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Understanding Immediate Annuities

An immediate annuity is a contract between yourself and a life insurance company, whereby you exchange a lump sum of money for a stream of income.

An immediate annuity is a great way to turn retirement savings into guaranteed lifetime income.

Immediate annuities provide for immediate income. The terms of the annuity contract govern who owns, who pays, and who benefits from the income.  While this may be the same person, it can actually be three different people.

Immediate Annuities vary in payout with the state of you residence, your age, and with the performance and financial strength of the issuing company.  It pays to shop around before buying an immediate annuity because you may find that the highest payout offered comes from a company with a less than stellar credit rating.

Let AnnuityStraightTalk be your guide to selecting the immediate annuity with the best combination of safety, profitability, and flexibility.

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Immediate Annuities For Retirement Income

The use of immediate annuities for retirement income is easy to understand and well-supported with extensive research.  This is where retirees  go for the highest level of guaranteed income available.

How To Use Immediate Annuities For Retirement Income

In exchange for a lump sum premium you get a guaranteed paycheck for life.  You can look but won’t find a better deal anywhere.  That doesn’t mean immediate annuities come without drawbacks because they do.  Like any other product, the individual situation must call for it- be sure to review the Pros and Cons of Immediate Annuities page

Drawbacks using immediate annuities for retirement income:

Many people are concerned about the fact that payments stop upon death of the contract owner and in some instances that means the insurance company keeps a portion of the initial premium.  If that’s the case, immediate annuity contracts come with additional contract components that guarantee certain payments will be made to heirs.  That will ensure the company at least returns the original amount invested and enough options exist to accommodate the specific desires of each individual planning situation.

Another major concern with immediate annuities for retirement income is that inflation will erode the spending power of fixed payments over time.  As such, most companies offer inflation adjusted payments so income can steadily increase throughout retirement.  As with other benefits, inflation adjustments will cause a lower initial payment. If you are planning on using an immediate annuity for retirement income, the free Annuity Report from Annuity Straight Talk is a great start- just enter your email to the right.

We offer a free Immediate Annuity Report that describes how to use immediate annuities for retirement income in detail and contains a simple calculation table that will give you and idea of where income payments will start.

Annuity Rates

It seems as though there would be a simple explanation for such a plain term as ‘annuity rates’. You’ll find, however, that depending on the type of product you are considering, several different rates may apply.

There are many annuity rates to consider that all contribute to the performance of a contract. It’s important to know what to expect with a major financial commitment so an analysis of each of these rates is needed to determine what is appropriate to your situation.

This section will give you a great idea of what to look for when comparing annuity rates among different contracts. Each type of annuity contract is listed below with a list of rates appropriate for each. Follow the link to the product of your choice for a more in-depth explanation of what those rates mean.

Fixed Annuity Rates

Fixed Annuities are among the simpler contracts to understand, but still, there are a variety of rates to consider.  We have a full page on Fixed Annuities and explanations, where you will encounter:

  • Multi-Year Guarantee Rate
  • Current Rate
  • Renewal Rate
  • Guaranteed Minimum Rate
  • Bailout Rate
  • Bonus Rate
  • Yield To Maturity

Immediate Annuity Rates

Immediate Annuities have the fewest moving parts of any annuity- it’s primarily a payout rate, determined by you age, and the current marketplace.  Click to learn more detail about Immediate Annuities and understand the following terms:

  • Discount Rate
  • Mortality Credit
  • Payout Rate

Fixed Index Annuity Rates

Fixed Index Annuities have considerably more moving parts, and unfortunately, the actuarial complexity turns many potential investors away from these fundamentally sound and safe contracts.  Please explore our in depth analysis of fixed index annuities, and do not hesitate to Contact Us if you want a thorough analysis and the right annuity for your needs.

  • Declared Fixed Rate
  • Participation Rate
  • Cap Rate
  • Guaranteed Income Growth Rate
  • Payout Rate
  • Death Benefit Rate

Variable Annuity Rates

Variable annuities by their nature are, well, variable, based on the underlying investments that you select.  However you will likely see a few terms when investigating variable annuities:

  • Fixed Rate
  • Death Benefit
  • Guaranteed Income Growth Rate
  • Payout Rate

Secondary Market Annuity Rates

Secondary Market annuities offer higher rates of appreciation and return than most other annuities, for the simple reason that they are sold at a discount from face value.  With these annuities you will see various definitions, such as:

  • Immediate Income
  • Discount Rate
  • Deferred Income
  • Growth Rate
  • Discount Rate
  • Future Lump Sum Rates
  • Growth Rate

Summary:

There are a lot of different rates to understand. It’s definitely not something that can be explained in a sound bite. If you haven’t gone through the individual product pages to learn how each type of contract works, this might be a good time to do it. Also, feel free to take a look at the pros and cons of each type of annuity to see which one most appeals to you.

If you have already done all that and have a firm grasp on what each type of annuity contract is intended to do, then by all means visit the page that most interests you. Follow the links above to a separate page for each. If something just doesn’t seem to come together for you, please contact an expert now to get answers to all your questions.

