Economics

All You Need to Know About Immediate Annuities

October 24, 2008 nnyq.com edit An annuity has been one method of investing for the future for a very long time. An annuity is a payment that may accumulate value and take the current value and pay it back to you over a period of years. At first there was only one option, but nowadays there are many. One of these options is called the immediate annuity, which is done through an annuity insurance company. You invest in an immediate annuity when you make a payment to the annuity insurance company, and then you will start to receive payments right away. This is much unlike a deferred annuity option, where you have to wait a specific amount of time before receiving payments.

An immediate annuity tends to have a lower interest crediting rate than a fixed or variable annuity because it starts paying right away. Regardless of this, it does have other benefits that will balance out the cons.

So How and When Would I Benefit From This Kind of Annuity?

An ideal candidate for an annuity is someone who has just received a large amount of money in a variety of ways. A few examples would include gaining an inheritance, winning the lottery, or some other method that leaves you with a large lump sum of money. A lot of people choose annuities to ration the money so they will be able to control their spending and make the money last. Far too many people would be tempted to use it all at once, and want to ensure it's available for the future.

The two options you can choose from with an immediate annuity is a variable immediate annuity, and a fixed immediate annuity. A fixed annuity will ensure all the payments stay the same with each time variable you choose for payment (weekly, monthly, quarterly, etc.) Most people go this route since it's easy to anticipate the income. Some may want to go with the variable annuity because of low interest rates and strong equity.
So What Are The Advantages of Immediate Annuity?

There are many benefits to an immediate annuity. One is having the option of receiving payments for the rest of your life, or only for a specific time. It provides a dependable source of income that you can depend. The security an annuity can bring in the later years of life is something that everyone desires.

Also, it is the most simple of all annuities, because there is no portfolio needed. You will have a source of income immediately after the annuity is purchased, and the payments may be made weekly, monthly, quarterly, yearly, or at any other interval of time. You are able to choose any length of time, and in some cases, the method of payment. A few examples of this are regular deposits to a savings account, monthly home mortgage payments and monthly insurance payments.

There are a few forms of immediate annuity, and it is important to decide which is best for you. A few examples are the "Straight life annuity" and "Joint and Survivor annuities". A "Straight Life Annuity" makes periodic payments to the annuitant until his or her death, at which point the payments stop completely. You will be unable to designate a beneficiary. A "Joint and Survivor Annuity", also known as a "Joint Life Annuity" is issued to two individuals under which payments continue in whole or in part until both individuals die. Keep in mind, this is only a few of the options. You will be able to receive all of the payments in any specified amount of time if you like.

Before you make a final decision on what annuity you plan to take, you should gather information about the rates and get a few annuity quotes to gauge which deals are better than others. You can do this online with ease, or talk to an annuity insurance company about other options.