A deferred annuity, a long-term personal retirement account, is designed to help your assets grow and in the future provide the investor with a steady income after retirement. Immediate annuities provide investors with regular income payments for a lifetime, or for the lifetime of a loved one. It can be designed to provide income for a set time period as well. There are two types of immediate annuities – – fixed and variable. A fixed annuity guarantees the investors a fixed income for life or a set period of time. A variable annuity allows you to divide your money from a fixed income option that gives you a guaranteed fixed income and the other part goes into professional investment management options such as stocks and bonds. This option can allow someone to make potentially more money by diversifying their money.
Ultimately, retirees are faced with the issue of survival after they finish work. Immediate annuities allow the investor to receive regular income payments. This assures that they can survive the living costs of being unemployed after years of work. It also ensures that their loved one will be taken care of in case of their death. The two varied options (fixed and variable) allow for a secure income or a more risky one, which may result in a bigger outcome for them and their loved ones. Immediate annuities allow them the security they need to survive without work.
Since immediate fixed annuities are determined by a set period of time, their regular income payments could potentially end and they could be still living without any money at all. Ultimately, the variable option is more risky, but could allow for a more secure standard of living for themselves and their loved ones. By choosing this option, they could be assured that they would be set financially till the end of their life. It allows for a more responsible decision when investing and also will help ease their financial troubles for the rest of their life.
The payout options on an immediate fixed annuity include a fixed, guarantee interest rate. These rates are guaranteed for a period of time that is determined when first investing. At the end of that period, a new rate is established which may or not be at the same level as the initial one. The rate and time period depend on the contract issues at the time of the investment and often include a minimal interest rate.
When deciding on options, one should potentially take into account, the chances of surviving after their money runs out. They must decide how much money to invest, how much money they need to survive a month, and the potential of something financially damaging occurring to them and what they would do to solve that problem. With most retirees, I would suggest the variable option even though it is more risky. But it offers more of a chance for a secure steady income and could potentially be financially rewarding for investors.