Immediate annuities or payout or income annuities demand payment to an insurance company. The insurer sends you a list of payments, starting right away. These streams of income annuities come in two different forms. Let’s look at income annuities in detail.
* Immediate fixed annuities. In this type, the buyer gets the same fixed amount each month, as long as the annuity lasts.
* Immediate variable annuities. All of us know that getting a fixed payout doesn’t seem attractive because every fixed amount loses its attractiveness over the years due to inflation and the cost of living. Some immediate variable annuity options are where payments change based on the inflation rate. Initially, you start with a lower amount, but your payments will grow gradually over the years. Another option in case of an immediate variable annuity is getting the chance to choose your investment account in the hope that they will do well to increase your payments.
Immediate annuities may look suitable for people aged 65 and older. When you buy an annuity, your increasing age will give you more cash flow, and you’ll receive a more significant portion of each check, tax-free.
When you plan to buy an immediate annuity, you get an option to choose the terms of the contract. Here are your choices:
* Straight life annuity. This type of annuity is suitable for one person. It will make payment for one as long as they live and last for one month or 50 years.
* Joint annuity. As the name suggests, this type of annuity is for a married couple. It will make payment as long as either spouse is alive.
* Period certain annuities. This type of annuity is similar to a straight life annuity and makes payment to one person. But the insurer guarantees to make payments for at least ten years. If an annuitant dies within ten years, the beneficiary will continue to get paid until the 10-year term.
These annuities are available for different lengths of time.
A straight life annuity has a higher payout than Joint annuities and individual period annuities. It's your decision, and I'm sure you want to protect a spouse or another beneficiary or get the reduced cash flow when you are alive.