An immediate fixed annuity, also referred to as a single premium immediate annuity, is a contract between you and an insurance company that offers a guaranteed monthly income for life or a specific term regardless of economic conditions. Immediate fixed annuities are purchased by people who wish to convert assets into a stream of income tailored to their needs. The benefits are determined at the time of purchase and are guaranteed for life or a specific fixed period, such as 10 or 15 years.
An immediate annuity can provide a secure, tax-advantaged way to receive income payments from assets and usually payments begin within one year from the time the annuity was purchased. Purchasing an immediate annuity requires a one-time premium payment and income payments usually begin soon after the immediate annuity is purchased. Immediate annuities can provide diversification benefits. When you purchase an immediate annuity with a portion of your retirement assets, you effectively create a secure income foundation. This strategy may allow you to continue investing the remainder of your retirement assets with a longer time horizon in mind, which may help guard against the possibility of outliving your investments.
An immediate annuity is an insurance product that provides a fixed monthly income and level of security that many other investments may not. It can provide lifelong income, thus reducing the risk of outliving one's resources. Like a growing number of "Transitioning Investors", you may want to consider the benefits of an immediate annuity as part of your retirement planning process. Consult with your tax advisor, accountant or financial planner for help in evaluating your financial situation.