Immediate annuities, also known as immediate payment annuities or Single-Premium Immediate Annuities (SPIA), are policies that disburse payments to annuitants within a short period of time. This is as opposed to typical annuities, which have surrender periods in which an annuitant must wait before being able to access the account’s funds. Immediate annuities are different from others in how they’re purchased, payout options, and what policyholders can add to their policies.
How Do Immediate Annuities Work?
Immediate annuities are fundamentally different from other options. Instead of making multiple payments over the course of several years like delayed annuities, you get a policy with just one premium payment alone. From that point, you’re given the choice of how often you want your income to be issued to you. This payment schedule is known as the “mode”, and modes include monthly, quarterly, and yearly payments.
The amount released to you depends on a few factors:
- Duration of payments
- Your age
- Interest rates comparable to the majority of other policies
You also have control over what influences the amount you get. You can get a variable form, where market conditions play a role in how much you get paid. Another option is inflation-adjusted, which will increase your payments to match the current level of inflation. However, once you join a policy, there is no cancellation for a refund.
Companies typically issue payments within the first 30 days of signing up.
What Makes Immediate Annuities Ideal?
Instant withdrawal and access to funds makes immediate annuities great for someone considering another source for emergency costs. Immediate annuities are also an attractive option for someone looking to supplement his or her income alongside other sources, such as Social Security. Immediate annuities can serve as a safe haven for unexpected income windfalls such as lottery winnings, ensuring that you can make the most of what you have while making it last.
And with an inflation-adjusted immediate annuity, your money will not lose its value in times when costs are rising. This helps you keep what you worked for.
How Can My Loved Ones Benefit?
Typically, the insurance company keeps the money stored in your account if you die before all of it is disbursed. This can come as a major disadvantage if you intend to provide for your loved ones.
Fortunately, you can opt for a second type of annuity to go along with your immediate annuity – the joint and survivor annuity. Similar to a life insurance policy, a joint and survivor annuity allows your surviving spouse (and in some cases, one other beneficiary) to receive the remainder of the funds in case you die.
Learn More About Immediate Annuities Today!
Coastal Insurance Planning gives you a variety of options so that you can make your money work for you. We can get you the immediate annuity that suits your needs.