?
As a producer, sit down and think about the most basic and succinct way to describe an annuity to a client. How few of words can you use to describe this product? Please post your attempts below.