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Resource Center > Annuities GlossaryAAccumulation UnitMoney paid in or transferred into an investment division of the Separate Account is credited in the form of accumulation units. Any increase or decrease in value is based upon the investment performance of the corresponding underlying investment portfolio. After Tax SavingsTerm used to describe investments or contracts purchases with money that has already been taxed. Also known as "non-qualified" investments or contracts. Annual Step-up Death BenefitA type of variable annuity death benefit available in Preference Plus Select® that can protect purchase payments and earnings by locking in performance gains each year on the contract anniversary. The key benefit is that it can provide a safety net against market downturns. See Preference Plus Select Product Prospectus for more information, including charges. Annual Step-up/ 5% Increase Death BenefitA type of variable annuity death benefit available in Preference Plus Select that can protect purchase payments and earnings by locking in performance gains each year on the contract anniversary, plus provides a 5% annual compounded "floor" on purchase payments. See Preference Plus Select Product Prospectus for more information including charges. AnnuitantThe person(s) on whose life the income payments are based. The contract owner decides who the annuitant(s) will be. AnnuitizeTo convert the account balance under a deferred annuity contract into a stream of income, either for one or more lifetimes or a specific period of time. AnnuityA tax-deferred contract that can provide an income for a specified time period, such as a number of years or for life. There are two types of annuities: deferred annuities, which allow you to grow your assets tax deferred and convert your account balance to income payments at a later date, and immediate annuities, which generally allow you to receive income payments right away. Annuity DateThe date when your annuity income payments begin. This date usually appears in your annuity contract. You may be able to change this date, with limitations, before you reach the annuity or maturity date. Asset AllocationA financial strategy for investing money into various asset classes - such as stocks, bonds and cash - based upon your financial goals, risk tolerance and time horizon. Asset allocation has two main advantages: it can help increase investment returns and reduce risk. BBenchmark IndexCommonly refers to stock or bond indexes used to measure market performance and to compare the relative performance of an investment portfolio. Investing directly into an index is not possible. In addition, these benchmark indexes do not have transaction costs and other expenses as does an investment portfolio. BeneficiaryGenerally, the person(s) who receive(s) money upon the death of the annuity's contract owner or annuitant. The contract owner decides who the beneficiary will be. BondsAn IOU or promissory note issued by companies or governments and their agencies. Bonds provide income and some growth potential but not as much growth potential or historical price fluctuations as stocks. The amount of interest paid by a bond varies depending on its credit risk (the risk the issuer will repay the loan) and on its maturity risk. High quality, short-term bonds generally pay the lowest yields, and low quality, long-term bonds pay higher yields. CCash EquivalentsA security that can be readily converted into cash (e.g. Treasury bill or money market fund). Contract OwnerThe person(s) or entity who purchases the annuity and has all rights to the contract. In a variable deferred annuity, like Preference Plus Select for example, this person can make investment decisions, transfer money among funding options, make withdrawals, and name the annuitant (usually the contract owner) and the beneficiary. Credit RiskThe risk that a creditor or bond issuer will not pay the interest and/or principal owed when it is due. DDeath BenefitThe guarantee that if you should die before you convert your variable annuity into regular income payments (annuitize your contract), your annuity's beneficiaries will receive the higher of the account value or a different amount specified in the deferred annuity (such as the amount you contributed to the annuity, less withdrawals). In many variable annuities, the death benefit can increase over time. Deferred AnnuityA type of personal retirement account that provides tax-deferred growth potential for long-term goals, such as retirement. When you are ready to receive income payments, the deferred annuity provides many choices, including guaranteed income for life. There are two types of deferred annuities: fixed and variable. DiversificationA financial strategy to help reduce risk by spreading your assets across different asset classes, such as stocks and bonds, or across different types of securities within the same asset class. For example, you can diversify your stock holdings into stocks of different industries. Dollar Cost AveragingA financial strategy of making investments at regular intervals with a fixed dollar amount. A key benefit is that over time, your average per unit cost should be lower than either the market high or the average price. Dollar cost averaging does not guarantee a profit or protect against a loss. It involves continuous investment in securities regardless of fluctuating prices. You should consider your financial ability to continue purchases through