ANNUITY IN ARREARS Meaning and
Definition
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An annuity in arrears is a type of financial arrangement or payment in which regularly scheduled payments are made at the end of a given period, typically on an annual basis. This means that the payment is made after the time period has elapsed, hence the term "in arrears."
In the context of annuities, this payment structure is commonly seen in retirement plans or insurance policies. For example, an individual who receives a yearly annuity in arrears will receive their payment at the end of each year, rather than at the beginning or in regular intervals throughout the year.
The distinction between an annuity in arrears and an annuity in advance is important when considering the time value of money. With an annuity in arrears, the recipient must wait for the payment, reducing its present value compared to an annuity in advance, where the payment is received at the beginning of the period.
This payment structure can have implications for cash flow management and planning for individuals or organizations receiving annuities. Understanding the terms and conditions of an annuity, including whether it is paid in arrears or in advance, is crucial to effectively budget and manage personal or business finances.
Similar spelling words for ANNUITY IN ARREARS
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- errors and omissions.
