There are two types of annuities, immediate and deferred. An immediate annuity forms through a single, one-time premium payment, making all the benefits of the annuity immediately available.
This popular investment product might be the ideal retirement investment you’ve been looking for. Below we take a closer look at immediate annuities to help you make an informed decision.
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What is an Immediate Annuity
An annuity is a contract between you an insurance carrier in which requires the insurer to make payments to you, either immediately or in the future. The payout from your annuity may come in two ways, either a single lump sum or through income payments that can last the rest of your life.
There are two main types of annuities.
The difference between the two is how you make the purchase.
Immediate annuities form through a single, one-time, premium payment.
Deferred annuities form through a series of premium payments. Investing in an annuity this way allows you to build up your investment over time.
Both types of annuities offer the same benefits. However, an immediate annuity makes all the benefits immediately available, while deferred annuities deferred annuity benefits into the future.
Benefits of Immediate Annuities
- Single, one-time premium payment
- Guaranteed income to last the rest of your life
- Customized payout options to fit your overall financial plan
- Fixed or Variable rates of return
Types of Immediate Annuities
Immediate annuities come in three different types.
Fixed-rate annuities offer a guaranteed fixed rate of growth for your investment. As a result, you know how much your investment will grow and how much income it will produce. These products have lower yields and the ideal low-risk retirement investment.
Variable-rate annuities offer variable interest rates that fluctuate depending on market performance. These products have the potential for higher yields. However, they also carry the risk of financial loss. These products fit well with individuals who want to grow their retirement income rather than just protect it.
Indexed annuities can offer either fixed or variable interest rates. These products place your funds inside a market index and return yields based on performance.
Immediate Annuity Quotes & Illustrations
Do you need income now or in the future?
If you’re looking for an immediate source of income, then an immediate annuity may be your ideal investment. Individuals who do not need immediate income stream may want to consider a deferred annuity instead. For most individuals, deferred annuities are easier to budget.
Immediate Annuities are Ideal For Rolling Over Other Retirement Investments. They fit particularly well for individuals who have a 401K or IRA to roll over. These traditional retirement investments leave you exposed to market fluctuations. Millions of Americans saw their retirement savings disappear in the 2008 recession. An annuity can protect your retirement income while still offering real growth potential.
Retirement annuities that are part of a qualified retirement plan receive significant tax advantages. Qualified annuities form through pre-taxed dollars so you can grow your investment faster. Non-qualified annuities are not part of a retirement plan and do not have the same tax advantages.
Learn more about qualified vs. non-qualified annuities.
Not all insurance carriers are the same. Annuity companies offer different rates and also differentiate with subtle details of the annuity contract.
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