Immediate Payment Annuity

Filed Under » ,
Dictionary Says

Definition of 'Immediate Payment Annuity'

An annuity contract that is purchased with a single lump-sum payment and in exchange, pays a guaranteed income that starts almost immediately. An immediate payment annuity is especially suitable for retirees who are concerned about outliving their savings. However, one disadvantage is that an immediate payment annuity is irreversible once it has been purchased. This may pose a problem should the annuitant need a large sum to deal with an emergency.
Investopedia Says

Investopedia explains 'Immediate Payment Annuity'

Another large drawback of an immediate payment annuity is that it is terminated upon death of the annuitant. This means that in the event of the annuitant's premature death, the size of the estate left to his or her heirs may be much smaller than it would have been if the immediate payment annuity had not been purchased. Since the annuity payments are terminated upon the death of the annuitant, financial planners do not recommend this type of annuity for retirees who are not in good health.

Articles Of Interest

  1.

    Calculating The Present And Future Value Of Annuities

    At some point in your life, you may have had to make a series of fixed payments over a period of time - such as rent or car payments - or have received a series of payments over a period of time, ...

  2. Immediate Annuities: More Income and Lower Taxes

    These instruments may shed their bad rap to bring you a hefty tax break.

  3. Weave Your Own Retirement Safety Net

    Build savings to support yourself in case pension plans and Social Security fall through.

  4. Passing The Buck: The Hidden Costs Of Annuities

    These may look like good retirement vehicles, but beware of the fees buried in the fine print.

  5. 5 Ways To Fund Your Retirement

    Generating income without going to work tends to be a murky concept. Find out how it works.

  6. Getting the Whole Story on Variable Annuities

    Variable annuities are another way to save money tax-deferred - but don't jump in blindly!

  7. Annuities: How To Find The Right One For You

    Fixed, variable and indexed annuities offer different features. Find out which one fits your needs.

  8. Lifetime Income Annuities: The Instant Pension Plan

    If you are looking for a retirement play with a guaranteed structure payout, lifetime income annuities could be the answer.

  9. Inflation-Protected Annuities: Part Of A Solid Financial Plan

    If you worry about inflation and longevity risks, this may be the investment for you.

  10. Break Out Of Annuity Prison

    Annuities offer security but also lock up your cash. The secondary market could be your key.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...

  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center