CandleFocus Glossary Editor
What is an Immediate Payment Annuity?
Immediate payment annuities are investments contracts available from life insurance companies that provide a guaranteed stream of income from the time of purchase. The annuity is purchased with a lump sum payment and the investor receives regular payments in return. These payments can be scheduled as monthly, quarterly, or annual, and can continue for a predetermined period of time or the lifetime of the investor.
Immediate payment annuities are particularly attractive to people who want a guaranteed, stable stream of income they can count on over the long term. Since the payments are guaranteed by the insurance company, they cannot be outlived, regardless of how long the investor lives.
What Benefits do Immediate Payment Annuities Offer?
Immediate payment annuities can offer several benefits. They provide a consistent, predictable stream of income that can be paid monthly, quarterly, or annually. For those who do not want the risk of stock market investments, immediate payment annuities offer a guaranteed return. The payments also have potential tax advantages due to their ability to produce a tax-deferred income stream.
What are the Drawbacks of Immediate Payment Annuities?
The biggest drawback of immediate payment annuities is that they are not particularly liquid investments. The insurance company is unable to provide any kind of refund if the investor decides to cancel the policy, or reduce their payments. Once the contract is purchased, the payments and term of the contract cannot be altered.
Another potential downside of immediate payment annuities is that they are subject to fees and charges. The insurance company will generally charge various fees and commissions, which can erode the return on the investment.
Should you Consider Purchasing an Immediate Payment Annuity?
Before investing in an immediate payment annuity, it is important to understand the potential risks and benefits. These investments are typically well suited for people who are not interested in the fluctuating returns of stock market investments, and desire a fixed, predetermined stream of income. For those who need or want income for life, these annuities can be a viable option. It is important to remember that immediate payment annuities are not liquid investments, so the decision to purchase should be thought through carefully.
Immediate payment annuities are investments contracts available from life insurance companies that provide a guaranteed stream of income from the time of purchase. The annuity is purchased with a lump sum payment and the investor receives regular payments in return. These payments can be scheduled as monthly, quarterly, or annual, and can continue for a predetermined period of time or the lifetime of the investor.
Immediate payment annuities are particularly attractive to people who want a guaranteed, stable stream of income they can count on over the long term. Since the payments are guaranteed by the insurance company, they cannot be outlived, regardless of how long the investor lives.
What Benefits do Immediate Payment Annuities Offer?
Immediate payment annuities can offer several benefits. They provide a consistent, predictable stream of income that can be paid monthly, quarterly, or annually. For those who do not want the risk of stock market investments, immediate payment annuities offer a guaranteed return. The payments also have potential tax advantages due to their ability to produce a tax-deferred income stream.
What are the Drawbacks of Immediate Payment Annuities?
The biggest drawback of immediate payment annuities is that they are not particularly liquid investments. The insurance company is unable to provide any kind of refund if the investor decides to cancel the policy, or reduce their payments. Once the contract is purchased, the payments and term of the contract cannot be altered.
Another potential downside of immediate payment annuities is that they are subject to fees and charges. The insurance company will generally charge various fees and commissions, which can erode the return on the investment.
Should you Consider Purchasing an Immediate Payment Annuity?
Before investing in an immediate payment annuity, it is important to understand the potential risks and benefits. These investments are typically well suited for people who are not interested in the fluctuating returns of stock market investments, and desire a fixed, predetermined stream of income. For those who need or want income for life, these annuities can be a viable option. It is important to remember that immediate payment annuities are not liquid investments, so the decision to purchase should be thought through carefully.