Interesting Facts About Immediate Annuities

Annuities are contracts between an insurance company and an individual, whereby the individual pays a certain amount of money with the guarantee that the insurance company will pay back the principal plus interest within a certain period of time. Immediate annuities are annuities where you begin receiving payouts immediately within the next payout period whether you opted for a monthly, quarterly or annual payout plan. People usually purchase immediate annuities with a single premium and can purchase an annuity for a certain period of time, for life, or for their lifetime and that of another person. The payout depends on the amount paid as premium, the type and duration of payout that was selected, the kind of immediate annuity selected (fixed or variable), and the purchaser's personal details.

Immediate Annuities A Means To Ensure You Do Not Outlive Your Savings

Annuities are popular because they are a means to ensure you have enough money in your old age. They are basically thought of as retirement planning tools. Immediate annuities guarantee an immediate and consistent income for as long as you choose. Income is guaranteed from within a year of purchasing the policy. A basic immediate annuity can cost around $10,000; the interest rates and payout are consistent and never change.

If you were to buy immediate annuities privately, a considerable part of your monthly payout will be tax-free, with interest being charged only on the "earnings" part of the payout. If the immediate annuity was purchased within a company pension, it is taxed fully.

Disadvantages Of Immediate Annuities

The returns are very mediocre and not modest, heirs do not get any part of the payout, and if a person bought a lifetime immediate annuity for $100,000 and died within a year, the remaining cash will get credited to the carrier. These are not like other annuities in that they are not designed specifically to help in retirement planning; they just provide a guaranteed and steady monthly income. So shop around and find a good carrier, and get a steady monthly income for life with part of your savings, leaving behind the rest as legacies.

 

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