An immediate annuity, also called a single payment immediate annuity (SPIA), is a type of insurance contract that is paid for with a lump sum from a savings account, 401(k), or individual retirement account (IRA). An immediate annuity is irrevocable, so you cannot change your mind once you begin the policy. These irreversible income streams are called “annuitization” or “annuitizing.” You can receive your annuity checks within 30 days or delay them for up to 12 months if you use SPIAs. You might be interested in purchasing a Deferred Income Annuity or a QLAC if you want to postpone receiving the income for longer than 12 months. Consider a Guaranteed Lifetime Withdrawal Benefit if you want lifetime retirement income but prefer more flexibility and control. Due to the income rider, the results will be similar to the SPIA annuity, but, in most cases, they will be better. Immediate Annuity Payments When you purchase an immediate annuity, you agree to receive a series of payments at regular intervals. You will find a concise explanation of how income annuities are paid out in the following paragraphs. Life Income An immediate lifetime annuity gives the Annuitant a steady income for as long as they live. But there will be no further payments after the Annuitant’s passing. Therefore, if you want a beneficiary to continue receiving payments after the Annuitant dies, you shouldn’t select this option. Joint and Contingent Life Income: Income will be paid for the duration of the annuitant’s or contingent annuitant’s lives. So, the Annuitant will get the full joint-life income for as long as they live. Contingent annuitants receive payments for as long as they live, whether or not the Annuitant passes away first. However, payments will stop when either the contingent or the Annuitant dies. Income for a fixed Period You can get guaranteed payments based on how many years and months you choose on the application. Additionally, annuitants are entitled to a death benefit in the form of a lump sum payment equal to the annuity’s value if they pass away within a certain period. Instead of getting the commuted value, the death benefit recipient can choose to get the remaining guaranteed annuity payments. A fixed period annuity is the same as an ordinary or certain annuity. Life Income with a Guarantee Period As long as annuitants live, they will continue to receive income payments. However, suppose the Annuitant dies during the Guaranteed Period. In that case, you or your beneficiary will receive the balance of the Guaranteed Payments. Life Income with installment Refund After the date payments start, the Annuitant is guaranteed to get payments for as long as they live. Furthermore, suppose the Annuitant passes away before receiving the full amount of the annuity. In that case, a lump sum payment will make up the difference. Adjusted for inflation (Cost of Living Adjustment) You have the option to choose an initial income amount that is lower than the rate of inflation currently in effect, with subsequent annual increases.
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