Annuities are an investment option that has been around for quite a while, but there are many different kinds available today. An immediate annuity is only one type, but it could be the best choice for you. Read on to see if this might be the case.
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In an immediate annuity, you make a payment to an annuity insurance company, and you begin receiving payments immediately (hence the name). If you had chosen a deferred annuity investment, payments do not begin for a pre-specified amount of time, which can be anywhere from a few months, or a year, or even a couple of decades. The interest rate is lower on immediate annuities than other types, such as variable rate and deferred annuities, but the main benefit is that it begins paying you right away. There are also other advantages to an immediate annuity.
Prime Candidates for Immediate Annuity
Because of the lower interest rate, some people may shy away from this type of annuity, but it is actually a good choice for someone who has just come into a large sum of money and isn’t sure what to do. An inheritance, lottery winnings, or a settlement are all good examples of money that could be put to better use in an annuity. The annuity gives people a way to measure out their money over a long period so that they do not spend it all immediately and regret it later.
There are two types of immediate annuities available: fixed-rate and variable-rate. Most people choose the fixed-rate option because they are guaranteed that every payment will be for exactly the same amount, which provides a great measure of security and peace of mind. However, the variable-rate option carries a greater equity and can have a better interest rate.
Immediate Annuity Benefits
An immediate annuity can be set up so that you receive payments for only a specified amount of time or for the rest of your life. Besides that, there is no need to manage a portfolio with this type of investment. You will begin receiving your payments immediately upon investing, and you can set your payment terms so that you receive the payments in the manner that best suits you: monthly, quarterly, bi-annually, or annually.
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As with all annuities, there are different types of immediate annuities to pick and choose from, so choose an annuity company who can fully explain the different kinds and help you pick the best one for your situation. There are many strange-sounding terms such as “survivor” and “joint” annuities, or “straight life” annuities, and “index” annuities, but the company should be able to guide you through the process of choosing the right one.
Research several different companies, and go with the one who seems the most informative and offers the best rates. Don’t be afraid to take your time, so you can make the best choice and have a secure financial future.