The annuity principal is the sum of money you use to buy an annuity and the base on which annuity earnings accumulate.
If you're buying a deferred annuity, you may make a one-time - or single premium - purchase, or you may build your annuity principal with a series of regular or intermittent payments.
For example, if you own an annuity in an employer-sponsored retirement plan, you add to your principal each time you defer some of your income into your account - typically every time you're paid.
When you buy an immediate annuity, you commit your annuity principal as a lump sum, and that amount is one of the key factors that determines the amount of your annuity income.
- Browse Related Terms: Account balance, Accumulation period, Accumulation unit, Annuitant, Annuitization, Annuitize, Annuity, Annuity principal, Deferred annuity, Fixed annuity, Hybrid annuity, Immediate annuity, Income annuity, Life expectancy, Lump-Sum Distribution, Minimum required distribution (MRD), Nonqualified annuity, Split-funded annuity, Systematic withdrawal, Variable annuity, Withdrawal