Immediate Annuity Calculator

Your comprehensive annuity investment guide: Annuities.

Immediate Annuity Calculator

An immediate annuity is a product sold by insurance companies that is designed to provide you with an income stream for life. The income, by definition, is designed to start immediately, although some immediate annuities allow you to defer payments for up to one year.

It is very important to remember that once you set up an immediate annuity, you no longer control the money you put in it. Likewise, while the income stream is guaranteed for your lifetime, an untimely death will not result in any money being returned to your estate. Of course, there are survivor and heirs benefits you can arrange, but you must do so prior to purchasing the annuity, not after the fact.  This immediate annuity calculator is designed to help you estimate, in general, your monthly payments from an immediate annuity.

View all our annuity calculators, or read on for a description of how this immediate annuity calculator works.

Fixed Annuity Calculator

Variable Annuity Calculator

Immediate Annuity Calculator

Fixed Index Annuity Calculator

Immediate Annuity Calculator: Definitions

Amount to invest
The amount you wish to invest in your immediate annuity.  Enter into the immediate annuity calculator.

Your life expectancy
The number of years you expect to live and receive payments. Enter into the immediate annuity calculator.

Annual rate of return
The annual rate of return for the immediate annuity. Enter into the immediate annuity calculator.

Frequency of payments
How often payments are made to you from the immediate annuity. Options include monthly, quarterly and annually. This immediate annuity calculator assumes that your distribution occurs at the beginning of each period. Enter into the immediate annuity calculator.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues, including your immediate annuity calculator needs.

We hope you find this immediate annuity calculator useful

Pros and Cons of Immediate Annuities

Immediate Annuities are the most traditional annuity product available.  In simple terms, you give an insurance company your money and in return receive income payments for either a specified period of time or the remainder of your life; the choice is yours.

Pros and Cons of Immediate Annuities: Pros

The benefits are all on the income side…

  • Lifetime Income- With an immediate annuity you will receive a higher level of guaranteed income than you can get with any other product.
  • Income Adjustments- If you add a cost of living adjustment (COLA) or tie your payments to the consumer price index (CPI) than you’ll receive guaranteed income that rises over the years to meet the increases in living expenses.
  • Flexible Payment Terms- The contract can be structured to pay you the way you want to be paid.  Single life payment options are available for individuals and joint options for couples.  Also, income can be guaranteed for a specific number of years or until the original principle is repaid, even if the payments are made to your heirs.

Pros and Cons of Immediate Annuities: Cons

The disadvantages can be avoided with proper planning…

  • Locked Contract- Once you purchase a contract, it is set in stone unless you decide to sell your payment stream, which should only be considered in dire circumstances.  A thorough financial analysis is necessary before final purchase.  As a rule, allocate just enough money in an immediate annuity to generate a comfortable level of income and reserve the remainder of your assets for other investments.
  • Surrender of Principle- You give the company money and they pay you.  When you’re gone, the payments stop and the company keeps the remainder balance, if any.  If you outlive expectations then you win big because the company must pay for life.  Explore the flexible payment terms available to ensure your spouse or heirs are protected with continued income or return of principle.  It may cost you a little on the income side but it’s usually the correct route to take if you have someone to take care of besides yourself.

This should give you a good idea of how immediate annuities work and the pros and cons of the product.  If you want more, sign up for a free membership and download Immediate Annuities:  The Official Report. This report goes into greater detail on how these annuities work and the payment terms available.  Also included is a payment rate spreadsheet so you can do a little calculation on your own and begin to see just how an immediate annuity can give you the safety, flexibility and profitability that everyone wants in retirement.  You can sign up in the form to the right.

This is the most traditional annuity product available.  In simple terms, you give an insurance company your money and in return receive income payments for either a specified period of time or the remainder of your life; the choice is yours. The benefits are all on the income side… Lifetime Income- With an immediate annuity you will receive a higher level of guaranteed income than you can get with any other product. Income Adjustments- If you add a cost of living adjustment (COLA) or tie your payments to the consumer price index (CPI) than you’ll receive guaranteed income that rises over the years to meet the increases in living expenses. Flexible Payment Terms- The contract can be structured to pay you the way you want to be paid.  Single life payment options are available for individuals and joint options for couples.  Also, income can be guaranteed for a specific number of years or until the original principle is repaid, even if the payments are made to your heirs. The disadvantages can be avoided with proper planning… Locked Contract- Once you purchase a contract, it is set in stone unless you decide to sell your payment stream, which should only be considered in dire circumstances.  A thorough financial analysis is necessary before final purchase.  As a rule, allocate just enough money in an immediate annuity to generate a comfortable level of income and reserve the remainder of your assets for other investments. Surrender of Principle- You give the company money and they pay you.  When you’re gone, the payments stop and the company keeps the remainder balance, if any.  If you outlive expectations then you win big because the company must pay for life.  Explore the flexible payment terms available to ensure your spouse or heirs are protected with continued income or return of principle.  It may cost you a little on the income side but it’s usually the correct route to take if you have someone to take care of besides yourself. This should give you a good idea of how immediate annuities work and the pros and cons of the product.  If you want more, sign up for a free membership and download Immediate Annuities:  The Official Report.  This report goes into greater detail on how these annuities work and the payment terms available.  Also included is a payment rate spreadsheet so you can do a little calculation on your own and begin to see just how an immediate annuity can give you the safety, flexibility and profitability that everyone wants in retirement.

