Immediate annuities (sometimes called income or payout annuities), are pretty straightforward – basically a mirror image of a life Insurance Policy. Instead of paying regular premiums to an insurer that makes a lump-sum payment upon your death, with an annuity you give the insurer a lump sum of cash in return for regular income payments until you die. (Actually, you have several options, including payments for a specified period of time – say, 10 or 20 years – or payments that will continue for as long as you or your spouse is alive.)
As the name suggests, immediate annuities start paying out right away, so they’re are frequently used by people already in retirement. A deferred annuity can also be converted into an immediate annuity.
Immediate annuities start paying out right away, and can prevent retirees from outliving their nest egg.
Plus, with a fixed immediate annuity you lock in an income stream for your entire life (or a specific number of years, if you choose). Knowing you can count on a guaranteed income stream can be a boon for retirees who don’t want to worry if they will have enough money to pay the bills each month.
Plus, the payments can be higher than you would normally be able to get by putting your money into safe investments on your own.
With a variable immediate annuity you have the potential of keeping the buying power of your lifetime payments ahead of inflation by divvying up your investment among a variety of mutual-fund-like portfolios.
If you need annuities explained further, contact us for a no obligation consultation.
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