What Are Immediate Annuities And What Do They Offer?
An annuity is an investment product that offers an individual a type of pension plan. A person invests into the annuity and in return receives guaranteed payments for the rest of their life. There are two types of annuities available on the market: immediate and deferred.
Immediate annuities are just what the name states. They are a type of annuity that, once the investment is made, begins to make payments to the annuity holder immediately. This type of annuity can offer disbursements in a monthly, quarterly or yearly pay out to the holder.
A differed annuity is an annuity plan that one invests into and receives payment from at a later date. Many differed annuities are selected by younger people for their retirement. This allows the fund to build a considerable amount of wealth over the years before payments begin.
Annuities must be purchased from a life insurance company. Contrary to other forms of investments, annuities are a life insurance policy. The insurance company takes the money you invest into the annuity and invests it in their preferred method and in return makes payments to you for the remainder of your life.
Recently a new product has emerged in the annuity market. It is referred to as a variable annuity or a variable immediate annuity. This type of investment product guarantees a payment for the rest of your life like the original annuity program, but the payment amounts are based on the performance of the investment. With this type of immediate annuity you are not guaranteed specific amounts each pay. If this is your only form of income you may have troubles when the stock market does not perform well. A with any other type of investment product it is best to seek the counsel of a financial advisor prior to making any commitments.
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