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Frequently Asked Questions About

Immediate Annuities

What is an Immediate Annuity?

In an immediate annuity, the investor begins to receive payments immediately upon investing or at a predetermined date in the future. This is for investors who need immediate income from their annuity. When you purchase an immediate annuity you can choose between payments for a certain period of time (typically five to twenty years – “period certain”), payments for the rest of your life or your spouse’s life, or any combination of the two. You can even choose between a fixed payment that doesn’t vary or a variable payment that is based on market performance. In almost every case, once you purchase an immediate annuity it is an irrevocable decision between you and the insurance company and cannot be voided. If you fund your immediate annuity with after-tax dollars, each payment you receive will be part return of principal and part interest, so a portion of each payment will not be taxable.

Advisor Insight

Scott Sadar

Certified Financial Planner

“Immediate Annuities provide income which begins within 12 months of the purchase date. Folks are often concerned with having their funds remain with the insurance company upon their death, and this is only true if Life Only was the type of annuity you bought. This is completely preventable because the choice of which guarantee period to select is up to you!

Installment refund and cash refund are the payout options which guarantee all of your purchase price will benefit you and/or your family with nothing being lost to the insurance company.

The income may be for a certain number of years for the SINGLE life of an owner or the JOINT lives of the owner and their spouse. One point to remember is how joint lifetime income may be selected even when the assets are in the IRA of one spouse.”

Articles & Reviews

This is an Exceptional Time for Prospective Annuity Buyers

Learn why this is an excellent time for would-be annuity owners and repeat annuity owners to seriously consider purchasing an annuity.

Immediate and Deferred Income Annuities Are Especially Attractive Today

Insurance companies are going out of their way to offer unusually good deals on select immediate and deferred income annuities making it the ideal time to take a look at the best of them. Dive into the top income producing immediate and deferred annuities on the market.

Is This a Good Time to Check Out an Immediate Annuity?

In effect, immediate annuities function as a risk management tool that works like a mirror image of life insurance, which pays a benefit not in life but in death. Moreover, they are simple, easily understandable products offering nary a worry about payout distribution timing. Let’s say you are someone roughly in your mid-60s who has …

From Our Blog

Retirement is a Perfect Time to Purchase an Immediate Annuity

Immediate annuities guarantee income: You pay a sum of money to an insurance company, and the firm provides you with a stream of payments that can last a lifetime. Payments begin as soon as 30 days after purchase. According to Rob Williams, managing director of wealth management at Charles Schwab, and NerdWallet, now may be …

The Rock-Solid Safety of Annuities

Are you thinking about retiring? And what that could look like for you? If you are, your primary goal is most likely to be able to retire comfortably with a steady stream of income. New York Life reviews the safety of annuities.  Guaranteed Monthly Income for Life Annuities can assure that you have a steady …

Generating Lifetime Income From Your Retirement Savings

One of the leading providers of life, disability, dental and other benefits in the U.S., Guardian life Insurance Company of America, has just launched a new fixed indexed annuity with an optional guaranteed living benefit rider.  In an effort to help mitigate market volatility and longevity risk, the company introduced the Guardian Secure Index Annuity, …

What is an Immediate Annuity?

Which Immediate Annuity is Right for me & my Retirement Income Needs?

It depends upon your particular goals. An immediate annuity allows you to create a pension with your own “structure”. As a result, an immediate annuity can cover just your life or your life and your spouse’s life, and can incorporate beneficiaries as well. Immediate annuity payments begin almost immediately, offer income for life and pay more than most annuities because investors sacrifice principal. A variable annuity with an immediate payment offers potential for higher payments, which are pegged to market performance, but a fixed income annuity is usually best for most buyers because payment size is guaranteed, eliminating market timing risk. If an immediate variable is bought at the height of a bull market, for example, future income will eventually drop.

Types of Immediate Annuities

Fixed Income Annuities:
Most immediate annuities are fixed income annuities. They pay a set amount for life and do not vary.

Single Premium Immediate Annuities:
Virtually all immediate annuities are single-premium annuities, which means they are a one-time purchase and cannot be subsequently changed. Immediate annuities have no fees. They are also tax-efficient because an exclusion ratio is used in dispersing funds.

Immediate Variable Annuities:
Payments begin within 30 days and last for life. They may pay more than a fixed income annuity if the stock market does well over the life of the investment. Payments will vary, however, and could fare worse over time.

How do you Purchase an Immediate Annuity?

It is purchased from a licensed agent. It is underwritten, but not sold, by an insurance company. It is best to purchase an immediate annuity from an independent dealer representing multiple insurance companies because the dealer can offer a bigger product assortment.

Immediate Annuity FAQs

How do you Calculate an Immediate Annuity?

You can get an idea what an immediate annuity will pay, as well as other annuities, by requesting quotes from sites including AnnuityFYI.com. Complete the short form above to request custom immediate annuity quotes.

How Much do I Need to Put Towards an Immediate Annuity?

There is no one-size-fits-all answer. The required minimum investment will vary from one company to the next. More important is how much principal you would like to sacrifice in exchange for guaranteed lifetime income. One simple way to go is to add up your regular expenses in retirement, subtract any guaranteed sources of income, such as Social Security, and then buy an immediate annuity to provide enough income to fill in the gaps. In this case, you need additional, non-committed assets in the event of unexpected events.

Is a Deferred Annuity Better Than an Immediate Annuity?

Again, there is no absolute answer to this question. It depends on personal preference. A deferred annuity, like an immediate annuity, offers higher payments than most annuities but for different reasons. In the case of a deferred annuity, it pays more because it doesn’t kick in until well into the future, thereby covering a shorter lifespan. In addition, a deferred annuity — unlike an immediate annuity – does not require sacrifice of principal. On the other hand, a deferred annuity is less tax-efficient. Which one is best for someone, however, varies enormously.


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