How to Purchase an Immediate Annuity
You can buy an annuity and start receiving payments from it immediately. Find out how immediate annuities, which are sold by insurance companies, work - and whether they will work for you.
- Difficulty:
- Moderate
Instructions
-
-
1
Understand what an annuity is. Normally, an investor pays a sum of money to an insurance company for a contract saying that the investor will receive a stream of money in the future, usually at retirement.
-
2
Know that an immediate annuity provides the stream of money immediately or within the first year of the investment. Payments can be made at a fixed or variable interest rate.
-
3
Call or send e-mail to a variety of top insurance companies and ask for details about their immediate annuities.
-
4
Inquire about the payout options. Some insurers offer a monthly payment as long as the investor is alive. Others pay only for a set number of years. Others send payments to the investor and a beneficiary for life.
-
5
Learn whether the annuity pays a fixed or variable rate of interest and decide whether it suits your needs.
-
6
Know that in some cases, if the investor dies before the balance is exhausted, the insurer may keep the money. Know the rules before you buy.
-
7
Ask the insurer if you can get your money out - and under what terms - if you change your mind after making the investment.
-
1
Tips & Warnings
Avoid annuities that charge fees exceeding 2 percent.
Remember that if inflation rises, your investment may not keep pace.
If the insurer becomes insolvent, the investor loses out.
Related Searches
Comments
-
Sep 12, 2006
1. Immediate annuities do not have fees, except for possible state premium tax in a handful of states. 2. Deposits have a limited guarantee through each state's guarantee association (similar to FDIC insurance). Every state's specific rules vary, but most states guarantee deposits up to $100,000.