Qualified Longevity Annuity Contract and Quarterly rate: Difference between pages

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imported>Doug Williamson
(Create page. Sources: linked pages, US Treasury webpage https://www.treasury.gov/press-center/press-releases/Pages/jl2448.aspx and Immediate annuities webpage https://www.immediateannuities.com/qlac-qualified-longevity-annuity-contract/)
 
imported>Doug Williamson
m (Category added 9/10/13 and spacing)
 
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''Pensions - defined contribution - US.''
The quarterly rate of interest (or yield) is a quoting convention for the simple interest ''nominal annual rate'' for compounding once per quarter (four times per year).


(QLAC).
For example, if the quoted quarterly rate is 6.00%, the amount of interest compounded quarterly is 6.00%/4 = 1.50%.


Longevity annuities are designed to deal with the US pensions problem of retired people 'outliving their savings' caused by the US Required Minimum Distributions rules.
Not to be confused with the related ''annual effective'' rate, which in this case is 1.015<sup>4</sup> - 1 = 6.14%.
 
Longevity annuities do not start paying out until later in life, so they can pay out higher annual amounts in those later years, while still enjoying favourable tax treatment.
 
 
'Qualified' refers to the compliance with the tax rules, so as to enjoy favourable tax treatment.
 
A qualified longevity annuity contract is exempted from the US Required Minimum Distributions (minimum withdrawal) rules.
 
So that more of the total retirement fund can be retained to support income in the later years of life.
 
 
Longevity annuities are contrasted with immediate annuities, which start to pay out immediately.




== See also ==
== See also ==
* [[401(k) plan]]
* [[Annual effective rate]]
* [[Annuity]]
* [[Nominal annual rate]]
* [[Contributions]]
* [[Periodic rate of interest]]
* [[Defined contribution pension scheme]]
* [[Internal Revenue Service]]
* [[Occupational pension scheme]]
* [[Required Minimum Distribution]]
* [[Stakeholder pension scheme]]
* [[United States]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Manage_risks]]
[[Category:The_business_context]]
[[Category:Financial_products_and_markets]]

Revision as of 13:59, 9 October 2013

The quarterly rate of interest (or yield) is a quoting convention for the simple interest nominal annual rate for compounding once per quarter (four times per year).

For example, if the quoted quarterly rate is 6.00%, the amount of interest compounded quarterly is 6.00%/4 = 1.50%.

Not to be confused with the related annual effective rate, which in this case is 1.0154 - 1 = 6.14%.


See also

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