What Is an Individual Retirement Annuity?

by KJ Henderson ; Updated July 27, 2017
Individual retirement annuities allow individuals to save for retirement.

An individual retirement annuity, also called a deferred annuity, is an investment product offered by financial services and insurance firms, allowing consumers to contribute money to be invested over an extended period of time. Money may be withdrawn to fund retirement once an individual reaches 59 ½ years of age.

Eligibility

Contributions to an individual retirement annuity can made by an individual or both an individual and his spouse.

Contribution Limits

As of 2010, the maximum contribution limit to an individual retirement annuity is $5,000 per year. If a contributor is over 50 years old, however, the limit is $6,000 per year.

Tax Deferment

An individual retirement annuity is a tax-deferred account, meaning that contributors are not taxed on any earnings until they withdraw the funds.

Early Withdrawal

If an individual chooses to withdraw money from their individual retirement annuity before turning 59 ½, a 10 percent penalty is assessed to the transaction.

Purchasing

Individual retirement annuities can be purchased through insurance companies such as MetLife as well as from brokerage firms

References

About the Author

KJ Henderson has more than a decade of HR and talent acquisition experience. He has held roles at a Fortune 100 investment bank, a media conglomerate and at one of NYC's largest executive staffing firms. He currently heads recruitment sourcing at a major movie studio. He read literature at Oxford.

Photo Credits

  • Image by Flickr.com, courtesy of Jon Rawlinson
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