immediate annuity

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Immediate Annuity

An annuity that the annuitant purchases with a lump sum payment and from which he/she begins to receive payments immediately. An annuitant often buys an immediate annuity after he/she has reached retirement age and wishes to receive his/her savings or other money in an organized manner. An immediate annuity may either be fixed or variable; that is, payments may remain constant throughout the life of the annuity (or the annuitant's natural life) or they may change according to the performance of the investments made by the lump sum payment. See also: Deferred annuity.

immediate annuity

An annuity that is purchased with a lump sum and that begins making payments one period after the purchase. Immediate annuities are most commonly purchased by people who have accumulated a sum of money and are ready for retirement. Compare deferred annuity.

Immediate annuity.

You buy an immediate annuity contract with a lump-sum purchase. You begin receiving income from the annuity either right away or within 13 months.

A fixed immediate annuity guarantees the amount of income you'll receive in each payment, based on the claims paying ability of the insurance company selling the contract.

A variable immediate annuity pays income based on the performance of the annuity funds, or subaccounts, you select from those available through the contract.

Immediate annuities appeal to people who want to convert a sum of money to a source of regular income, either for themselves or for another person. One way they're frequently used is as a source of retirement income.

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