What is an Immediate Annuity
Knowing About Immediate Annuity
Immediate annuities are policies that are commonly used as retirement investments and can be purchased from an insurance company. An immediate annuity can provide regular income that can be availed as early as one year right after the first premium payment. The annuity can either continue for the rest of one’s life or for a specific time period selected by the policy holder.
Different immediate annuity policies are given in structured terms that can be determined by the type of annuity policy chosen. There are Life Only annuities that you can choose as your retirement investment. This type of immediate annuity can provide a regular income for you as long as you live.
The Life Only annuity policy usually provides the highest income possible for all the other types of annuities. This can be the policy to choose especially if you have no dependents to think of or have dependents that earn enough income on their own.
Another type of annuity is the Life Annuity with Period Certain. This type of policy allows you to earn an income for as long as you live as well as a guarantee that your dependents will be receiving regular income for a set number of years after you die. This payment option usually has a period certain ranging from ten to twenty years. In case you live longer than the stated period certain, you will continue to receive payments until you die.
If in case you die somewhere during the period certain, your beneficiary will continue to receive the payments until the term period is reached. If you die after the stated period certain, your beneficiaries won’t be receiving any more payments from your annuity. You should bear in mind that the period certain is an added benefit to an annuity and therefore provides a smaller income as compared to the Life Only option.
Another annuity option available is the Joint and Survivor option. This allows you and your beneficiary to receive regular income as long as both of you lives. You may have the option to receive payments fore a set length of time. And just like the period certain option, this is an added benefit to your annuity and may provide a smaller income than the Life Only option.
In trying to choose the right annuity policy for you, there are some factors that you should consider. The first one is by trying to consider the lifestyle that you are comfortable with. If you require a higher income for yourself, then there are annuity options that will well cover for your needs.
Another thing that you should also consider is the probable use of your annuity. If it is to provide added income for you or your family and not only for yourself, then there are annuities that would benefit your beneficiaries and provide added income to them even after you die.
Another important factor that you should consider is the cost of the annuity premiums. The minimum investment usually required for immediate annuities ranges around 10,000 US dollars. The payments that you will be receiving will depend on the sum that you have paid to the insurance company, the type of policy that you have chosen as well as the prevailing interest rates when you availed of the said policy.
In immediate annuities, the payments that you will receive monthly will be the same for the span of the investment, the life of the policy holder or that of the beneficiary. This is usually guaranteed for by the insurance company, that the interest rates and the payouts for the policy remain the same.