Broker Check

Enjoy a Steady Retirement Income with Immediate Annuities

| April 07, 2017
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Immediate annuities such as Single Premium Immediate Annuities (SPIAs) are considered by many financial advisers and investors as a good way to ensure a steady retirement income. Despite the ups and downs of the financial markets and economy, payout amounts of a SPIA are pre-determined and do not vary in amount or frequency.

At the time of purchase, the buyer can customize their immediate annuity to pay over the time period they choose, whether it is yearly, quarterly, or monthly.

These types of annuities can be funded through a pension plan lump sum distribution, a CD (Certificate of Deposit) or an Individual Retirement Account (IRA.) Depending on the annuitant’s financial or life circumstances, a SPIA or immediate annuity can be set up to start paying out as soon as one month after the effective date, or can be deferred until another date up to one year later. This steady source of immediate income could be important in the case of a divorce settlement, pension termination, personal injury, or retirement. No changes are allowed to the annuity contract, and the immediate annuity cannot be cashed in once the payments have begun.

Some of the advantages of a SPIA or immediate annuity:

Easy to manage- The annuitant is not required to make adjustments to keep up with fluctuating market conditions and volatility. There are no sales charges or administrative fees associated with immediate annuities.

Tax advantages- Under current IRS regulations, purchasing a SPIA with after-tax funds means those payments are only partially subject to federal income taxes. The portion of each payment that is considered non-taxable represents the return of the original investment over the life of the annuity.

Higher return rates- Interest rates for SPIAS and immediate annuities are generally higher than CD or Treasury rates. With every payment, immediate annuities return a portion of both interest and principal. Bonds and other types of investments pay interest only until maturity.

Security- No matter how long the annuitant lives, the annuity contract continues for the rest of their life. The insurer guarantees the amount of the principal, and it is not subject to market fluctuations.

A SPIA or immediate annuity can be a safe investment option that offers a low-risk, guaranteed retirement income. For more information, please contact us.

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