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 Money may be withdrawn to fund retirement once an individual reaches 59 ½ years of age.
Contributions to an individual retirement annuity can made by an individual or both an individual and his spouse.
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.
An individual retirement annuity is a tax-deferred account, meaning that contributors are not taxed on any earnings until they withdraw the funds.
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.
Individual retirement annuities can be purchased through insurance companies such as MetLife as well as from brokerage firms
- Image by Flickr.com, courtesy of Jon Rawlinson