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Meaning / Definition of

Fixed Annuity

Categories: Insurance, Legal, ,

A fixed annuity is a contract that allows you to accumulate earnings at a fixed rate during a build-up period. You pay the required premium, either in a lump sum or in installments. The insurance company invests its assets, including your premium, so it will be able to pay the rate of return that it has promised to pay.At a time you select, usually after you turn 59 1/2, you can choose to convert your account value to retirement income. Among the alternatives is receiving a fixed amount of income in regular payments for your lifetime or the lifetimes of yourself and a joint annuitant. That's called annuitization. Or, you may select some other payout method.The contract issuer assumes the risk that you could outlive your life expectancy and therefore collect income over a longer period than it anticipated. You take the risk that the insurance company will be able to meet its obligations to pay.Some variable annuities offer a fixed rate account with a guarantee of principal, such as an interest account.

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Definition / Meaning of

529 College Savings Plan

Categories: Finance,

Each 529 college savings plan is sponsored by a particular state or group of states, and while each plan is a little different, they share many basic elements. When you invest in a 529 savings plan, any earnings in your account accumulate tax free, and you can make federally tax-free withdrawals to pay for qualified educational expenses, such as college tuition, room and board, and books at any accredited college, university, vocational, or technical program in the United States and a number of institutions overseas. Some states also exempt earnings from state income tax, and may offer additional advantages to state residents, such as tax deductions for contributions.You must name a beneficiary when you open a 529 savings plan account, but you may change beneficiaries if you wish, as long as the new beneficiary is a member of the same extended family as the original beneficiary.In most cases, you may choose any state's plan, even if neither you nor your beneficiary live in that state. There are no income limits restricting who can contribute to a plan, and the lifetime contributions are more than $300,000 in some states.You can make a one-time contribution of $60,000 without incurring potential gift tax, provided you don't make another contribution for five years. Or, you may prefer to add smaller amounts, up to the annual gift exclusion.

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