If your ideal annuity plan includes immediate payments that can continue through your entire life, an immediate annuity (sometimes known as a SPIAA) might be right for you.
In short, an immediate annuity works as a payment that promises to work in return for your lump sum. They often begin paying out one month after you purchase your plan. However, the payments–often called the “mode”–can be personalized to fit your strategy. If a monthly payout isn’t of interest, many opt for a quarterly or yearly structure instead. Other specialization options are available as well.
Immediate annuities are designed to enhance your cash flow through immediate monthly payments. They prove to be beneficial not only in the immediate but also through the course of your life. Under your investment, an immediate annuity can run for a designated period of time or until your passing. Keep in mind that payment totals hinge on a series of factors like:
- Life Expectancy, Age, and Health
- Amount Invested
- Interest Rates
Is It Right for Me?
As is the case with any financial endeavors, you have to determine what’s right for you. When it comes to an immediate annuity, a few types of people stand to benefit from the investment. A retiree in need of more monthly cash may seek out an immediate plan, just as someone who set aside their funds for an heir may. The same goes for an individual with no heirs and doesn’t concern themselves with leaving an estate. A range of people and scenarios could benefit from this approach. These are just a few instances. Be sure to consult with a specialist if you are unsure where you stand.
The Pros and Cons
Immediate Annuities offer a wealth of benefits ranging from security and simplicity to high returns, especially if the retiree’s age is advanced or health is suboptimal. Those looking to defer taxes until they may find a lower rate should consider this plan. In addition to skirting the usual front loaded annuities, you’ll be provided a consistent pay until for the rest of your life.
On the flip side, some severe drawbacks can arise from this sort of plan. Remember that payments are set and may not increase for inflation without some exception. Additionally, these aren’t liquid. Once done, the purchase is permanent and the money cannot be accrued. Once a annuitant passes, payments are no longer issued–unless a period curtain is in place. Once they pass, the insurance company owns the remaining money.
For some, those negatives can be a dealbreaker. However, if you fit the bill an immediate annuity could be the stable plan that sets you up for your remaining years.