Immediate Annuity Discover how an immediate annuity provides lifetime income. An immediate annuity lets you convert all or part of your retirement savings to a guaranteed stream of income that you can count on for the rest of your life. This type of annuity gives you the security of knowing you will continue to receive money each and every month – even if you live to be 100 or older.
How an Immediate Annuity Works You can buy an immediate annuity with funds available from a 401k, IRA, savings account, life insurance policy, inheritance, or even the sale of a home or major asset. An insurance company that you select provides the immediate annuity to you for a set upfront cost, and agrees to make regular scheduled payments to you either by check or automatic deposit to your bank. You can choose how often you receive a payment from the annuity, such as every month, quarter or yearly. The amount of income you receive is based on the amount of money you initially contribute, plus a number of factors including your age, sex, income option selected, and interest rates at the time of purchase.  An immediate annuity could be right for you if:
- you want the certainty of knowing you won’t outlive your income
- you have retirement expenses not covered by your monthly pension
- you want to eliminate future money management of your savings
- you want to protect assets from high nursing home costs
Immediate Annuity Payout Options There are many different types of payout options you have with an immediate annuity, with the most commonly available including:  Each payout option includes its own set of unique advantages and benefits depending on your individual need, age, objectives, health, and income requirements. Look for a qualified financial planner that can help you through objective and independent advice to get the most from your specific plan. Quick Tips on Immediate Annuity Contracts
Be leery of the immediate annuity calculators you may find online. Many of them are biased as they are aligned with low or no interest products that will not give you the best performance rate for future income generation. Not all annuity calculators are created equally!
In some states, the immediate annuity is also known as a Medicaid annuity, as long as it is actuarially sound and irrevocable. For certain circumstances, a Medicaid annuity can help preserve and protect assets you have accumulated from rising nursing home costs. (Contact us for current legislation in your state.)
The immediate annuity is a very important part of the split annuity strategy, whereby part of your savings is utilized to generate monthly income, while the balance works to fully restore your original principal over a 5 to 10 year period. A split annuity is a great alternative to a CD, as it can dramatically increase the income side, and still guarantee a return of principal for reinvestment or transfer to your heirs.
Sometimes individuals want to start their income from an immediate annuity at a period later in the future. The immediate annuity can also be purchased and deferred to create income as far out as twenty years when needed. This can be an excellent planning tool if a 58 year old wants to make sure they have $1000 for life starting on his or her 65th birthday.
An immediate annuity is sometimes now being used to fund premiums on life and long term care insurance policies, transforming a small savings amount into a permanent guaranteed lifetime protection policy with no future worries or financial requirements.
If you would like more information on immediate annuities, a member of the Annuities Institute would welcome a personalized and objective interview to discuss how they could work within your financial plan. Request a friendly and no-obligation interview today, or call us toll free at 1-888-429-3070. |
