GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Life Expectancy Method


Synonyms:certain method, recalculation method
Filed Under: annuities, investments
Tags: annuity, investment
 

Definition of life expectancy method

life expectancy method
1. 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).

Related Terms and Acronyms:

  • accumulation period (AP)   The period where an investor continues to put money into his or her investment(s).
  • annuitization   The process of turning a retirement plan or annuity into income in the form of periodic payments or a single lump sum.
  • annuity   A financial instrument that disperses a number of payments over a set period of time.
  • deferred annuity   An annuity that makes payments to the annuitant at some date in future instead of immediately.
  • life annuity   An annuity that will continue to make payments until the death of the annuitant.
  • payout phase   The phase of a deferred annuity where the annuity begins to make payments to the annuitant.
  • split-funded annuity   Two annuities purchased together, one with a deferred payout and the other with an immediate payout.
  • straight life annuity   An annuity that stops all payments upon the annuitant's death.
  • substandard health annuity   An annuity with increased income payments for people with shorter life expectancies due to medical conditions.
  • tax deferred annuity (TDA)   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).

More Related Terms and Acronyms

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