Immediate Annuity-

What Is an Income or Immediate Annuity?

The immediate annuity is an insurance product.  An immediate annuity is funded with a first time payment and then the policy begins making monthly payouts. Your annuity can be funded by several methods. The money could come from savings, retirement accounts, real estate or other sources of funds that are available.  After you setup the account, the insurance company will make systematic payments for a set amount of time. The payments can be for a set amount of time such as ten years or for your lifetime. Payments can be made monthly, quarterly or annually.

What determines the amount of income you will receive? The insurance company’s payment rates are determined by your age, gender and how long the payments will last. The older you are when you start payments, the greater amount the payments will be. Also some plans have inflation riders that will increase your payments to try to keep up with inflation. However, they will not increase enough to keep up with the 7% to 8% inflation we have now.  This could give you some comfort knowing that some of your living costs will be covered in the future to go along with social security.

 

When Does an Immediate Annuity Begin Making Payments

You’ll can start receiving payouts within the first month of your annuity. Usually, they have to begin in the first year of the contract.

An immediate annuity can be used to bridge the gap between when you retire and begin to take social security. If you retire at age age 65 and want to wait until you take social security at age 70, a five year immediate annuity with cover that time period. Since the payments will only last 5 years, they will be larger than a lifetime annuity.

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