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What is Immediate Annuities Insurance?
The offered insurance plans are made to provide you a consistent source of income in the later years of your life. These are the plans that provide you a guaranteed monthly income and help you live a comfortable life after retirement. You can utilize this income to take care of your daily life expenses and spend your retirement life easily. Under these plans, you buy the desired annuity plan by making a lump sum effect and can start receiving your monthly payout immediately. You can also choose the payment mode from monthly or quarterly to yearly.
Understanding Immediate Annuities
These are a valuable option to plan your retirement well in advance so that you will have less to worry about in future. They not only help you receive an uninterrupted income every month to pay for their essential expenses but also save for the unplanned expenses. People who have forgotten to buy a retirement plan while they were working can choose this option to ensure a comfortable life after retirement. If you also are approaching retirement or have already retired, you can choose an immediate annuity and can start receiving the monthly payout from the very next month to manage your all essential expenses.
Types of Immediate Annuities
Under the immediate annuities, there are further two types: fixed immediate annuities and variable immediate annuities. You can choose which plan you want to go with depending on your requirements.
  • Fixed Immediate Annuity
    Under the fixed one, you will receive a fixed monthly income after making a lump sum investment. These plans are great for those who like to live a planned life as they can plan their expenses in advance and manage them in an easier way. Based on your specific needs, you can also choose whether you want the annuity payment to be made monthly, quarterly, half-yearly or annually.
  • Variable Immediate Annuity
    As the name says, the variable annuities provide a variable monthly income to the annuitant. Under this plan, a fixed portion of the amount is invested into the bond and rest into the markets. You will receive a base payout with the profit share on the investments made. This profit share completely depends on the market performances and may vary accordingly.
Features in Annuities
Immediate annuities come with their own set of features and here we are going to mention some of them:
  • The annuity can be bought with a single lump sum amount.
  • You can choose to receive a fixed or variable annuity payout.
  • You can receive a guaranteed monthly income for life or a specific period to take care of your daily life expenses.
  • There are plans that provide an accumulated death benefit to the beneficiary after the demise of the annuitant.
  • These plans are tax-deferred and the annuitant doesn’t have to worry about paying taxes on the accumulated amount before they withdraw the same.
  • For plan withdrawals, you may have to pay a surrender charge and while a withdrawal before 59 ½ years will incur 10 percent federal income tax penalty along with the ordinary income taxes on the amount accumulated.
Limits & Restrictions
Like their features, these have their limits and restrictions as well and some of them are mentioned below:
  • All the withdrawals are subject to ordinary income taxes.
  • A surrender charge is applicable if you choose to withdraw your plan.
  • The profit or loss share will fluctuate depending on how your investment options perform in the markets.
  • A 10 percent federal income tax penalty along with the ordinary income taxes on the amount accumulated if you withdraw before 59 ½ years.
  • Excess withdrawals will reduce the future payment and you will receive a smaller monthly income.
  • Annuity payment’s guarantee depends on the paying ability of the provider and the government has very little to with the same.
  • Under variable annuity, the performances of investments depend on the market fluctuations and the insurance provider isn’t responsible for the same.
  • Any kind of investment involves risk and you should be ready for both profits and the loss of money invested.
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