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.

References in periodicals archive ?
An immediate annuity can provide an income stream that starts right away, without any added cost.
The cash flow from an immediate annuity will be taxed in one of two ways, depending on where the annuity is held.
A person who would qualify to purchase long-term care insurance would be too young and healthy to enroll in the long-term care benefit plan or the medically underwritten immediate annuity.
Clients can structure payouts from an immediate annuity in many ways to meet their needs and minimize the need for a rider to access their income.
Rituraj Bhattacharya, Head of Product Development at Bajaj Allianz Life Insurance, says: "The new pension product guidelines have made it mandatory for companies to bridge the gap between deferred and immediate annuity plans wherein the insured will have to compulsorily buy immediate annuity from the same insurer on attaining the vesting age.
Rituraj Bhattacharya, head, product development, Bajaj Allianz Life Insurance, says, " The new pension product guidelines have made it mandatory for companies to bridge the gap between deferred and immediate annuity plans wherein the insured will have to compulsorily buy immediate annuity from the same insurer on attaining the vesting age.
This has had the effect of either causing annuity companies to exit the market for immediate annuities or to price their immediate annuity products with very low, unattractive returns, thus dampening sales of immediate annuities.
The firm has launched a non-linked immediate annuity plan, Pension Guarantee, which would provide the option to extend the annuity (pension) to the spouse of the person covered.
Eventually she converted the contract to an immediate annuity.
Regardless of interest rate levels, the highest contractual payout for the client and the most efficient solution for immediate income is a single premium immediate annuity (SPIA).
I would argue therefore that an indexed annuity with a living benefit is really just a deferred immediate annuity that allows for liquidity at a discounted value.
When an immediate annuity is purchased, the consumer (or annuitant) is transferring longevity and market risks to an insurance company that is more efficiently equipped to manage the risks.