What is an Immediate Annuity?

Purchasing an immediate annuity is a permanent contract that is for life. This is an important decision to make for your retirement years. Understanding your choices is most important when considering immediate annuity policies.

The first reason to choose these products is for a permanent income that is secure and will continue through inflation, recession, or other factors that change annuities. Your return will be conservative, maximizing on the long-term payout and not striving for the most you can get for your return.

People use SPIA fixed annuity policies to shelter assets. Taking their funds from their estate, meets Medicaid minimal requirements. Another benefit is for creditor protection. Usually states exempt your fixed immediate annuities cash value. Ask specifics for the state you live in. Ask what happens when disabilities occur and other unseen events.

The "exclusion ration" offers a percentage of the annuity income to be tax-free. Only a small percentage or ration will be paid on taxes. This money is your "return of principle" and also called new money, placing it in a "new money" tax category.

The immediate annuity is a contract between you and the insurance company. You will pay the company a lump sum of money. The company will pay you back in payments over a extended period of time or as long as you live.

You will want to think about the option "life income with a lump sum refund". The policies stops paying at the time of death and the insurance company keeps the reminder of the money. Add the option to your policies and your heirs can receive the remaining balance.

Choosing the "life only" option will give you higher monthly payments. If you are not interested in what happens with these funds but only want to have the income from this fund the "life only" would be a good option for you.Shopping around will ensure that you get the best fixed annuity rates, so do some homework before buying.