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The Benefits And Disadvantages Of Immediate Annuities  

You can buy an immediate annuity if you don’t have a pension from your employer when you retire and want a steady income stream. This type of insurance is typically purchased with a lump sum payment and is designed to pay you a fixed amount for a specific length of time. An immediate annuity may be an alternative for retirees who need more income to pay ongoing bills or are concerned about outliving their savings. However, the amount you receive will be determined by several factors, and there are some drawbacks to consider. Where Does An Immediate Annuity Come From? An immediate annuity is a type of insurance purchased with a lump-sum payment and then paid out. You begin by funding your annuity account with money from your savings account, 401(k), or IRA. Following this deposit, the insurance company will make periodic payments to you. “This is different from delayed annuities,” explains Aaron Maassel, owner and creator of Voyageur Advisory Group in Maumee, Ohio. “…Where the money is invested with the insurance company, and no immediate payout or benefit is paid to the buyer. Rather, the money grows specifically for the buyer’s future advantage.” When you buy an immediate annuity, the insurer will consider your age and the length of time the payments will endure before deciding the monthly amount. You can compute your fixed expenses and use that figure to establish how much you’ll need in the revenue stream.  Several annuity schemes provide an increasing income stream to help you keep up with annuity. This may give you the peace of mind that your living expenses will be paid in the future. When Do Payments On An Immediate Annuity Begin? You’ll begin receiving payments based on the timeline and conditions of your immediate annuity. “You can usually start collecting money within a month after depositing,” says Jeff Kronenberg, founder and president of Imagine Wealth Group in Ridgefield, Connecticut. You can request that payments be made monthly, quarterly, or annually. You can also choose a payout period, which may be a specific number of years or your entire life. Many people prefer the lifetime annuity plan, which guarantees payments for the rest of their lives. According to Ken Nuss, CEO of Annuity Advantage, an online annuity marketplace, “the payment period can be tailored in different ways to match the individual’s needs.”  “It isn’t always necessary to have a lifetime annuity.” Maybe you want to put off taking Social Security at 62 until you’re 70. To bridge the income difference, you might purchase an eight-year immediate annuity. “An eight-year annuity provides a bigger and substantial payment than a lifelong annuity,” Nuss adds. Advantages Of Immediate Annuity You can request a guaranteed income for yourself and one other beneficiary, such as your spouse, when purchasing an immediate annuity, regardless of how long you both live.  Since the contract covers two lives, the income payment in an immediate annuity for two persons is usually smaller. “Because it works like a pension, regardless of what happens in the stock market and economy, pay your bills,” Kronenberg adds. You’ll only pay taxes anytime you withdraw annually from an immediate annuity if you acquired it with pre-tax funds. You won’t be taxed on the additional profits until you receive them as income if the account grows and accumulates more than you take out in a year.  Immediate Annuities Drawbacks You usually don’t have quick access to the money you put into an annuity plan once you deposit it. There will be obstacles if you wish to terminate the contract and get your money back. “There will be penalties for surrendering a policy early,” Maassel warns. Another potential drawback is what you will leave behind in the shape of annuity inheritance. “While you will receive an income stream for the rest of your life, you will not leave any death benefit to your heirs,” Kronenberg adds.
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After spending many years studying information technology, specializing in web development, digital marketing, and search engine optimization (SEO), I enjoy applying my skills and experience in helping others achieve their goals online. As a marketing specialist at Credkeeper, I help people get the most out of their online reputation. Your prospects perform Internet searches for your name before they buy from you. What they see on the first page of Google outweighs almost all other marketing! What do people currently see when they search your name on the Internet? If you would like to know more about Credkeeper and what we can do for you, feel free to reach out to me!

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