Prescribed Annuity

compare with a nonprescribed annuity

  • spread capital evenly over the expected benefit period
  • each payment is a blend of interest and return of capital → good for tax planning


  • less interest is reported in the early years → less tax → more net income
  • you know exactly how much taxable income is reportable each year

Qualifying Prescribed Annuity

  • level benefit payments
    • exception: Joint Last and Survivor (JLS) where the payment can be reduced for the surviving annuitant upon the first death
  • benefit payments start by December 31 of the year following purchase
  • the annuitant owns the contract
  • a Term Certain Annuity matures by age 90
    • age based on the younger life for a Joint and Last Survivor annuity


  • same tax burden each year
  • interest and principal portions of each annuity payment is fixed and constant for the life of the annuity
  • interest earned on the annuity principal is reported on a level basis over the life of the annuity
  • reduces tax in the early years, meaning higher after-tax income in the early years
  • same total amount of income tax as a nonprescribed annuity, but the timing differs

PS Network

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