Advantages of Immediate Annuities

Immediate annuities start paying out right away, and can prevent retirees from outliving their nest egg.

Plus, with a fixed immediate annuity you lock in an income stream for your entire life (or a specific number of years, if you choose). Knowing you can count on a guaranteed income stream can be a boon for retirees who don't want to worry if they will have enough money to pay the bills each month.

Immediate annuities provide many advantages to the buyer, such as: (1) Security - the annuity provides stable lifetime income which can never be outlived or which may be guaranteed for a specified period; (2) Simplicity - the annuitant does not have to manage his investments, watch markets, report interest or dividends; (3) High Returns - the interest rates used by insurance companies to calculate immediate annuity income are generally higher than CD or Treasury rates, and since part of the principal is returned with each payment, greater amounts are received than would be provided by interest alone; (4) Preferred Tax Treatment - it lets you postpone paying taxes on some of the earnings you’ve accrued in a "tax-deferred" annuity when rolled into an immediate annuity (only the portion attributable to interest is taxable income, the bulk of the payments are nontaxable return of principal); (5) Safety of Principal - funds are guaranteed by assets of insurer and not subject to the fluctuations of financial markets; and (6) No sales or administrative charges.
Plus, the payments can be higher than you would normally be able to get by putting your money into safe investments on your own.

SPIAs are particularly suitable for providing income in the following situations: (1) Retirement from Employment; (2) Terminal Funding or Pension Terminations (including deferred commencements); (3) Retired Life Buyouts; (4) Professional Sports Contracts; and (6) Credit Enhancement and Loan Guarantee Transactions.