Immediate Annuity…Does It Have a Purpose?
Posted on July 9, 2014
A Single Premium Immediate Annuity, otherwise known as an Immediate Annuity is the original annuity product first introduced back in the Roman times. It must work if it has lasted all these years right?
Some people think that with an immediate annuity you are just getting back your own money and that it doesn’t make a lot of sense. Today we are going over the ins and outs of immediate annuities so you can decide if this is a good idea for you and your family.
Often, when people are looking for an income stream that will function like a pension does they purchase immediate annuities. The reason for this is that they don’t want to outlive their money. One thing people never want to do is outlive their money and have to scramble or start working again after retirement just to get by.
An immediate annuity is a pure transfer of risk product. When you purchase this type of annuity you are in essence transferring risk to the insurance company to guarantee paying you for the rest of your life. What this means is that if you live longer than your proposed life expectancy, the insurance company is on the hook to pay you for the entire time you are alive.
All annuity income streams are based on your life expectancy at the time you decide to take income.
Another option you have is to set up an immediate annuity to pay for a certain period of time. An example of this would be if you buy a 10 Year Certain Immediate Annuity. There will be 10 years of payments coming to you/your listed beneficiaries if you die before the 10 year time period is up. After the 10 years of payments, the policy is over.
You can buy a “Life with 10 year certain” immediate annuity which means the annuity will pay you for life (regardless of how long you live), or 10 years….whichever is longer. So if you live till you are 105, it will pay you that entire time. But if you die 5 years after the annuity was issued, your listed beneficiaries will receive 5 more years of payments and then it will be complete.
An immediate annuity payment is a combination of return of principal and interest. Outside of an IRA (or in a non-qualified account), your income stream will have tax benefits because you will not pay taxes on the principal, but only the interest.
Hope that helps clarify things a bit for you and help you to decide if an immediate annuity is the right choice for your particular situation. If you have any questions please don’t hesitate to contact our office and we can help you understand your options better.
John Bulbrook, Bulbrook Drislane – IN-FORCE ™ Secondary Market, Finance and Investments, Secondary Market, Annuities, Fixed Term Annuities, Life Insurance, Structured Settlements, Previously Owned Annuities, Pre Owned Annuities, Immediate Annuities, Factored Structured, Settlement Secondary Market Annuity, Aftermarket annuity, Inforce fixed term annuities, Inforce fixed term annuity, Inforce annuity, Deferred Variable Annuity, Inherited Annuity, Equity Annuities, Straight Life Annuity, Non Qualified Annuity, Mutual Fund Settlement, 20 Year Annuity, 10 Year Annuity, 5 Year Annuity – Click here for his Facebook,Twitter, LinkedIn, Google Plus