An immediate annuity is an agreement between you and your insurance company which, simply put, states: You will immediately pay the insurer a lump sum of money. The insurer, in return, will start making regular monthly payments to you, and do so normally for the rest of your life. The immediate annuity starts paying you money immediately (or very shortly after, usually within a year) upon the signing of the contract.

There are numerous benefits to you when you purchase an annuity. First, your future income is guaranteed for the rest of your life. The risks you were facing before purchasing an annuity – economic instability, or simply running out of funds at an advanced age – all these are now assumed by the insurer. Second, you no longer have to spend time managing your money. The insurance company invests the money in your stead, and pays you the agreed upon amount every month. The third benefit is tied to the second – there are no direct administration or transaction fees on your money, as there would be with most investment and savings plans. The fourth benefit comes in the form of high returns – annuity interest rates are generally higher than Certificate of Deposit (CD) or Treasury rates, and since a portion of the principal is paid out each time, the monthly payments are greater than the accrued interest alone. Depending on the type of annuity you select, you may also be able to save on taxes.

The basic arrangement, what is known as a Straight Life Annuity, tends to yield the highest interest. However, that type of annuity may not be the best choice for you, and insurance companies are prepared to offer you many choices. Some of these are listed below:

• Period Certain Annuity: The money is guaranteed to be paid out for the defined period, to you or, should you pass away before the period ends, to your beneficiaries. Note that you may outlive this annuity.
• Period Certain & Continuous Annuity: The income is guaranteed for your lifetime, but should you pass away before the end of the period, your beneficiaries are paid the annuity until the period end.
• Joint & Survivor Annuity: Two people receive the full monthly payment. Should one of them die, the other continues to receive a pre-determined portion of the annuity payments (generally 50%-75%).
• Variable Income Annuity: In a fixed income annuity, the amount you receive each month is pre-determined. You may purchase a variable income annuity, instead, in which your monthly payment is directly tied to how well the investments of your choice performed. You may also combine the two, guaranteeing a portion of your monthly payment, and potentially earning a higher return on the variable income portion.

This list is anything but complete; you should consult a professional insurance broker to determine which variation, or combination of variations, will be most suited to your needs.

An immediate annuity can be an extremely effective and versatile tool for ensuring your financial future. Our expert insurance professionals can help you determine the best combination of annuity options for you. Click here for a

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