Immediate Annuities

It’s possible to get a high fixed return on your money with an immediate annuity. An immediate annuity is simply the payment of a premium to an insurance company.  In exchange, the company converts your premium to a monthly income for life.  You cannot outlive this income!  (Monthly payments are based on the claims-paying ability of the insurer, so picking a financially solid insurance company is important.)

Here’s a hypothetical example.  A 76-year-old gentleman paid $50,000 in premium to an insurance company.  He now receives $388 per month, every month.  That’s $4,656 each year of checks in the mail.  For $50,000 where else can you get guaranteed $4,656 every year for the rest of your life?

Regardless of how long a person lives, he gets his check every month.  If he dies early, his beneficiaries will receive the $388 monthly until $50,000 in payments have been received in total.  This is called the “installment fund” provision.  (If the owner does not need or does not elect the installment refund provision for his beneficiaries, the monthly payments would be even higher at $473 per month.)

For whom is an immediate annuity suitable?

• A retiree needing increased monthly income
• A person with no heirs or who is not concerned about leaving an estate
• Someone who has set aside other funds to leave to heirs if they desire to leave an inheritance
• A retiree desiring the fixed payment and wanting to avoid maturities, rolling over investments and the maintenance and administration required of investing on one’s own