Deferred Annuities

In the Annuity marketplace, “Deferred Annuities” can describe two components.

1) In terms of Timing of your income, you can have either an Immediate Annuity, in which income payments start immediately, or you can have a Deferred Annuity, where income payments start in the future.

2) And in terms of Taxation, all annuities enjoy Tax-Deferred Appreciation .

Secondary Market Annuities, fixed annuities, indexed annuities, and variable annuities allow you to compound and grow your investment by tax-deferring appreciation. Taxes will be due in the future, but for now, gains compound tax deferred.

Generally, when people refer to ‘Deferred Annuities’ they simply refer to the timing of the cash payments from the insurance company.  However, when you choose to place your money with an insurance company and grow that investment Tax Deferred, you are compounding the gains without tax, and can take those compounded gains out at a future date.

Tax deferred compounding growth, what annuities offer, is often referred to as ‘triple compounding’.  Not only do you earn money on your principal, but you also earn money on your interest, and your earn money on what would otherwise be spent on taxes in other less competitive investments.  Triple compounding can make an annuity investment really shine when compared to CD’s or bonds that incur taxes each year.

For more info on how an annuity can help you grow your investments and retirement income, be sure to sign up to our site and get our AST Flex Strategy videos to learn more on the tax deferred benefits an annuity offers.

Immediate Annuity

The Immediate Annuity has several names- Instant Annuity, Single Premium Immediate Annuity, Single Life Annuity, and Single Payment Annuity, among others.  All refer to the same thing- An Immediate Annuity is a contract with an insurance company that immediately converts your savings into an income stream.

In terms of Timing, the payments of income and principal commence immediately, in contrast to Deferred Annuities which build for some time before converting into payments.

Immediate Annuity Benefits:

The Immediate  Annuityprotects your retirement with steady, predictable income.  You can learn more about the Pros and Cons of Immediate Annuities here. Also, there are a wide array of annuity options and riders that add benefits and duration to an Immediate Annuity income stream.

For example, if you want to remove all the responsibilities and risks associated with managing your money thru retirement, the purchase of an immediate annuity can give you a guaranteed income stream for life, no matter how long you live.   Or, if you have assets that make you ineligible for Medicaid, an immediate annuity may allow you to remove the assets from your estate.

How an Immediate Annuity Works:

You can buy an immediate annuity with funds available from a 401k, IRA, savings account, life insurance policy, inheritance, or even the sale of a home or major asset. The insurance company you select promises to give you an income stream you select in exchange for an upfront premium expense.  The company assumes all investment risk and calculates the income amount based on your age-weighted life expectancy. You can choose how often you receive a payment from the annuity, such as monthly, quarterly, or yearly. The amount of income you receive is based on the amount of money you initially contribute, plus a number of factors including your age, sex, income option selected, and interest rates at the time of purchase.

Get our report to learn how an immediate annuity can help, if:

  • You want certainty that you won’t outlive your income,
  • Your retirement expenses are not covered by your monthly pension payment,
  • You want to eliminate management of your retirement savings,
  • You want to protect assets from high nursing home costs.

Please Contact Us and let us find the best Immediate Annuity for you.

Annuity Resources

This directory of Annuity Resources is intended to offer an overview of annuities and point you in the right direction for more detailed information.

So what are annuities? Do you want to know How Annuities work?

First- An Annuity Definition:

An Annuity is a contract between you and an insurance company.  You pay premiums to the company, and the company in turn grows your money tax- deferred, and commits to pay you either a lump sum, or a stream of income.

There are two main categories of annuities:

In terms of timing, there are either Immediate Annuities, or Deferred Annuities. These two choices refer to the timing of the payments from the insurance company to you.

Annuity Rates:

As to the rate of rate of appreciation on the capital you give the insurance company, there are many kinds of annuities, including Fixed Annuities, Variable Annuities, Fixed Index Annuities, and Immediate Annuities.

Sounds simple, right?  Well there are millions of ways to complicate even the most straightforward concept, and annuities are no exception.   We’ll cut to the chase and help you understand the ground rules.  If you determine that an annuity might make sense for you, be sure to sign up with your email  for our essential tools to choosing an annuity.

If you have an annuity already, you should know that there is an active market to buy and sell annuities on the secondary market- you may be able to receive cash today to sell an annuity you have owned for several years.  Also, buying secondary market annuities is an excellent way to find a high yield, safe investment.

We also have sections on annuity riders and living and death benefits this is where products can get complicated, and expensive.  Be sure to explore the pages of this site once you are a Member too- our tools can really help you to cut to the chase and figure out what is important and what is not.