What is an Immediate Annuity?
In an immediate annuity, the investor begins to receive payments immediately upon investing or at a predetermined date in the future. This is for investors that need immediate income from their annuity. When you purchase an immediate annuity you can choose between payments for a certain period of time (typically five to twenty years – “period certain”), payments for the rest of your life or your spouse’s life, or any combination of the two. You can even choose between a fixed payment that doesn’t vary or a variable payment that is based on market performance. In almost every case, once you purchase an immediate annuity it is an irrevocable decision between you and the insurance company and cannot be voided. If you fund your immediate annuity with after-tax dollars, each payment you receive will be part return of principal and part interest, so a portion of each payment will not be taxable.