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Annuities Immediate Annuity

Regular and guaranteed income irrespective of any adverse market changes and irrespective of economic changes.
Choice of payout periods that can start from as early as 1 year and go right up to your entire lifetime.
Unlike mutual fund investments, there are no commissions are loads to worry about. Nothing cuts into your check amount!

An Overview on Immediate Annuities

Immediate annuities are wonderful investments that allow you to reap the benefits of a one time premium deposit in the form of a regular stream of guaranteed earnings that can either go on for the lifetime of the annuitant or can be limited to a pre-specified number of years. A single premium immediate annuity is a non-qualified contract that falls under the fixed annuity contract umbrella. Most insurance companies that give out single premium immediate annuities usually give out the option of choosing the best payment option that suits your needs.

Single Premium Immediate Annuities

No matter what your stage in life and no matter what your financial background, everyone plans for his or her post retirement years. Finding a way so that today’s income can be used in some way today, so that it can provide the lift of regular income in the later years is imperative to proper retirement planning. One way to achieve this financial independence in the later years is to invest properly today. An annuity is one investment avenue that provides a steady stream of incomes when you need them in the twilight years of your life. Not only do annuities pay out a guaranteed income stream over a number of predetermined years or even an entire lifetime, but they also give the following:

  • Regular and guaranteed income irrespective of any adverse market changes and irrespective of economic changes.
  • Choice of payout periods that can start from as early as 1 year and go right up to your entire lifetime.
  • Unlike mutual fund investments, there are no commissions are loads to worry about. Nothing cuts into your check amount!

There are several different types of annuities that you can choose from, depending on your financial goals as well as your personal needs. We will take a detailed look on what immediate annuities entail.

Salient Features of Immediate Annuities

Here a look at some of the features that are a part of single premium immediate annuity contracts:

1. 15 Day Review Period The annuitant has 15 days after the purchase if an immediate annuity contract to review the contract terms and cancel the contract if he or she thus wishes to do so. In case of such a cancellation, the annuitant shall receive a refund of the full amount paid as initial premium towards the annuity contract.

2. Amount Choices As Single Premium The single premium amounts for an immediate annuity contract can range between the minimum amounts of $10,000 to the maximum amount of 1 million dollars per single annuity contract owner. As the name ‘single premium annuity’ suggests, no additional premiums can by put into an already existing contract and people wishing to invest more in them need to purchase new immediate annuity contracts. The payments received by the annuitant depend not only on the premium amount put in by him or her but also on the payment options that have been chosen for the payouts.

3. Annuity Payment Guarantee Immediate annuities come with the issuing company’s guarantee when it comes to the annuity payments, irrespective of whether they are for a fixed limited period or for lifetime. This guarantee is often specified in the contract when you purchase the immediate annuity.

4. Payment Frequency The payment frequency is entirely up to the annuitant and he or she may choose to receive it every month, every quarter, every six months or even every year. Immediate annuity payments are made in the beginning of each period and the payment modes can be changes by the annuity owner during the course of the annuity. The annuity that pays out less frequently in each year obviously receives lower annual income.

5. Other Expenses Most immediate annuities do not have any other charges, surrender fees, commissions or entry and exit loads.

6. Safety of Investment With the guarantee that you get your annuity payment for life, there is hardly anything more left to say about the absolute safety of investment.

Different Payment Options for Immediate Annuities

1. Fixed Period Option Under this option, the annuity owner has the option of having his income payouts over a fixed period of between 1 and 30 years. Whatever period is chosen, the whole accrued annuity amount is paid out at the end of that period and all payments after that cease to be paid out. On the other hand, if the annuitant passes away before just a fixed period is reached the remaining payments including the end one is received by a designated beneficiary. If the annuitant desires random withdrawals of lump sum amounts this can be made possible with a clause in the contract, as long as the annuity’s total accumulated value does not fall below a certain pre-specified minimum value. These random withdrawals do not affect or reduce future payments.

2. Annuity with Life Income But No Death Benefits The advantage of this type of immediate annuity is that the annuitant gets the highest amount of monthly income over the course of his or her lifetime. The down side is that while the payments are guaranteed to continue throughout the annuitant’s lifetime, they cease completely upon his death. There are no options to withdraw amounts in between and the annuity cannot be revokes after its 15-day review period.

3. Life Income With Continued Payments Till Fixed Period With this type of annuity the payments are guaranteed not till the annuitant’s lifetime but till the fixed period of contract even if the contract outlives the investor. This means that even in the circumstance of the premature death of the annuitant, the periodic payments will continue till the time specified in the contract and will go to the nominee or beneficiary. If the annuitant’s death occurs after the fixed contract date however, no additional payments are then paid.

4. Tax Deferred Exchange Annuities This annuity is the transfer of the surrender value of an existing annuity or contract of insurance into another single premium immediate annuity without the applicability of any kind of taxes. This annuity is in effect only a transfer and is often called as a ‘1035 exchange’. One caveat for such a transfer to be indeed tax-free is that the new annuity as well as the old annuity must have the same person or people listed as the receiving parties. This only applies to annuities and insurance contracts and does not apply to 401 (K), IRA and other similar retirement accounts.

5. Joint and Survivor Income Annuities Under this annuity, premium payments are made for the life of two annuitants. When one dies, the other surviving annuitant continues receiving income as per the predetermined rate. This predetermined percentage can be a full hundred percent or parts such as 66 and two third or even fifty percent of the payment amount. When the surviving annuitant also passes away that payments cease completely. The annuity contract cannot be cancelled once its 15-day revocation period has passed and this annuity does not have any withdrawal options.

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