What is an immediate annuity?
An immediate annuity is a contract between an individual and an insurance company that allows the individual to convert a lump sum of money into a steady stream of income for a specified period of time.
Why would someone want an immediate annuity?
An immediate annuity is a useful option for someone who has money to invest now, but wishes to establish a source of cash income on a monthly basis.
For instance, an individual could use $10,000 to create an immediate annuity that can be used to make child support / alimony payments, provide monthly income for a relative or pay for a child's education expenses.
How long can an immediate annuity provide monthly payments?
You can set up an immediate annuity to make payments for a specified number of years (i.e. 5 years, 10 years, 25 years), monthly until your death (or have the payments transfer to a beneficiary of your choice upon your death.)
How much can an immediate annuity pay on a monthly basis?
The amount that an immediate annuity will pay on a monthly basis depends on how much you are willing to provide upfront to the insurance company and how many years you want to have the payments spread over.
The more money you provide upfront, the greater the monthly income payments will be. The shorter the term of the immediate annuity, the greater the monthly income payments will be.
Who offers immediate annuities?
Immediate annuities are offered by life insurance companies. Consult with a life insurance professional to get more detailed information on the benefits of an immediate annuity.