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The Pros and Cons of Immediate Annuity

If you’re hoping to enjoy steady flow of income when you retire from active service, you’ve got to know more about annuity for retirement.  It’s a kind of insurance policy that helps you to have steady stream of income when you retire. There are specific kinds and forms of annuity you need to know.  Immediate annuity is certainly one of them. Let’s examine what it’s all about.

Basically, immediate annuity is a kind of   policy that guarantees you quick access to streams of   income from the investment you make.  It’s also known as Payout or income annuity. In this kind of annuity for retirement, regular premiums are not made to investor upon death. Instead, the investor receives   a large sum of cash in return for the regular income payment until he she dies.

There are several options to choose in immediate annuity.  You can choose to make payments for specified period of years or you can decide to be paying until death.

Simply put, immediate annuity as a form annuity for retirement starts to pay right away. Most people going into retirement prefer to go for it.  Even if you’re having a deferred annuity, it can also be converted to immediate annuity if you wish.

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The pros

As a form of annuity for retirement, immediate annuity starts paying right from the time you make the initial investment. This can prevent you from outliving your investment when you retire. You keep on enjoy steady flow of income even before you go into retirement.

If you go for the fixed immediate annuity, you can easily maintain a steady stream of income all through   the days of your life. You can equally enjoy that for specified number of years you may choose.

This kind of annuity for retirement   can prevent you from worry when you retire since you’re sure of steady stream of income. You’ll always have enough cash to settle your monthly bills through the steady income. You also stand the chance of enjoying higher payments than you would have gotten from ordinary savings accounts you may have in a bank.

Meanwhile, if you go for the variable immediate annuity you’ll have to keep the buying power of your life payments ahead of any kind of inflation that may come up.

The Cons

As a form of annuity for retirement, immediate annuity also has some negative as aspects. There may be loss of purchasing power arising from inflation especially with fixed immediate annuity.  There may also be high fees with variable immediate annuity. A fixed annuity guarantees you a set of payment for a specified period of time. However, you may live longer than that specified period of time you choose.  This can put you into trouble since the income may cease to flow anymore.  Again, the fixed payments are not likely to change with the increase in inflation. This can reduce the value of the cash and make it worthless as you retire.

On the other hand, the variable immediate annuity can protect your payments from being affected   by inflation. But the truth is that the payments can go up and down depending on the performance of your investment.

In all, you can always gain a lot from immediate annuity if you succeed in locating a reliable insurer. You have to take your time to consider the various options before you make your choice.