Fixed Immediate Annuity: What Is It?
A fixed immediate annuity is one form of annuity offered by many insurance companies. Insurance companies offer these investments to individuals who are looking for a retirement income producer. Whereas many other retirement accounts will pay out based on their value at the time of retirement; the annuity will payout over the retirement as a form of income. Insurance companies offer the fixed immediate annuity as well as various other forms of annuities to those who are looking for a way to earn money throughout their retirement.
There are two important aspects to remember about a fixed immediate annuity. First, the annuity offers a fixed rate of earning and payout. This means that the insurer is guaranteeing that the annuity will earn a certain rate of payout over its lifetime. The value of the annuity will rise to a specific amount, as guaranteed by the contract of the annuity. This is in contrast to a variable annuity which actually varies according to the performance of investment funds in the marketplace. A variable annuity may lose principal, but it does have the potential to earn more over the long term.
The second aspect of a fixed immediate annuity is the “immediate” portion. Individuals can invest in annuities over the span of years, if they would like to, much like other types of retirement accounts. With that said, a fixed annuity can be paid or set up using a lump sum as well. Those who are purchasing a fixed immediate annuity are investing a lump sum into the annuity just before or perhaps during retirement. As such, the annuity can begin paying out disbursements from its value right away, according to the contract of the annuity. This is an immediate source of income for the investor at that point.
When investing in this type of annuity, it is important to know the details of the investment as well. Fixed or variable is a large difference, as is the type of funding structure. In addition to this, though, it is important to know about various other terms the annuity has in place. For example, some offer a lifetime payout. This means that the annuity will pay out the same amount from the point it is started until the investor dies. If the policy is owned by a married couple, the payout will continue until both spouses die.
Another option is the death benefit. In this additional, often times extra costing benefit, the annuity will continue to be paid out according to its terms to a beneficiary, only if the annuity does not reach its maturity before the owner dies. This may mean that the funds may be passed on to an heir.
The investment of a fixed immediate annuity can be a good investment for those who are considering a long term payout. Fixed annuities perform well and they do not carry the risks associated with the loss of principal many other investments make. Nevertheless, it is important for all investors to consider all options prior to investing.