periods of low price levels. EEnhanced Dollar Cost Averaging ProgramA type of dollar cost averaging program that offers a potentially higher interest rate under certain circumstances. For example, these programs typically offer a higher guaranteed rate of interest for new purchase payments only, have a limited time period, and may require a minimum payment. The Enhanced Dollar Cost Averaging Program specified amounts of money are automatically transferred from a fixed account to an investment division over a specified period of time. Expense RatioThe amount, as a percentage of your total annuity account balance, that you pay annually for investment and insurance-related charges. FFixed AnnuityA tax-deferred annuity that guarantees you will earn stated or declared rates of return during the savings phase. When you convert this money into income payments, you will receive a fixed amount of income on a regular schedule. Flexible Premium AnnuityAn annuity that accepts periodic contributions, which can usually be made at any time (as opposed to single premium). Free Look PeriodPeriod of time after an annuity contract is issued and delivered (usually between 10 and 30 days) when the owner may cancel the contract and receive either their initial payment or the current value of the annuity contract. State rules vary. GGuaranteed Minimum Income BenefitA type of "living benefit" in a variable annuity that can provide a guaranteed minimum future income level regardless of how the stock and bond markets perform. This benefit is usually available for an additional annual fee and must meet certain requirements. For example, the owner may be required to own the contract for a specified time period before exercising the benefit. This benefit guarantees a fixed income stream by calculating the value of purchase payments compounded annually at a specified rate. This benefit grows independently of investment performance. However, you must annuitize the contract to receive this benefit, generally at conservative annuity purchase rates. This benefit does not establish or guarantee investment performance or a minimum account balance. HHigh-Yield BondsLower-rated bonds, or bonds rated below investment grade quality (also known as "junk bonds"). These bonds typically have higher yields than investment grade bonds but also have higher credit risk, or risk that the issuer will not pay the interest and/or principal when it is due. High yield bonds generally fluctuate more in value than investment grade bonds. Historical PerformanceThe return on an investment or an investment portfolio over its lifetime or certain periods of time. IImmediate AnnuityAn annuity contract that you generally buy with a lump sum and from which you begin receiving income within a short period, always less than 13 months. An immediate annuity can be either fixed or variable. Income OptionsThe various ways to receive income payments that an annuity contract offers. Many annuities offer a variety of options you can choose from, including guaranteed income for life. Index PortfolioInvestment portfolio that attempts to mirror the performance of a benchmark index, such as the Standard and Poor's® 500 Composite Stock Price Index ("S&P 500®"). The portfolio tends to hold all or many of the same stocks or bonds that are tracked by the actual index. Index portfolio fees may be lower than those of other portfolios because there is relatively little buying and selling of portfolio securities. Individual Retirement AccountA tax-deferred retirement account for individuals that allows a contribution of 100% of earned income up to a maximum of $3,000 per year in 2004. See the table below for increased limits and age considerations. Under current law, these increased limits expire after 2010.  With a Traditional IRA, some or all of the contribution may be tax deductible, depending on the individual's income level and coverage by qualified retirement plans. With a Roth IRA, the contribution is not tax deductible, but all earnings are tax free, provided certain conditions are met. Inflation RiskThe risk that the rising cost of goods and services will reduce the value of your investment, and your buying power, over time. Interest Rate RiskThe risk that interest rates will rise and reduce the value of an investment. For example, bond prices generally move in the opposite direction of interest rates. As interest rates rise, bond prices generally fall, and vice versa. Investment ChoicesThe investment portfolios offered in a variable annuity are sometimes referred to as investment choices, subaccounts or investment divisions. Many variable annuities offer a wide range of stock and bond investment options, with different risk levels. Investment ObjectiveA financial goal a client hopes to achieve through investing. Common investment objectives include: Preservation of Capital, Income, Growth and Income, Growth and Aggressive Growth. Investment-Related ChargesIn a variable annuity, the investment-related charges are the annual amount you pay to cover the costs of the professionals who manage the investment portfolios and the expenses incurred by the portfolios and 12b-1 fees. The amounts you pay depend on which investment options you select. JJoint AccountAn account in which two or more individuals are co-owners. MMarket RiskThe chance that the stock or bond markets, or the economy as a whole, may stumble. Minimum Distribution ServiceFederal tax law and regulations generally require that you begin taking minimum distributions from