An Immediate Annuity is guaranteed income that will be given almost immediately on your investment funds. An immediate annuity is exactly what you need to feel secure when you retire. This will remove the pressure on you, whatever your situation might be, after retirement. Moreover, you can recommend them to anyone thinking about buying an annuity without any reservations.
Immediate Annuities meet your essential expenses, therefore you don’t have to worry about your day-to-day expenses. It can assure a guaranteed payment from an unexpected market crash. An immediate annuity is an insurance product that gives you a guaranteed stream of income in exchange for a huge amount of cash. Immediate annuities have several advantages, such as long-term stability and tax-deferred income. It includes monthly income payments for the rest of your life.
An immediate annuity is a contract under which a company agrees to give you a fixed amount of money per month, starting immediately.
An immediate annuity is similar in structure to a pension plan: You give a company a big cash contribution in exchange for guaranteed income. It is most appropriate for people who are already retired and are looking for peace of mind regarding their retirement income. You may not need the money right away but you should make the higher monthly payments.
Before you can decide whether an immediate annuity is a good choice for you, it is important to consider the advantages and disadvantages of this type of investment.
Advantages of an Immediate Annuity
It is a good choice for you as you start receiving income on your funds right away. You cannot outlive your retirement savings. The income is guaranteed from the assets of the insurance company you buy it from. In other words, it is a stable and locked income until death. The simplicity of an Immediate Annuity is that there is no need for you to look further once you have purchased it. Moreover, there is no need for you to monitor it after investment in it.
Immediate Annuities hold tax advantages, which allow you to defer taxes, until later life, after retirement. You will be paying taxes only as you keep receiving the income and not at once.
Disadvantages and Drawbacks
In Immediate Annuities, the benefits or payments end once you die. For example, if you need to use your money in an emergency case, you will not have access to your principal you paid earlier. This includes the loss of purchasing power.
Investment Options With Immediate Annuities
Immediate Annuities offer several options in which you can choose:
- Life: fixed monthly income till death.
- Life with cash refund: an early death before your principal amount is paid, your beneficiaries will get the remaining amount. However, this feature comes with low monthly payments.
- Period certain: makes the immediate payment for a specified period of time, maybe 10 or 20 years.
- Life and period certain: immediate annuities pay income for the remaining 6 years for 10 years of specified time to your beneficiary.
- Joint Immediate Annuities: it involves two persons, especially popular among married couples. Payments are made to either of them as long as they are alive.
- Variable Immediate Annuity: a part of your principal is invested in mutual funds where your payments can grow with their market performance.
- Inflation-protected Annuities: an annual cost-of-living adjustment (COLA) is offered by certain insurance firms. This maintains your buying power of the immediate annuities income.
The advantages of Immediate Annuities outweigh the drawbacks. Therefore, they are an ideal platform for your investment for hassle-free retirement life.
