Immediate annuity: When you could wait no more

An immediate annuity is where the periodic income benefit payments of the one who purchased the annuity will immediately begin after the issue date of the annuity contract. Put simply, if you buy an immediate annuity with a lump sum investment, you can begin to get the income after you purchase the annuity. This means that the person who bought the annuity plan can convert his investments into a guaranteed series of payments for a number of years, or until you die, whatever is based on your original contract.

An immediate annuity could either be fixed or variable, and you will begin receiving payments usually within less than 13 months or even the month after you deposited your payment. After you pay, you will have a secure regular income for as long as you live. This is also known as income annuity.

With an immediate annuity, you are secured of a steady income which will always come regularly for the rest of your life. It is just like putting a lump sum in somebody else' care and have a specific amount doled out to you regularly. With immediate annuity, you never have to worry of where to get next month's rent and other financial worries because the annuity benefits will always come. You cannot outlive it.

Immediate annuity offers you many benefits, serving as a supplement to your income. If you know that you are about to retire, maybe it would be good for you to transfer your savings or other investments you have into an immediate annuity. Another option is to also transfer the proceeds of your deferred annuity into an immediate annuity.

Another advantage with immediate annuity is you only have to pay taxes on the part of your immediate annuity payments that can be considered as your earnings. This means that you won't have to pay taxes on the principal amount, or the initial deposit you made.

When you go for fixed immediate annuity, the payments you will receive are based on your total contribution, your age and the interest rate when you purchased the immediate annuity. Whatever happens, the amount you will be receiving will remain constant. With variable immediate annuity, the amount you receive will depend on the performance of the investments that you chose.

Owning an immediate annuity spares you from the hounding of creditors because your money is now in the management of the insurance companies. This means the only access they will have of your money is when this is paid out to you. Again, before you purchase an immediate annuity, check to see if it suits your particular needs. Once you commit, the contract of an immediate annuity is irrevocable and non-refundable.