Today's Best Immediate Annuity Rates

What is an immediate annuity?

Reviewed by Ryan Hart
Licensed Insurance Agent

An immediate annuity is a contract. I give an insurance company a lump sum of money, and they promise to pay me a steady income right away.

This type of annuity can be a great addition to a retirement plan. It gives me peace of mind knowing I'll have a guaranteed income stream to help cover my basic expenses. 

Plus, I don't have to worry about managing investments or making complex financial decisions.

I like that immediate annuities are simple and straightforward. Once I buy one, the payments can start almost instantly - usually within a month. 

This quick turnaround makes them different from other annuities that might make me wait years before I see any money. 

For someone who wants extra income now, not later, an immediate annuity could be a smart choice.

Types of immediate annuities

When researching annuities, you might discover there are several types to choose from:

Fixed immediate annuities: These pay out a set amount each month. I like that the payments stay the same, which makes budgeting easier.

Inflation-adjusted annuities: These increase payments over time to keep up with rising prices. I think they're good for long-term planning.

Period certain annuities: I can pick how long I want to get payments, like 10 or 20 years. If I die early, my beneficiary gets the rest.

Single life annuities: These pay me for as long as I live. I don't have to worry about running out of money, but there's nothing left for my heirs.

Joint and survivor annuities: If I'm married, this type keeps paying my spouse after I'm gone. It gives us both peace of mind.

How do immediate annuities work?

Immediate annuities are pretty straightforward. Here's the basic idea: 

I give the company a big chunk of money upfront. This is called a premium. In return, they promise to pay me a steady income right away.

The payments start within a year of buying the annuity. That's why it's called "immediate."

There are a few key things to know:

  • Payments can be monthly, quarterly, or yearly
  • I can choose how long I want the payments to last
  • Some options pay for a set number of years
  • Others pay for my whole life

The amount I get depends on a few factors:

  • How much money I put in
  • My age and gender
  • Current interest rates
  • The payout option I pick

One popular type is called a single premium immediate annuity (SPIA). With this, I make one big payment and start getting income right away.

I think immediate annuities can be good for people who want a steady income stream they can count on. But it's important to compare quotes before buying one.

How to buy an immediate annuity

When I buy an immediate annuity, I'm making a big financial move. I need to think about how I want to get paid, how much money to put in, and who gets any leftover cash if I die. 

Let's look at these key parts of buying an annuity:

Payment options and terms

I have a few choices for how I get my annuity money. I can pick monthly, quarterly, or yearly payments. Monthly is nice for regular income, but yearly might be better for big expenses.

I also decide how long I want the payments to last. I can choose:

  • My whole life
  • A set number of years
  • As long as me or my spouse is alive

The amount I get depends on these choices. If I want payments for life, each one might be smaller than if I pick a short time frame.

Initial annuity premium

The lump sum I pay upfront is called the premium. How much should I put in? That's a big question.

I need to think about:

  • How much income I want each month or year
  • My age and health
  • Current interest rates

If I put in more money, I'll get bigger payments. But I don't want to use all my savings. I should keep some cash for emergencies.

It's smart to talk to an insurance agent that is licensed to sell annuities. They can help you figure out the right amount based on your needs and goals.

Selecting a beneficiary

A beneficiary is someone who gets money from my annuity if I die. Picking one is important.

I can choose:

  • My spouse
  • My kids
  • A charity I like

If I don't pick anyone, the insurance company might keep any leftover money. That's not what I want!

I can also decide if my beneficiary gets a lump sum or keeps getting payments. This choice affects how much I get while I'm alive.

It's a good idea to review my choice every few years. My family situation might change, and I want to make sure the right person gets the money.

Pros and cons

I think immediate annuities are awesome. They give me steady income right away, which is nice for retirement. I don't have to worry about the stock market going up and down. The payments keep coming no matter what.

Another plus is that I can get payments for my entire life if I want. That takes away the fear of running out of money as I get older.

But there are downsides too. Once I put my money in, I usually can't get it back out. That's not great if I need a big chunk of cash later.

Inflation is another problem. My payments might stay the same while prices go up. That means I can buy less as time goes on.

I also have to think about taxes. The IRS sees some of my payments as taxable income. That could push me into a higher tax bracket.

Here's a quick rundown of the pros and cons:

Pros:

  • Steady income
  • Lifetime payments option
  • Market protection

Cons:

  • Limited access to funds
  • Inflation risk
  • Potentially subject to taxes

I'd say immediate annuities can be good for some people, but they're not for everyone. It's important to look at my own situation before deciding.

Immediate vs deferred annuities

Choosing between immediate and deferred annuities can be tricky. I'll explain the main differences and help you decide which might work better for you.

Immediate annuities start paying me right away. I give the insurance company a lump sum, and they send me checks soon after. It's great if I need income now.

Deferred annuities wait to pay out. I can put money in over time or all at once. The cash grows tax-free until I'm ready for payments, often years later.

With immediate annuities, I know exactly what I'll get each month. Deferred ones can offer higher potential payouts, but the amount might change based on market performance.

Immediate annuities are simple. I hand over cash, I get income. Deferred ones have more moving parts and choices to make down the road.

Which one should you choose?

My current needs matter most in the decision making process. If I need income now, immediate annuities make sense. If I'm planning ahead, deferred could be smart.

My age plays a role too. Immediate annuities often work well for folks already retired. Younger people might prefer deferred to grow money longer.

I should also think about flexibility. Deferred annuities let me change my mind about when to start payments. Immediate ones lock me in right away.

My other income sources matter. If I have enough cash flow now, a deferred annuity could boost my future income. If I'm short on funds, immediate payouts might help.

Frequently Asked Questions

People often want to know more about immediate annuities. Here are answers to some common questions I get asked:

How soon can you start receiving payments from an immediate annuity?

You can start getting payments within a year of buying an immediate annuity. Some companies even offer payments as soon as 30 days after purchase. This quick start is why they're called "immediate" annuities.

Is there a way to calculate my payments from an immediate annuity?

Yes, many insurance companies have online calculators. You can input your age, gender, and the amount you want to invest. These tools give you a rough idea of what you might receive. But for exact numbers, you'll need to get a quote from an annuity broker.

What's a typical payout from a single premium immediate annuity?

Payouts vary based on factors like age, gender, and interest rates. For a 65-year-old, a $100,000 premium might pay around $500-600 per month for life. But this can change a lot depending on your specific situation.

How much does a $100,000 immediate annuity pay per month?

A $100,000 immediate annuity might pay around $500-600 per month for a 65-year-old. But this can change based on current interest rates and other factors. Women often get slightly lower payments because they tend to live longer. It's best to get quotes from an insurance agent to see what you could actually get.