What is an Immediate Annuity?

An immediate annuity is a type of investment that is commonly used in retirement planning. Here are the basics of the immediate annuity and what it can provide to you as an investor.

Immediate Annuity

An immediate annuity is a product that is sold by insurance companies. With this type of investment, you are going to give them a certain amount of money in order to purchase the annuity. At that point, you will immediately begin to receive annuity payments from the insurance company. These payments could last for a specified period of time or they could continue for the rest of your life.

Application

This type of investment is commonly used whenever an individual retires and they are provided with a lump sum of money. For example, if they take a lump sum payment from a pension plan. They will then take the lump sum of money and give it to the insurance company in order to receive a regular income during their retirement years.

Considerations

When you are considering this type of investment, you need to think about the long-term consequences. You will not be able to get your money back and choose a different investment later. You are also potentially locking yourself into a specific interest rate and payment for the rest of your life.

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