4 Essential Tips to Choose the Right Immediate Annuity
Shopping for an immediate annuity can feel overwhelming, with sales pitches that highlight the benefits and hide the details in the fine print. Here are four tips to help you separate hype from reality and choose the right annuity for you.
Tip #1: Relax and Take Your Time
Annuity marketing material is designed to make you feel like you should buy an annuity quickly. If you do this, you may not fully understand what you are purchasing, and you may not compare the annuity to ensure you’re getting the best deal.
Take a deep breath — you don’t need to rush when buying an annuity.
Instead, take the time to make sure you understand the annuity you are interested in. First get a handle on the basics, then look into the individual annuity details.
The Basics:
Want a good place to start? Check out our Annuity Shopper Buyer’s Guide for basic information on annuities.
The Details:
When you think you found your annuity, read the product brochure carefully, including the fine print. Or call us at (866) 866-1999 and request a sample contract. This is a generic contract where you can read the terms of the annuity contract.
Tip #2: Focus on Contractual Guarantees in Your Immediate Annuity
A lot of annuities have different “bonuses” or “features” that allow the insurance company to hype-up unrealistic rates. Remember the old saying: if it’s too good to be true, it probably is.
If you’re coming across annuity rates that seem too high to pass up, call our annuity experts at (866) 866-1999. We’ll go through the annuity with you to help you cut through the noise.
We promise to help you understand the true value of your annuity: the contractual guarantees.
Tip #3: Don’t Get Overwhelmed by Interest Rate Forecasts
A lot of people like to try to time their annuity purchases based on interest rate predictions. They do this despite financial experts’ consensus that timing the market doesn’t benefit the average investor.
Instead, focus on getting a comfortable rate that you understand from a well-rated insurance company.
You can also use strategies like an annuity ladder to ease into the marketplace, and visit our annuity trends page to understand why annuity rates fluctuate.
Tip #4: Someone Will Always Tell You What You Want to Hear
I bought two annuities this year and was extremely satisfied with the service from Immediate Annuities.com each time. In short, their staff was courteous, professional, and prompt. I would recommend them to anyone who wants to buy an annuity.
You’ve heard all the sales hype before. Clever marketing techniques can make anything sound like a great deal.
Don’t fall for it. Trust your instincts and don’t be persuaded by someone telling you what you want to hear. Chasing the golden goose instead of following common sense often leads to trouble.
If something doesn’t seem right with your annuity advisor, don’t think twice, move on. Find someone you can trust, then discuss your decision with people who are close to you before you buy.
Our U.S.-based annuity experts have a proven track record of satisfied customers and access to a wide range of products. We will help you understand how annuities work without any sales pressure or gimmicks. If you want our help, call us at (866) 866-1999. If you want to work with someone else, just make sure that they put your best interest first and will give you honest answers to your questions.
The Bottom Line:
By taking your time, focusing on guarantees instead of rate forecasts, and trusting your instincts, you’ll be better positioned to choose an annuity that fits your needs. If you’d like expert guidance along the way, our U.S.-based team is here to help.
References:
- Schwab Center for Financial Research. “Does Market Timing Work?” Schwab Center for Financial Research, July 18, 2025.
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Comments (6)
Hersh Stern (ImmediateAnnuities.com)
2015-08-05 11:47:25
Hi Dan-
I've separated your question into two parts.
1. Where will interest rates be when I'm 68?
You wrote that you think interest rates will be a little higher in two year. Perhaps. But to me it's anyone's guess.
For the past 33 years interest rates have been in a protracted down trend. And every year since 1982 they've been many talking-heads who've been predicting that rates are just about to rise. They've been wrong.
At some point, interest rates will begin to rise again and the pundits who predicted so that year will be heralded as genius market timers. You won't hear from them that they'd been saying the same thing for 10 years. But, I guess that's the nature of it.
I have a lot more to say about interest rates here:
https://www.immediateannuities.com/annuity-trends/does-an-annuity-make-sense-with-low-interest-rates.html
2. How much money will I have in two years?
You already know the stock market is volatile. Your S&P fund could be 50% higher in value in two years. Or, there's a risk that when you reach age 68 the economy will be in a deep recession and your fund will be worth half of what it is today.
