Immediate Annuity

What Does Immediate Annuity Mean?

An immediate annuity is an annuity that begins paying out immediately after it is purchased. To obtain an immediate annuity, a large lump sum of money must be paid to the annuity provider.

In the context of insurance, many life insurance companies offer immediate annuities to their customers.

Insuranceopedia Explains Immediate Annuity

The main benefit of an immediate annuity is that it begins paying out right away. Because most buyers are retirees turning savings into a steady income, immediate annuities often come up in the same conversations as life insurance for seniors over 70 when planning a retirement budget.

Immediate annuities are typically designed to last for ten or twenty years, but they can also be structured to continue for the rest of the recipient’s life if desired. However, there is a trade-off with longer payout periods: generally, the longer the annuity is set to last, the more expensive the initial lump sum payment will be. Anyone weighing the timing of payouts usually finds it helpful to read a general overview of how annuities work before deciding between immediate and deferred options.

It is also possible to set up immediate annuities to provide benefits to two people, ensuring that both receive payouts.