your Traditional IRAs, SEPs and SIMPLEs by April 1st of the calendar year following the year in which you reach age 70½. Some companies, including MetLife, offer a Minimum Distribution Service on many products that calculates the minimum withdrawal required by Federal tax law for your MetLife IRA. PProspectusThe legal document that provides detailed information about your variable annuity contract. It must be given to every person who is offered to buy a variable annuity contract. Purchase PaymentsThe contribution(s) made to an annuity. Some annuities allow you to make a single contribution, and some allow you to make multiple contributions on a regular basis, or anytime you like. QQualified AnnuityAn annuity contract you generally buy with pre-tax dollars as part of a tax-qualified retirement plan. RRenewal RateThe new, declared interest rate for money that has completed the initial guaranteed interest rate period. In a fixed deferred annuity, for example, the interest rate on your contract may be renewed periodically, usually every year, to reflect current market conditions. RiskA measure of the price volatility of an investment. There are different types of risk, including credit risk, interest rate risk, inflation risk and currency risk. Roth IRAAn IRA that enables your earnings to grow tax free, if certain conditions are met. Roth IRA contributions are not tax deductible, and are purchased with after-tax dollars. Like traditional IRAs, your contributions are limited to $3,000 per year in 2004. See the table below for increased limits and age considerations. Under current law, these increased limits expire after 2010.  Eligibility is based on Adjusted Gross Income (AGI) limits. For single taxpayers, you may contribute to a Roth IRA if your AGI is under $110,000. For married taxpayers filing jointly, the combined AGI must be under $160,000 to make the maximum contribution. SSavings and Investing PhaseTime period during a deferred variable annuity contract when money is invested and/or left to grow on a tax deferred basis. Also known as the Accumulation Phase. Separate AccountThe account established by an insurance company to hold the money you contribute to the investment choices in your variable annuity. It is separate from the company's general account. Money in the separate account is not available to the company's general creditors. Separate Account ChargeAn annual fee in a variable annuity that pays for insurance related charges, such as mortality and expense risks. The mortality portion generally pays for: the guarantee to pay you a lifetime income, even if you live longer than originally estimated; and the guarantee to pay your beneficiary a death benefit, even if it is larger than your account balance. The expense portion pays for the guarantee that your contract expenses won't increase, even if costs are greater than estimated. This charge also pays for distribution costs. Spousal Continuation OptionA feature that enables the annuity owner's surviving spouse to continue the annuity contract, if the owner dies before annuitizing the contract. Generally, the contract may be continued at the highest of the account balance or the death benefit amount. Surrender ChargeSee Withdrawal Charge. Systematic Withdrawal ProgramA program that allows for periodic payments from an annuity, for example on a monthly, quarterly, semiannual or annual basis. In a variable deferred annuity, you can generally make systematic withdrawals from your contract while keeping the rest of your money invested in the funding options. TTax-Free TransfersThe ability to move money between the investment choices and fixed account within a variable annuity without incurring current taxes. In most annuities, these transfers are free of charge. Tax-Sheltered AnnuityA tax-deferred annuity available only to employees of schools, nonprofit hospitals and certain other tax-exempt organizations in which your contributions are made through payroll reduction on a pretax basis (up to certain limits). All earnings grow tax deferred until such time as you make any withdrawals. UUnit ValueThe dollar value of a single accumulation unit or annuity unit in a particular investment division. Unit value changes to reflect the current value of the underlying portfolios that correspond to the investment division. VVariable AnnuityA type of annuity in which the account balance may fluctuate based on the value of investment portfolios underlying the separate account. The contract owner has the ability to allocate money among several available investment choices. The contract owner, not the insurance company issuing the contract, assumes investment risks. Variable Immediate AnnuityAn income annuity that begins providing income payments right away, or soon after purchase. The amount of the payments is based upon the performance of the investment choices that you select. VolatilityThe speed and extent to which the price of a security or an investment rises and falls within a given period of time. WWithdrawal ChargeThe penalty imposed by an annuity issuer for early withdrawal. The withdrawal charge will be set forth in the annuity contract. WithdrawalsMoney that you withdraw from your annuity. In a deferred annuity, you can generally make full or partial withdrawals, although a withdrawal charge may be imposed. A tax penalty may also be imposed. YYieldThe rate of return on an investment, generally expressed as a percentage of the current price. |
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