Immediate Income Annuities

What is an Immediate Income Annuity?

Immediate Income Annuities or Single Premium Immediate Annuities (SPIAs) are one of the simplest forms of an annuity. You purchase a SPIA with one lump sum payment and then the insurance company guarantees to pay you a specific amount every year for the rest of your life. Payments can be annual, quarterly or monthly. In some cases SPIAs are designed to make payments to whichever spouse lives the longest.

Who should consider getting an Immediate Income Annuity?

  • People who want a guaranteed stream of income that lasts for the rest of their life
  • People who don't want inflation to outpace their retirement income
  • People who don't want to have to worry about IRS required minimum distributions
  • People who want to diversify their retirement portfolio
  • People with a low tolerance for risk
  • Anyone who is entering retirement
  • People who have received a large life insurance or legal settlement
  • People with a large sum of money that they want to last a specific length of time
  • People who need more money than Social Security will provide
  • People who might outlive their normal income

More Information about Immediate Income Annuities

Immediate Income Annuities can make retirement planning easier. They do this in two ways:
  1. With an Immediate Income Annuity you don't have to worry about required minimum distributions, and
  2. You don't have to worry about taking too much money out of your retirement account in the beginning of retirement and then running out of money later on. In fact, annuities allow you to withdraw a higher percentage of your retirement money than you can safely take out of a portfolio of stocks, bonds and mutual funds. 
It should be noted that Immediate Annuities protect your assets by reducing their liquidity. While some annuities have optional riders that will allow you to withdraw extra money in case of an emergency, most income annuities are specifically designed to allow you to lock in a guaranteed stream of income distributions.

The other thing to realize about income annuities is that the money you put into an annuity isn't invested in the stock market. This is a great thing if the stock market goes down after you purchase an annuity, but if you like the possibility of your money growing in retirement, you might consider only putting a portion of your money into an income annuity.

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