So considering the uncertainties, I'm not able to guide you either way. You may be better off waiting to buy the annuity in two years. Or, you may look back with regret at having missed this opportunity.
Hersh
Dan
2015-08-05 11:29:35
I am a 66 year old male with $130,000 split 50/50 between a money market fund and an S&P index fund. Would it be better to buy a single premium immediate annuity when I retire at age 68 or buy a 2 year deferred income annuity now? I am assuming that interest rates will increase a little over the next 2 years.
Hersh Stern (ImmediateAnnuities.com)
2015-06-15 09:45:56
Hi David-
A good way to calculate how much to invest is to add up your regular expenses in retirement, subtract any guaranteed sources of income, such as Social Security and your pension, and buy an immediate annuity that provides enough income to fill in the gap.
We have a retirement savings calculator on our site which can help you go through the steps, here:
https://www.immediateannuities.com/retirement/retirement-savings-calculator.html
When you do the math, add all of your known expenses and sources of income. For example, add together your monthly expenses for housing, utilities, food, auto(s), all insurances (home, car, health) and other regular expenses. Then add up your pension plus Social Security plus any income from rental properties (after expenses) and other investments.
An immediate annuity will give you dependable income every year for the rest of your life - no matter what happens to the stock market or interest rates. But because these payments never change, your purchasing power will shrink over time with inflation. While some insurers offer immediate annuities with inflation-adjusted payouts, they start with much lower monthly payments in the beginning.
In summary, I agree with you about not tying up more than 50% of your retirement savings in an immediate annuity. This will let you invest some money at higher returns to keep up with inflation. Also, remember that once you've handed over your lump sum to buy the immediate annuity you won't be able to tap it again (except in very limited situations and only if you bought your annuity from one of the few companies that lets you do that).
One last suggestion: since you were asking about the right percentage to invest in an immediate annuity in your situation, perhaps you would benefit from a more in-depth review of your finances and retirement plans with a fee-only financial planner. I have some ideas on how to select a financial planner here:
https://www.immediateannuities.com/retirement/how-to-find-a-financial-planner.html
-Hersh
David
2015-06-15 09:40:01
I will be retiring within the next 12-14 months. I receive a modest pension and a near max SS benefit. I will have somewhat over $200K in an IRA and am thinking about using half of this for an immediate annuity and leaving the other half in the IRA, so I have access to some funds for emergencies. Does this sound reasonable?
Hersh Stern
2015-06-12 10:19:43
Hi Joe-
Really nice to hear from you and I especially appreciate your thumbs-up and acknowledgement!
You asked what I thought about your decision to split the premium three ways. I think it's a great approach and I often recommend that to clients who ask.
It is true if you invested a smaller amount of premium with each of three companies instead of buying one larger annuity that your aggregate monthly income from the three will be about 1% or 2% lower than had you purchased one annuity from the highest paying company. That's due to two factors:
First, many companies pay a tad more income on larger premiums. In your case, you'd be giving up that slight bonus.
The other reason is by splitting the premium in three parts you in effect are buying two-thirds of your annuities from companies that are not the most competitive. So you'll end up with a little less income than if you placed the full investment with the very topmost competitive company.
On the other hand, since one of the main reasons people buy immediate annuities is to secure an income stream, you're certainly adding greater security by diversifying your nest egg. I'd look at the 1%-2% reduction in income as a price worth paying for added peace of mind.
By the way, more than half of our clients who spend more than $200,000 on annuities split the premium into $100k parcels on average.
I'd also like to draw your attention to a blog I wrote on the state guaranty system which addresses your question in more detail. Read especially the Q&A section at the bottom of the page. You can find that article here:
https://www.immediateannuities.com/state-guaranty-associations/
Hersh
Joe
2015-06-12 10:17:47
I am planing to invest roughly $360,000 into a 20 year certain immediate annuity with payments starting in January, 2016. In order to simply mitigate risk (which I know is already low), is there a reason I would not want to purchase three separate annuities, each in the amount of $120,000?
Thank you!
By the way, I was doubtful that I would not receive phone calls when I requested information from you but have been pleasantly surprised. That integrity of honoring what your site said will gain you a new customer.