The Makings Of An Immediate Fixed Annuity

In the world of fixed annuities, there are really only two different types. There may be many variations of these two different types, but one way or another you are going to end up in these two areas. The first type of fixed annuity contract is the deferred annuity, or simply an annuity product that defers distributions to a later date. Alternatively, the second variation of annuity is the immediate fixed annuity.

The immediate annuity behaves exactly as it indicates; it provides income almost immediately upon purchase. This type of annuity contract is designed to begin distributions one period after the purchase date of the contract. This can be anywhere from one month to one year, depending on the details of the contract.

If you elected to take payments on a yearly basis, the distributions will begin one year from the date of purchase. Correspondingly, if you elected to take distributions on a monthly basis, the first distribution to your designated beneficiary would begin one month from the contract start date. In this sense, this type of insurance product provides you immediate benefits.

The most common use for fixed immediate annuities is to facilitate an immediate income need. An individual is able to take lump sum of money and contract it with the insurance company for a fixed rate of return. The insurance company then sets up a payments structure that is determined inside the contract.

Distributions from the account can be for a set period of time or even for the lifetime of the individual. If you elect a lifetime option, the insurance company will calculate the payment based off of an annuity life expectancy table. Depending on the current interest rate, your age, the size of your contribution, and a number of other risk factors, your monthly or yearly income payment is determined.

Before you consider any sort of financial product, it is important that you consult with a professional experienced in this area. The details of the contract can be difficult to discern, and the penalties for misuse of the product can be detrimental to your long-term plans.